BROADBAND: Will it, Won’t It...?

Unlike in the West or even our Asian neighbors like China, Korea or Singapore, broadband was a late starter in India. While Asian cities like Shanghai, Seoul or Kuala Lumpur could boast of broadband connectivity in virtually every household, even corporates in India were still struggling with slow, intermittent connections. Behind this pathetic scenario was the perennial shortage of bandwidth. There has been a drastic turnaround from those times now even though broadband is still not at an optimum level. But this has more to do with underutilization of available bandwidth, rather than a lack of it. Small wonder that a majority of the broadband service providers who came in the last two years haven’t succeeded much.

Service Provider Milieu

Service providers present an interesting milieu. We have large telcos like BSNL, MTNL, VSNL, Bharti Broadband, Reliance Infocom, Tata Teleservices and even large public sector utility companies like Gas Authority of India Ltd (GAIL), PowerGrid Corporation of India and RailTel. A large number of existing dial-up ISPs like Sify, Rolta and Dishnet have diversified into broadband services. There are also exclusive broadband players like Spectranet, Tata Broadband, Zeenext and India Online Network. In addition, a large number of cable MSOs like Hathway, In2cable and Wincable and traditional VSAT players like HECL, Comsat Max and HCL Comnet are also in the fray. Amidst all this euphoric clutter there are tales of gloom too–quite a few players like Wipro Net, BSES Telecom, Applogic Broadband Systems, Cyberwave Internet Solutions and Sigma Online who sunk in huge amounts of money have either gone bust or turned around their plans for offering broadband Internet access and have started offering their networks to service the needs of telecom players.

RL Dube executive director, MTNL, Mumbai

Both the incumbents can effectively use their existing copper lines to deliver broadband Internet using DSL thereby effectively negating the last mile connectivity problem”

The reason behind these failures are not far to seek–when the Internet was driving the PC boom around two years ago, the IT industry was over ambitious. Broadband Internet access to the home seemed to be the most lucrative market because of the estimated numbers. With over 35 million Indian households already having cable TV connections, the players estimated that even if a portion of this segment opted for a broadband connection, there would be huge windfalls. Hypnotized by the market potential, players of all hues began a frantic race to wire up India with optic fiber. However, to the dismay of a large number of these service providers the broadband access market in India never took off. In fact, it is still in its infancy–a typical chicken and egg story. There are still various issues to be solved, like last mile infrastructure and lack of content and applications. Additionally, options available in the market were also not up to the mark.

The situation was reflected in the experiences of service providers who entered this space. Many players, according to Sudipta K Sen, CEO, Comsat Max, sought the best commercial routes and went about installing optic fiber networks worth crores after getting ‘market feedback’ that a particular area had a high literacy rate and good PC penetration. But the reality was very different. The inhibitor was the high cost that the players tried to recover from customers. This was a hopeless situation as customers were not ready to pay high rates and at the same time the players could not subsidize costs because they had invested huge amounts in building their networks. In an effort to reduce costs, players started downscaling bandwidth The result: complaint that access speeds were even slower than dial-up speeds!

For the Consumer

But what is the ground reality for consumers now? Today, broadband providers are trying to woo customers once again with a number of options.

n DSL Services: This technology, which allows a service provider to provide both voice and data on the same telephone line, has expectedly found some big names among its takers like BSNL, MTNL besides Dishnet. BSNL has currently broadband services on commercial lines in Kolkata, Pune and Bangalore with tariff ranging from Rs1000-1200, while MTNL has completely refurbished its network in Delhi in the last couple of years to offer broadband services such as TV-on-demand, entertainment, and education services. Says RL Dube, executive director, MTNL (Mumbai), “Both the incumbents can effectively use their existing copper lines to deliver broadband Internet using DSL thereby effectively negating the last mile connectivity problem.” This would in effect translate into solid gains in bottomlines for both, whereas other service providers like Dishnet DSL have to depend upon access to customers through the incumbent’s networks only. Naturally, with BSNL/MTNL losing their monopoly in basic telephony services, broadband can prove to be an attractive alternative for their bottomline, while Dishnet who pioneered this technology in India has been facing a financial crunch. However, Tata Teleservices (formerly Hughes Tele.Com) with its existing infrastructure for basic telephony in place, can emerge as a serious competitor to the public telcos. To prevent it from being swamped away, Dishnet has entered into an agreement with Tata Teleservices, whereby it will offer broadband Internet connectivity using the latter’s existing last-mile infrastructure.

n Cable Modem Services: With both CAS and DTH regime still looking uncertain, many cable MSOs are looking at broadband services as an alternate means of steady revenue. Hathway and In2cable in Mumbai, Spectranet in Delhi and Zeenext in Bangalore are some of the players to taste some success on cable through Internet. In2Cable has close to 30,000 users registered for cable Internet. In addition to providing services like broadband Internet access, cable players are also looking at providing value-added services to differentiate themselves from the competition. Says TM Sridharan, CEO, In2Cable India, “We have a CRM system wherein a customer can see his usage, his bills and all other required information.

David Appasamy chief communications officer, Sify

“ Broadband services are profitable and contribute to a large and increasing percentage of our access revenues”

Additionally, we are also providing VOIP-based services and VPN services.”

The other big cable player in this space, Hathway, is also optimistic on the growth of the market and is looking at launching a host of value-added services to boost revenues. Says Neeraj Bhatia of Hathway, “We see applications like real-time gaming and video content emerging in the coming year. This will add to the attractiveness for broadband connections. We have also launched VOIP services under the brand name, Net Talk.” The success of both these players can be seen from the fact that In2Cable has a presence in 8 cities across India while Hathway has a presence across 6 cities. Spectranet who launched its services in Delhi during the dotcom boom has not restricted itself to only cable but also got into DSL and leased line as transmission medium. SitiCable, the MSO from the Zee stable is offering Zeenext broadband services.

n Wireless Services: When the broadband race began, players who had the access to infrastructure and reach supposedly had the edge over other players. But some players like Sify have leapt over rooftops using wireless technology. Sify for instance uses a wireless broadband technology called Point-to-Multipoint technology that enables customers to be connected using a wireless radio network. The strategy has paid off in a big way as Sify has managed to sign up over 12,000 home broadband users currently. In addition, it has about 500,000 users on broadband connectivity from its 1200 strong iWay cyber café chain.

Informs David Appasamy, chief communications officer, Sify Ltd, “Sify has a Tier 1 Internet backbone infrastructure that is comparable to networks such as AT&T and Telstra in terms of speed, reliability, scalability and security featuring Gigabit Switch Routers. The points of presence (Nodes) of this backbone are linked by wireless broadband connectivity to customers or to franchisees (such as cable operators) and thence to customers. The technology, connectivity standards and equipment, management of the bandwidth are ours, the franchisee owns the fiber cable and Ethernet connectivity into homes.” Sify has a unique revenue model based on prepaid cards. Customers buy the cards, depending on their requirements, relating to speed and validity of the product. Also the customers can opt for plans where they are charged on the basis of data transfer or hourly schemes, where in the customer pays only for the actual data
transferred. “Sify broadband customers not only save 40 percent in terms of their money but are also able to experience greater speeds in connectivity and data transfer than a normal dialup user. This does have an impact on its bottomline: the broadband services are profitable and contribute to a large and increasing percentage of our access revenues.” Access contributed 38 percent of turnover in the last quarters revenues of Rs 66 crores of which
Internet home access through dial-up/broadband accounted for 17 percent, iWay cyber cafes 15 percent and
other services such as Net telephony 6 percent.

n VSAT Services: Traditionally used for providing connectivity to remote places and in linking geographically-dispersed locations, the VSAT industry got a boost from the government’s decision to change the licensing model to a revenue-sharing model. This has resulted in players offering more value-added services. Says Partho Banerjee, president and CEO, Hughes Escorts Communications, “Traditionally, we used to provide satellite communications services with the help of VSATs. But recently we have launched the DirecWay broadband platform in India that supports a slew of applications like gaming, interactive education/training and extended enterprise networks.”

Comsat Max offers broadband connectivity for a variety of applications, which include connectivity for a large group of users for a centralized app like ERP, banking and financial applications, service industries etc. With falling prices, one can expect VSATs to make a strong foray into niche applications like online lotteries and telemedicine. A couple of other areas where Comsat Max has started offering broadband services are disaster-recovery solutions and learning-management solutions which provide enterprises the option to train their employees across a vast geography. Says Sen, “There are various charging models for these services, including fixed annual costs, per transaction basis, fixed and provision for bursts during month ends etc. Since our offerings are aimed towards enterprises only, we typically customize based on the business needs. As a result, they contribute close to 50 percent of our overall bottomline.”

Roadblocks Ahead

There are a number of hurdles on the road ahead. The Internet for one, is still in its infancy in India with only 8 million users.

Second, capacities on both domestic and international bandwidth links in India are nowhere near that of international carriers or that available in more developed countries.

Sudipta K Sen CEO, Comsat Max

“Since our offerings are aimed towards enterprises only, we typically customize based on the business’ needs. As a result, they contribute close to 50 percent of our overall bottomline.”

It will be a very tough competitive scenario in the Indian terrestrial broadband market. However, service providers are setting up infrastructure based on expectations of demand. In this scenario, the break-even for Indian service providers will take much longer than anticipated. This will also lead to price wars, where only the big players might survive. Also, raw bandwidth will not be enough; players will have to provide a lot of value addition. In the case of satellite broadband, the value addition could be end-to-end communication services to customers, video broadcasting and multicasting, ASP offerings, a bunch of apps that customers can use (CRM, messaging), data centers and managed network services. In terrestrial networks, the value addition could be providing more capacity for doing video conferencing, bandwidth on demand, etc. These can become the key service differentiators.

The future in India is still hazy. The lack of proper infrastructure has so far, forced the broadband segment to experience slow growth. And there are some who say that the glut in capacity may never be matched by demand.

But there are many who expect the market to explode since content creation and conversion in local languages, distance learning, video on demand, education on demand, home shopping and interactive gaming are likely to boom in the coming years. The extent of this flow–a trickle or a flood–will determine the future of broadband players.

There are some who expect the market to explode since content creation and conversion in local languages, distance learning, video on demand, home shopping and interactive gaming are likely to boom in the coming years. Then there are those who differ...

Rajneesh De