India’s broadband dream looks more gloomy than “fantastic,” with companies backpedaling after having done a lot of math. According to an IDC report, there are only about 30,000 broadband customers in India, which is a tough reality for companies that have invested more than $8.5 billion into the concept.

Last year, Reliance architect Dhirubhai Ambani described Reliance’s project as the “change India” project. It was to be a 115,000-km fiber backbone covering 115 cities across 12 states. But now the company is reworking the business model to push through the competitive market. Reliance officials say they are in stealth mode, and are only looking at India’s top 25 cities that can really fetch some revenues, rather than blindly lay fiber optic cable.

The broadband dream has now become more distant in India. Spectranet chief executive Atul Punj was flying high this time last year. He was at the helm of a company that laid 600 km of fiber in Delhi, Bangalore, Ghaziabad, Gurgaon and Noida. But then Punj realized only six months later that the broadband game was only for those who had deep pockets. With all the money drained, he’s busy pitching a buy-out deal to the big boys of the game: Reliance, Bharti and BPL.

Joint Ventures Fail

Surprisingly, the firms that entered into joint ventures to strengthen their financial muscle are also backing out. The joint venture between Satyam Infoway and RPG Netcom to provide broadband Internet services in Kolkata through a cable network has fallen through. In Maharashtra, Enron is set to withdraw from its optical fiber venture with the Maharashtra State Electricity Board (MSEB). World-Tel had parted ways with Reliance Infocom early in their partnership. The proposed PowerTel — a tripartite venture between MSEB, Enron and Global Telesystems — was to lay an optical-fiber cable network covering 5,000 km in Maharashtra, but now it seems the project will not see the light of day.

A major reason for foreign players bailing out of Indian broadband projects has been the bribes demanded by local government and municipal officials in the areas where the fiber optic cables were to be laid. What was a technology and infrastructure problem rapidly became a real-estate game, disillusioning the foreign partners, who were unwilling to participate in illegal bribing activities that would have lead to potential scandals followed by extended litigation.

Mission Impossible?

But laying fiber across the country is not always hassle free, says T. H. Chowdary, information technology advisor to the government of Andhra Pradesh. “It would certainly take years to build a national communication backbone. India’s broadband dream is not shattered at all. In fact, Indian businesses are hungry for more bandwidth. The companies need various approvals from the municipal corporation, public works department, telephone department, etc. And the government has been supportive to the companies that are laying ducts by easing the regulations and procedures,” says Chowdary.

“We are not on a mission impossible,” says a Reliance official, on condition of anonymity. “The trend is to lay the top-of-the-line DWDM (dense wave division multiplexing) networks that allow maximum traffic through the fiber. Reliance, Hughes and Bharti are all in the race for DWDM capability. We are betting on the fact that traffic volumes are bound to grow. There are teething problems and we are coping with it.” The companies are not sure when they are going to achieve breakeven.

Different Business Model

With companies stressing traffic volumes, the price is going to be very high when it finally reaches the customer. And the big question is quality. Interestingly, each one claims that its broadband technology — DSL, fiber or satellite — is superior.

“Companies with a long funding arm coupled with a sound technical background will have absolutely no problem in deploying these networks. The advantage for Bharti, which is into satellite broadband services, is that it need not be present everywhere like DSL to offer broadband services,” says Sunil Mittal, CEO of Bharti.

The best bet for broadband companies is to look for business customers. Bharti and Reliance are looking up to multinationals to transmit huge data across the world.

But there is no broadband business model that has worked out successfully elsewhere in the world. Even in the United States, companies like AT&T are struggling with losses. “We are all groping in the dark as we don’t have any readymade broadband success stories from U.S. counterparts. We are in the experimental stage, and things would show up only after a couple of years,” says Mittal.