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Better Network, Greater Coverage

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A quiet revolution is happening in the Walled City of Delhi. The Shahjahanabad Redevelopment Corporation (SRDC), an autonomous body under the Delhi government, will soon start restoring monuments in the most densely populated part of Delhi. In the first phase, work has already started in crowded Daryaganj that links the old city to New Delhi. Here the SRDC is building an underground concrete pipeline network. Pipes will carry optic fibre cables and power lines. There will be separate ducts for water supply and sewage disposal too.

The pipeline network could well change the face of Union communications minister Kapil Sibal's constituency, Chandni Chowk. Apart from clearing the area of the overhanging wire maze, it will provide 2 mbps (mega bits per second) broadband connectivity to every home apart from regular power supply. State-owned Mahanagar Telephone Nigam (MTNL) is all set to lay the fibre optic cable.

However, this project is yet to excite private telecom operators. "Let it happen, we will then react," was the common refrain from both Bharti Airtel and Reliance Communications.

Daryaganj could lay the rules for building broadband infrastructure in the country. So, next time the government promises — like it will on this Independence Day — to give high speed broadband through the landline, don't dismiss it as yet another speech.

Despite the abysmal record of fixed broadband subscribers — less than 13 million as opposed to 850 million mobile subscribers — the government is optimistic and hopeful that fixed line will boom and in turn lead to an increase in the broadband base. To achieve this, the communications ministry has cleared a proposal to extend the optic fibre backbone to the villages. The Department of Telecommunications (DoT) has invited private operators to use the infrastructure to provide connectivity and applications. DoT will seek recommendations from the Telecom Regulatory Authority of India (TRAI) to fix tariffs.

As part of this programme, Sibal has recently announced that India will have a National Optical Fiber Network (NOFN). This Rs 20,000-crore network aims to provide quality Internet service to rural areas. The government is hoping that this infrastructure will be used by the Internet service providers (ISPs) to offer high speed connectivity in the rural areas. The project would be funded from the Rs 17,000 crore estimated to be lying with the Universal Service Obligation (USO) Fund.

This project is crucial for future growth of broadband. According to Trai, broadband growth has happened largely in urban areas. Over 60 per cent of India's broadband subscribers are in the top 10 cities. Only 5 per cent of broadband connections are in rural areas, which is meagre compared to the 31 per cent rural mobile telephone connectivity in the country.

To expand broadband services in rural areas, the USO Administrator has floated a tender for private operators to offer broadband services. The tender stipulates that only those ISPs will be allowed to bid in the tender who have spectrum available with them (3G and BWA). This effectively will ensure that only existing licencees with spectrum will be in a position to provide services.

The level of broadband penetration in India is abysmally low — less than 1 per cent. In contrast, in the US it is 26.34 per cent, the UK 31.38 per cent, China 9.42 per cent and in Korea 36.63 per cent.

Broadband is still a cliché in India. Two national policies (2004 and 2007) with specific targets for broadband growth, failed to deliver the speed or quality of broadband services. Worst, the government and the regulator failed to comprehend the speed of broadband and called 256 kilo bits per second as broadband. It was later hiked to 512 kbps. It was only in 2010 that the definition was changed to 2 mbps, but this is still only on paper.

This time round, the government has approached Sam Pitroda, advisor to the Prime Minister (Public Information Infrastructure and Innovation) to help improve broadband connectivity. Pitroda has been given the task to draw the road map to push broadband penetration in the country. Can he recreate the magic that saw the boom of PCOs in the country? "Offering access is of prime importance," says Pitroda. He also emphasises the need for building a broadband infrastructure for the next 25-30 years.

It is not that there is no opportunity in broadband connectivity. According to a report by the Confederation of Indian Industry (CII), the demand-side opportunities indicate an ambitious target of 214 million broadband connections by 2014 — a 30-fold increase from the current level. This translates to 695 million connected Indians by 2014, allowing an equitable and inclusive growth in both urban (386 million users) and rural (309 million users) areas in India.

Click here to view telecom and broadband graphic

But can the Indian government do what Finland did — it declared 1 mbps Internet connectivity a legal right in 2009? Growing broadband connectivity is important for the future growth of the economy. According to the World Bank a 10 per cent increase in broadband penetration increases GDP of a developing country by 1.38 per cent.

That could be critical in the 12th Plan (2012-17). The emphasis of the government during the Plan period will be on ‘innovation, inclusion and investment' for broadband. That is unlikely to happen unless past mistakes of the government to push broadband are not corrected.

One, the government should have ensured that fixed line services were attractive for private operators to invest in. This would have ensured that broadband services were provided quickly and at a lower cost .

Two, the basic infrastructure, similar to what SRDC is building in Daryaganj today should have been offered to telecom operators rolling out fixedline services.

Instead the government and the regulator continued to be mere spectators as the demand for fixedlines fell. Wireless has its benefits — it   works well for those on the move. The payout for spectrum (approximately Rs 1,00,000 crore) has left mobile telecom operators with no option but to offer services at high cost to
the consumers.

The government unleashed two competing wireless technologies — 3G and BWA. Operators will be forced to invest in 3G as a natural progression from 2G investments. "But 3G is going to be a challenge," says a senior analyst with a Gurgaon-based leading telecom analysts firm. Even Long Term Evolution (LTE) and high speed wireless of 100 mbps is only speculative as on date. So, a combination of high investment requirement and lack of liquidity in the market, combined with technology paradox of government, has not helped growth of wireless broadband either. "It is a fall back time on fibre optic and fixed line phones," says D.P.S. Seth, former Telecom Commission member and the first chairman of BSNL.  

An independent analyst advising the government on broadband says that any backbone built by the government will act as a disincentive for further investment by private operators. The government should work towards building the last mile, both in the rural and urban areas, an area private operators have neglected.

If the Indian government can create market potential for fixedline broadband provided it can create a market for it quite on the lines of mobile connectivity. "Revenues will get ploughed back to wire line broadband, create the market," says Seth.

It is, therefore, natural that a lot of countries are concerned about creating a robust broadband infrastructure that would sustain high growth of broadband services. In addition to building the infrastructure, the government and the private sector will also have to lower the cost of the device and services — a major inhibiting factor in the adoption of broadband in the country. "In the 21st century, affordable broadband access to the Internet is becoming as important to the social and economic development as networks like transport, water and power," says Dr Hamadoun Touré, ITU Secretary-General.

India has come a long way from the 56 kbps Internet connection in 1990s to a 2 mbps connection today. But the quality of service and reach still remains a challenge. The government's efforts will have to be supported by the private sector. Successful voice telephony in the country has transformed the lives of many and has had a positive effect on the country's economic growth. The challenge is to replicate that success in broadband.

In the National Telecom Policy, 2011, the union government is likely to make available broadband on demand by 2015 and nurture an ecosystem to achieve 175 million broadband subscribers by 2016.

The country needs both wireless and wire line telecom infrastructure to reap the benefits of broadband. A clear policy, an effective execution and an attractive market are necessary for broadband to be successful in India.

Click here to view telecom and broadband graphic


(This story was published in Businessworld Issue Dated 22-08-2011)