Wednesday, April 11, 2007

Drivers for penetration of broadband in India

As I discussed in the previous topic, the drivers for penetration of broadband in India will be-

# Decreasing cost per line
# Decreasing operating expense
# Decreasing cost of PC (or similar device)
# Social attitudes and habits embracing broadband facilities
# More Indian content

Decreasing cost per line

The cost per line right now runs between Rs. 7,000 and Rs. 10,000 for DSL services. However, it will be much higher for WiMAX in 2007, and comparable in 2009. Till 2009 the major customers for broadband from WiMAX will be enterprises and SOHOs. The residential broadband users will not contribute much to the incomes during this time. However, the revenues from enterprises and SOHOs are substantial and are a market worth pursuing; hence we will see some deployments. Residential broadband services will start turning out to be lucrative only in 2010 when the existing network can easily be used for increasing the capacities to cater to homes. That’s when there will be huge change in the deployment models by the operators who will vie for the residential customers. Each operator announcing a better deal than the other will push down the prices and also increases the subscriber base.

The decrease in cost per line will come from two factors- decrease in the cost of equipment and from the inherent advantage of wireless when adding new lines. The base stations which cost $3000-$5000 now will start costing $600-$1000 by end of 2009. The CPE (Customer Premise Equipment) which costs $200-$400 now will start costing $60-$80 by end of 2009. The cost of a wireless network is high in the first stage of deployment, because of factors like taking up space for tower, erecting the tower, cabling, housing, and connecting the tower to the network, installing base stations, etc. However, once those costs are recovered from enterprise services, adding new subscriber will come at a minimal cost. In comparison to a wireline network where each additional subscriber may cost more or less the same, in wireless network, each additional subscriber will be minimally higher.

Decreasing operating expense

Look at who is going to provide the bulk of broadband services in India. They are all major operators who already have cellular and landline networks. While laying out the WiMAX networks, those operators will combine the operations with the existing operating premises thus incurring marginal increase in costs while deploying and managing wireless broadband services.

We will see more and more infrastructure sharing between various operators which was completely absent till now. Especially, in rural networks, this infrastructure sharing will turn out to be mere common sense. The operators who own the spectrum will resell the spectrum to other smaller players who will mushroom in various parts of India to cater to non-metros. The towns and villages may not be very attractive to some operators right away and they may like to sell this franchise or sell these frequencies to smaller WISPs and operators. Also, the coming of Virtual Network Operators will add to competition.

Decreasing cost of PC (or similar device)

PC (or a device similar to that) is already becoming cheaper. With projects like one laptop per person, and other initiatives, the cost of PC is going to be less than Rs. 5000 by 2009. Other concepts like Novatium, if they tend to be aggressive can also make a marginal impact on the penetration of broadband. Companies like Intel and Microsoft (or will it be Linux?) will need to come up with exclusive strategy for catering to this revolution (and I am sure they will).

Social attitudes and habits embracing broadband facilities

Every school in India is going to have a PC and also an internet connection. Those kids who never knew PCs will now be used to using them at these schools. These kids in turn will make way for their families owning a PC and therefore a internet connection. All government employees are now moving towards using PCs and broadband connectivity. Those people who have never known PC or a broadband connectivity are now moving towards embracing these technologies. No family wants to be left behind when it come to his/her finishing up his/her homework using Internet at home. Some of these social changes and habits will increase the penetration of broadband.

More Indian content

What will further fuel the penetration is the content which is more relevant to the masses of India. Subscribers would like to see more content tailored to their needs and desires. More Indian language content, more applications suitable to Indian social context will come up in the next few years which will in turn contribute to increasing broadband penetration.

Updates:

[12 Apr 2007] Manoj Kohli, President and CEO, Bharti Airtel, has this to say:

"All I can say is that by 2010 the market is estimated to have 400-500 million subscribers.

We are looking at a market share of at least 25 per cent, i.e. 125 million subscribers. We have stepped up our Broadband penetration plans and will continue to lead the wireless market share with our passion to deliver the best to our customers."

[12 Apr 2007] In a bid to catch them young, Bharat Sanchar Nigam Ltd (BSNL) is rolling out its broadband services to one lakh schools across the country by December 2008, as part of a project being embarked upon by the Ministry of Human Resource Development.

[03 Jan 2009] BSNL, Novatium launch low cost PCs.

2 comments:

Jasmeet said...

BSNL alone breaking the ranks would not ensure broadband targets to be met. Private and Public Sector partcipation is essential to bring about competetion in the market which will boost broadband susbscribers numbers using innovate flat rate pricing models.
Availability of compelling content is another issue which could inhibit the growth

Darpan Shroff said...

In your spirit of providing low-cost connectivity to rural parts of India. Check it out,

http://www.unitedvillages.com/