BANDWIDTH: On the Expressway

Till last year, data used to contribute around 60 percent and it is expected that in FY 2003-04, data contribution will increase further and go up to about 70 percent

Things are definitely changing in the telecom landscape. If two years back, India was a bandwidth-scarce country, we now have an abundance of bandwidth–thanks to Network i2i, a JV of Bharti and SingTel. Network i2i has a maximum capacity of 8.4 Tbps and depending upon the requirement the company will light the capacities accordingly. The recent Reliance move to acquire Flag Telecom will only further help in increasing India’s bandwidth capacity. There is a strong possibility that Reliance Infocomm will upgrade the Europe-Asia loop from 10 Mbps to multiples of 10 Mbps, up to a maximum of 80 Mbps, as the market has been seeing outstanding growth. 

India’s international bandwidth is expected to reach 7.4 Gbps by March 2004 from a figure of 4.4 Gbps in March 2003. The bandwidth market is expected to show an outstanding growth of 69 percent during this period. It is also expected that the market will continue to grow at 50 percent for at least couple of years. The main drivers for this exceptional growth will be the availability of ample bandwidth and a substantial drop in bandwidth prices by ILD service providers due to increase in competition. With Reliance planning to unveil its ILD strategy in 2004, one can expect another phase of price wars next year.

 The two ingredients of the bandwidth market are voice and data. But it’s the data market that has been driving the bandwidth market. To add further spice, it is also forecasted that data will increase its contribution in the overall pie in the years to come. 

On the voice front, the Indian market has been growing at around 19 percent and the total India traffic in FY 2002-03 was at around 3.7 billion minutes in comparison to 3.12 billion in 2001-02. Incoming traffic contributed around 2.9 billion minutes and outgoing contributed around 800 million minutes. It is expected that in FY 2003-04 on the voice front, we might see a

similar growth. This will lead to voice contributing around 30 percent of the total bandwidth usage. 

Till FY 2002-03, VSNL was the sole data player, but now the number of players has gone up to three with Bharti Infotel and Data Access also joining the race soon after they got security clearance for data in the beginning of 2003. Even Reliance Infocomm is expected to join the race through the Flag acquisition route (subject to shareholder and regulatory approval). All this will take at least 6 to 8 months and one can expect Reliance to provide bandwidth services in 2004. Till that time, the company has to be dependent on VSNL and other private operators for both voice as well as data needs, giving good business to the incumbent operator. 

On the other hand, Bharti and Data Access have already taken a lead and have been very active in the Indian market. This year both the companies are expecting good business on the data front. The coming of more players in the bandwidth space will probably create a price war leading to an increase in overall bandwidth.

Till last year, data used to contribute around 60 percent and it is expected that in FY 2003-04, the data contribution will increase further and go up to about 70 percent. The main drivers for the data market are BPO, software development centers, and multinationals. The BPO industry has been growing exceptionally well at around 70 percent and is likely to continue the same growth rate for at least a couple of years. Sanjiv Bhagat, country general manager, AT&T Business Services, AT&T Communication Services India Pvt Ltd, says that due to consolidation in the BPO space, the companies are going for large chunks of pipes rather than opting for large chunk of small bandwidth that was the trend earlier. All this will only help in increasing bandwidth demand in the country. 

With BPO companies expanding in terms of number of seats, client base, and geographies, companies are opting for more and more bandwidth. With companies signing stiff SLAs (service level agreements), it is all the more important for their functioning. “BPO companies are going for all types of redundancy be it carrier redundancy, gateway redundancy, cable redundancy or even country redundancy,” says Ashok Juneja, CEO, Bharti Broadband Networks Ltd. The increase in number of redundancy level helps in BPO companies opting for large bandwidth, thereby increasing demand. 

VSNL has done a good business on the data front in FY 2003-04. Leased channel contributed around Rs 423 crore and Frame Relay contributed around Rs 106 crore. On the IPLC front, VSNL netted revenues of Rs 291 crore, showing a growth of around 31.78 percent. In terms of numbers, IPLC bookings jumped to 45,012 circuits from 11,142 bookings in 2001-02. The main growth driver for this jump can be attributed to the ITES sector, including business process outsourcing and call center customers.

With Reliance Gateway Net Private Ltd, a wholly-owned subsidiary of Reliance Infocomm Ltd acquiring Flag for $207 million. One might see intense competition between the two Indian owners of undersea cable systems–Bharti and Reliance.

And if that happens, it will be good for the customer as there could very well be a second round of price war in both voice as well as data. “With i2i facing competition, prices will come down,” says Siddhartha Ray, managing director, Data Access. 

If one compares the networks, Bharti has paid around $259 million for the Chennai-to-Singapore link whereas Reliance has paid just a small fraction of the $1.4 billion required originally for the Flag network. Reliance also has an advantage as it has three loops–Europe-Asia, Atlantic-1, and North Asia, connecting North America, Europe, the Middle East, and Asia whereas Network i2i connects only Asia. The company also has an IP network having 25 points-of-presence (POPs) in 14 countries, thereby giving it an edge over Bharti network. 

With expansion also happening in the domestic long distance leg, more number of cities is coming under broadband umbrella.

It is expected that in two to three years, there will be good telecom infrastructure in 2,000 odd cities. All this will help in increasing international bandwidth in days to come.

Pravin Prashant