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Shifting Gears: Broadband developments, challenges and growth drivers

September 17, 2014

Although India’s internet subscriber base is growing rapidly, broadband infrastructure continues to be poor, resulting in low data transfer speeds. However, increased adoption of 3G and access to Wi-Fi are changing the broadband landscape. With operators investing in infrastructure revamps and the large-scale deployment of 4G networks, subscribers will be able to avail of high speed broadband services. Industry experts share their views on the challenges and growth drivers for the broadband market in the country…

Rajesh_Chharia_Pres_ISPAIBenoy_CS_Director_ICT_Frost__SullivanHeramb_Ranade_CMO_Tikona_Digital_NetworksSandeep_Yadav_Head_Data_Business_MTS_India

What is the current status of the broadband market in India? What are the key challenges faced by the sector?

Rajesh Chharia

India has a large broadband market owing to the huge demand for broadband services. The primary challenges faced by this market are taxes and regulatory issues. For instance, the government has recently imposed an 8 per cent licence fee on pure internet and broadband services. Other challenges pertain to high broadband pricing.

Broadband is now a mature technology and, therefore, internet service providers (ISPs) should be allowed to broaden the scope of their offerings. The government has come out with a unified licence but all the services are still not available to ISPs. The main entry barrier is the entry fee and the performance bank guarantee imposed by the Department of Telecommunications (DoT).

Benoy C.S.

Mobile broadband is expected to boost the adoption of broadband services in India. As per a Frost & Sullivan analysis, the broadband subscriber base in India is expected to witness phenomenal growth and reach the 550 million mark by 2020. This growth will be led by mobile broadband with the fixed broadband segment accounting for only about 10 per cent of the overall broadband subscriber base. 3G services on mobile handsets are expected to lead the growth in the segment.

So far, broadband penetration has been abysmal. Rolling out a fixed broadband network in a country like India and covering the vast geographical expanse is difficult as well as expensive. Poor quality of service and lack of access in rural areas hampers the mass adoption of broadband. Poor fibre connectivity and cost-effectiveness of wireless technology as an access medium make mobile broadband the ideal choice for increasing broadband penetration beyond urban habitats, but the high cost of services and low data revenues have not helped. Lack of localised vernacular content has further slowed down the pace of broadband adoption. Bottlenecks in network infrastructure including radio access network and backhaul infrastructure are diminishing the end-user experience of mobile broadband services.

Heramb Ranade

Essentially, there are two very distinct segments within broadband – fixed broadband and mobile broadband. At present, there is a shortage on the supply side of fixed broadband capacity, which has been so far delivered mostly through DSL technology. There is about 18-20 million cable manufacturing capacity, of which about 15 million has already been used to serve the current broadband user base. Limited incremental capacity has been set up using DSL technology has been deployed in the past 10 years because of its financial unattractiveness. As a result, there is a gross shortage of capacity in the market, which is the reason for the limited growth in the fixed broadband segment.

For providing mobile broadband services, enhanced voice-data optimised (EVDO) and 3G have been the primary technologies used. Mobile broadband has benefited from the short supply of fixed broadband services. Customers in rural areas or far-flung suburban areas today use dongles to access broadband even for fixed applications, which has resulted in the proliferation of dongles across India.

With regard to internet on the mobile, 3G was the first platform to deliver relatively higher speeds. While Edge was launched much earlier, the technology was effective only to access emails. 3G has enabled better internet experience on the smartphone. Customers’ broadband experience will improve further with the advent of 4G services. In terms of challenges, the key issue for fixed broadband is undersupply. Copper cables will not be rolled out in the future as they are financially unviable. In India, the broadband demand will primarily be served by wireless networks in both licensed and unlicensed spectrum bands. Both 3G and 4G technologies will drive mobile broadband growth. But the constraints would be inadequate availability of spectrum and space on the existing towers and inadequate backhaul connectivity upto the towers.

Sandeep Yadav

The broadband market in India is expanding and shifting gears with the increasing penetration of wireless broadband technologies like EVDO. Infrastructure support, the increasing 3G adoption rate and falling tariffs are further contributing to the proliferation of internet in the country.

The key challenge faced by the sector is the poor broadband network infrastructure. While the policy framework is in place, there are gaps and delays in execution, which impedes investments, growth and overall development.

 

What are some of the new broadband technologies that are changing the country’s telecom landscape?

Rajesh Chharia

Although broadband technologies like 3G and 4G are gaining popularity, the predominant technology will be fibre-to-the-home (FTTH) or metro Ethernet-to-the-home (ETTH), as bandwidth demand increases in the future. In the wireless space, speeds of more than 512 kbps or 1 Mbps cannot be achieved due to the limitation of base transceiver stations. The government should now promote optical FTTH or metro ETTH so that services can be made available at a reasonable quality and cost.

Benoy C.S.

With spectrum liberalisation allowing telcos to deploy 4G networks in the 1800 MHz band, they can look to offer 4G services to subscribers on their existing handsets. This will help in the adoption of data-intensive applications and content, and enable telcos to improve and enrich the user experience.

Heramb Ranade

We expect that wireless solutions will eventually solve the broadband penetration challenge. Wireless technological solutions can help in overcoming fixed broadband challenges. For this, a large quantum of spectrum, of at least 20-30 MHz, should be made available at affordable prices. For mobile broadband, spectrum will cost more because it will be used for rolling out mobile networks for voice and data services, which are premium offerings. Mobile broadband services are relatively more remunerative than fixed broadband services. For instance, an operator receives Rs 250-Rs 300 for every GB of data usage with mobile broadband, as compared to Rs 40-Rs 50 per GB with fixed broadband. So, the former is six to eight times more expensive on a per unit basis. Thus, in the fixed broadband segment, a large amount of low cost spectrum needs to be made available.

Sandeep Yadav

While 2G data contributes two-thirds of the data traffic in the country today, 3G is expected to overtake 2G based on operator push and network efficiencies. 3G penetration will be the key to providing broadband access to the masses. Wireless backhaul Wi-Fi is increasingly being used to provide internet access. The key driver of this technology is its ability to provide connectivity to multiple devices simultaneously. With 4G round the corner, customers can look forward to a better and faster internet experience.

 

How important is the rural broadband segment from an operator’s point of view?

Rajesh Chharia

The rural broadband segment is very important for the operator as it offers a large unexplored market. For rural users, broadband is a means of empowerment as it gives access to services such as e-health, e-education, e-entertainment and e-governance.

Benoy C.S.

The importance of rural telecom services cannot be emphasised enough. Since urban areas have a high teledensity of 145 per cent, the focus would gradually shift towards the rural segment, which remains largely untapped with a teledensity of less than 50 per cent. But tapping the rural segment has its challenges, such as low ARPUs and low returns on investments, coupled with high cost of service and network roll-out.

With increasing literacy rates and smartphone penetration, this segment will become more attractive in the days to come. The availability of local language content, increased affordability and higher disposable incomes will help improve revenues for telcos.

Heramb Ranade

The rural broadband segment is very important for operators because service penetration in these areas is abysmally low. At present, rural broadband penetration varies from 1 to 3 per cent of households, varying across states. This indicates that there is a huge potential for growth. Any operator that intends to roll out broadband in rural areas would need to have a large quantum of wireless spectrum and a high bandwidth backhaul network up to the point of presence in rural areas.

The National Broadband Mission has been launched with a similar objective to create optic fibre connectivity to the gram panchayats. With this project, backhaul capacity will be extended to rural areas. Consequently, we may witness huge interest from operators in rolling out rural broadband services.

Sandeep Yadav

The next phase of growth in the data segment will come from the rural areas.  Mobile internet is driving the penetration of broadband in these areas. Operators have realised the need to launch products and services targeted specifically at rural market. Localised products are being looked at as a possible solution to tap this market.

 

How has the content/application space evolved over the past few years?

Rajesh Chharia

It is like the chicken-and-egg story. Whether the internet connection comes first or the content, both have to function together. As broadband connectivity reaches users, new applications will automatically be developed and new content will be provided.

Heramb Ranade

Applications today have become the most dominant part of a smart phone. Banks, airlines, e-commerce, companies are developing their own mobile applications. An app would need to be created for every product or service that requires interaction between the consumer and the service provider. We expect that there will be an exponential growth in the applications domain.

Sandeep Yadav

The content/application space is evolving rapidly from SMS, CRBT and WAP videos to data-centric services. While there has been a significant growth in the small screen applications domain for platforms like Android and iOS, the large screen domain has also witnessed strong development in the content/apps space. While video is driving data consumption, utility items such as tax filing and Indian Railway Catering and Tourism Corporation (IRCTC) bookings are also contributing to data traffic in a major way.

As data mobility increases, the industry will witness the convergence of semantics, context, analytics and location services for relevant and customised content for users on the move. More advertising-based models are being engineered for users.

 

What are likely to be the key growth drivers in the broadband market in the next two to three years?

Rajesh Chharia

Content and applications will be the key drivers in developing broadband in the country. This will encourage people to adopt broadband services. Moreover, improving the quality and availability of broadband at an affordable rate will help increase broadband proliferation. In fact, affordability will guide the market.

Benoy C.S.

Poor broadband penetration coupled with increasing demand for high quality seamless broadband connectivity would drive the growth in this segment. Falling prices of access devices, especially smartphones and tablet PCs, would fuel the demand for broadband devices. In India, over 50 per cent of the smartphones shipped are expected to be under $100 by 2017. Apart from the price of handsets, prices of customer premises equipment such as USB dongles have also been decreasing, further boosting adoption. Besides, the increased focus of service providers on data services as well as enhanced user experience bodes well for the segment. Optimal pricing and focus on end-user experience is likely to enhance adoption.

Heramb Ranade

Demand for broadband services will be triggered by the growing economy. Falling device prices, lower data tariffs and availability of content will also be key drivers.

On the supply side, spectrum resources for wireless technologies will need to be made available for the provisioning of fixed and mobile broadband services. There is also a need to create a high-capacity intra-city backhaul network connecting various localities to the hub centres within the city on optical fibre. Further, the backhaul network should extended to the rural areas aided by the ongoing government projects.

Sandeep Yadav

Governance: The National Telecom Policy provides a broad framework for broadband proliferation. It is very important that the government adheres to the time frame as defined in the policy document, to encourage investments, stability and credibility.

Regulatory issues/Ease of doing business: The regulatory uncertainty over the last few years has diminished confidence in the previously booming sector. Spectrum allocations, tax disputes and other regulatory issues need to be sorted out to regain industry confidence.

Service digitisation/e-Governance: One of the most proactive steps to help internet penetration will be to digitise all processes – tax, chalan payments, tenders and bookings, information dissemination, salaries, banking, health records, education, energy payments and financials, and right to information. We need to emulate the success of IRCTC in as many areas and fields available and applicable.

Markets: Falling terminal prices, cheaper connectivity, content availability, the maturing ecosystem of internet-based services and payments will trigger internet usage, thereby increasing the digital habit. Relevant content/vernacular base is also a key factor in pushing data usage.

 
 

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