BROADBAND: Lo, They Axe Themselves!

Till date, the focus of incumbent operators was on voice services for
residential users, but it’s gradually shifting to video and data services.
With decreasing ARPU, the incumbents are hardly left with any alternative but to
offer broadband services in cities for applications ranging from high-speed
Internet access to video-on-demand.

In order to increase its ARPU from wireline customers, BSNL came out with an
expression of interest (EoI) on 23 August 2002, for the provision of broadband
services in 84 cities. This was followed by MTNL, which also floated a similar
EoI in September 2002 for broadband services in Delhi and Mumbai. Both the
incumbents are planning to offer a complete suite of broadband services through
the franchisee route. Subscribers are expected to gain access to a lot of
value-added services both in terms of data and video.

An Exhaustive Suite Incumbents are contemplating a wide range of broadband services: Broadcast TV Interactive TV Video-on-demand Video conferencing Interactive distance learning Multicasting VPN Remote medical treatment Audio on demand Video gaming Unified messaging IP-enabled services High-speed Internet access DSL VoIP VoDSL

According to sources in BSNL, the company has received expression of interest
(EoI) from around 20 companies, which is a lukewarm response, considering the
fact that it has been extended twice. BSNL has now fixed 7 November 2002 as the
new date for submission of EoI, and one is not sure whether this is the last
extension. In fact, the EoI invitation bars ISPs from becoming a franchisee,
despite the fact that private operators like Bharti have opted for ISPs for
rolling out DSL services in cities like Bangalore, Chennai, Delhi, Faridabad,
and Gurgaon.

So far, BSNL and MTNL have not associated with other ISPs, since they have
their own ISP divisions. Now, since they are looking at the franchisee route for
broadband services, there seems to be a shift in strategic thinking. In this
context, it makes poor business sense to disallow ISPs from participating in the
broadband services EoI.

In the Indian context, it is the ISPs who have been successful in providing
broadband services. If the incumbents can tie up with these service providers,
both can benefit in the long run. BSNL and MTNL can increase their ARPU by
providing broadband services, can sell bandwidth (intercity and intracity), and
also increase their brand recall for data services. ISPs, in turn, can have a
substantial revenue stream, which will increase with each passing year.

Here, one can also take the analogy of DID operators in the country.
Currently 700 in number, DID operators have been instrumental in installing
250,000 lines in 12 states. They have been able to achieve this without any
support from the government. Since private operators are focussing more on
corporate customers, they can franchise DID operators for residential users.
This will help in faster rollout of services in different regions and will also
bring in increased revenue for companies. Similarly, incumbent operators can use
the services of ISPs for faster deployment, as these operators can help in
increased Internet penetration in ‘B’ class cities. This will be helpful for
broadband applications, once people are aware about the services that are being
offered by the incumbent operators through the franchisee route.

One of the issues that is of concern for franchisees’ is the
quality-of-service (QoS) offered by BSNL/MTNL on the broadband front. On the
infrastructure front, it is mandatory on the part of the franchisees to take
intercity and intracity bandwidth from BSNL/MTNL. But knowing the ground
realities of QoS and committed information rate (CIR) for leased line and
Internet bandwidth of the incumbents, there is a lot to be done to keep the
network up.

The incumbents should try to improve on these fronts, so that they can give a
good competition to the private operators when they launch full-fledged
broadband services in their respective circles. An improvement on the QoS front
will give a good facelift to both the incumbents. This will also help in
increasing their brand image, helping them to sustain the same growth even on
the corporate front.

Pravin Prashant