Thursday, November 13, 2008
In India, the Internet and the bandwidth crunch go hand in hand. According to Dewang Mehta, president of the National Association of Software and Services Companies (NASSCOM), “To meet this demand, practically all components of telecommunication technologies are turning digital with the price-performance ratio halving every 18 months. Thus, high bandwidths are increasingly emerging as the standard for networking applications.”
Three key international trends are expected to trigger bandwidth expansion in India: an increase in capacity, a drop in telecom costs and more demand for applications. “Submarine fibre optic capacities for both Trans-Atlantic and Trans-Pacific routes are expected to increase four- to seven-fold by 2001 compared to 1996 levels. This would result in easing bandwidth in India,” Mehta says.
A recent NASSCOM survey found that total international bandwidth through submarine cable, available with VSNL through FLAG, is 10 gbps. An additional 20 gbps comes from SMW3 (Sea-Me-We-3).
Key Segments
Key industries that will demand a lot of bandwidth are: financial services, government (including banks), retail trade, education, entertainment and infotech.
In recent weeks a flurry of broadband plans have been announced by corporate heavyweights like Reliance and BPL Innovation and by government undertakings like Power Grid Corporation and Indian Ministry of Railways.
BPL plans to spend $1.5 billion in the next two years. Reliance Industries Ltd., India’s leading corporate group, said it would deploy an optical fiber backbone across 115 Indian cities at a cost of $7.7 billion. Hughes Telecom and Lucent are jointly wiring up Maharashtra. And even state-owned Power Grid Corporation is planning to deploy a $1.13 billion, 50,000-km optical fiber backbone nationwide over the next four years.
“The Internet penetration must rise through increased bandwidth for access and lower access charges. National Internet Backbone (NIB) is expected to play a major role in the growth of IT-enabled services. Supply of bandwidth needs to automatically precede the demand,” says Mehta.
By 2008, an estimated 2.5 million employees will be working in IT companies in India. Total connectivity required from India for IT companies alone would exceed 50 gbps.
The total international bandwidth available for the Internet through the gateways of Videsh Sanchar Nigam Limited, India’s premier Internet service provider, is 325 mbps.
High Price
Indian prices for leased lines and switched data services appear to be generally higher than US or European prices for comparable services. Given the global trend of falling telecom rates, the gap between India and the rest of the world can only widen, unless the Indian government takes adequate and timely steps.
According to NASSCOM’s survey, the international and domestic bandwidth requirement in India by 2005 is expected to reach 300 gbps, from the current 10 gbps.
Jasjit Sawhney, CEO of the Mumbai-based ISP Net4India, “Broadband services will not be mainstream for some time (18 months+) and most significant service providers would have a migration path to broadband services very clearly figured out.”
Net4india is concentrating on fixed wireless broadband access services. For the first time a number of new operators are looking to provide data and related services using a range of new technologies, including data casting, the 3G mobile and satellite services. The government, meanwhile, is also looking at more mechanisms for meeting community obligations, which are likely to have a beneficial effect on the provision of services to regional India.
Limitations
The biggest regulatory limitation is that Indian companies are required to obtain special approval to offer international centralized voice call centers over leased circuits. Moreover, voice over IP is not yet permitted in the country.
Despite broadband being the latest buzzword in the Indian access market, it’s not clear what growth strategy these service providers are employing and what prospects they see for the future. According to Sanjiv Mittal, CEO of Bharti BT, which is looking to provide satellite based Internet access, the major roadblocks to the deployment of broadband are government policies. “The government should remove license fees for providing Internet access via satellites. If an ISP provides broadband access via DSL, or leased lines, or co-axial cable or fiber, he does not pay any license fees to the government. So why impose license fees for the same service via satellites? And this service can provide Internet access anywhere in India, in remote towns or villages because satellite communication can be deployed immediately and the quality of service is independent of location or distance from the hub.”
“The major issue today is that there are different licenses for individual services with lots of restrictions and conditions,” continues Mittal. “For example, VSAT license is restricted to 64 kbps, a restriction, which makes no sense in the current environment of broadband and data connectivity. Also, VSATs cannot carry the traffic of telecom companies or ISPs, again creating unnecessary policy bottlenecks. Currently, even for Internet access, VSATs cannot be deployed. If the convergence bill is passed, and the government makes various telecom licenses technology neutral, several new initiatives can be deployed.”
What’s Ahead in Broadband
Following is a sneak preview of the impending broadband revolution in India and some of the major movers and shakers:
Reliance Industries: The Indian petrochemical giant that alone contributes more than one percent to India’s GDP has both the vision and the infrastructure to implement its ambitious plans. It has plans for a $7.7 billion optical fiber network through Maharashtra, Karnataka and Tamil Nadu. Its subsidiary, Reliance Infocom, will lay an optical fiber backbone connecting 115 cities.
Enron: The company is pursuing opportunities in broadband data networks, data centers and broadband applications. This envisages a backbone of high-speed data carrying capacity networks across the country linking up six major metros initially (i.e. Mumbai, Delhi, Ahmedabad, Bangalore, Hyderabad and Pune) and later extending to other cities. “Enron is unleashing the distribution power of the global Internet,” says Joe Hirko, CEO of Enron Broadband Services. “Webcasting cricket tournaments is one example of the high-bandwidth entertainment, communications, and business applications made possible by our network,” he adds.
Enron, Global Telesystems and the Maharashtra State Electricity Board (MSEB): The three are jointly developing a 5,000-km fibre optic link across key towns and cities in Maharashtra. Sanjay Bhatnagar, chairman and CEO of Enron India, says, “This is the age of technology and our project is an exciting new venture. This will be centered on providing integrated and complete end-to-end broadband capacity and applications.”
The Rajan Raheja Group: The group has invested aggressively in infrastructure and is providing content through its two companies Hathway Cable and Datacom Pvt. Ltd., and through Asianet Satellite Communications Ltd. Hathway provides Internet access via cable modems in Mumbai, Pune, Delhi, Bangalore and Chennai. Star TV recently bought a 26 percent stake in Hathway.
Bharti BT: Incorporated in 1995 Bharti BT is a 50/50 joint venture between Bharti Telecom and BT (British Telecommunications Plc.). It provides satellite communications services to businesses. It also operates mobile service under the name AirTel. It achieved a turnover of Rs. 260 million in 98-99. Its portfolio of services includes TDMA, PAMA/DAMA and Hybrid VSAT services based on the Scientific Atlanta (SA) platform. Intel recently picked up a 20 percent stake in Bharti Telespatiale for $10 million. The firm is backed by high profile venture capitalists, including Warburg Pincus. Bharti BT in particular is looking at broadband Internet services using satellite.
Although most companies are not really sure how to move up the customer value chain, all are certain of one thing: an access revolution is brewing in India. Moving up the customer value chain will not only bring more revenues. It will also create a brand image in the minds of consumers.
(With inputs by T. Radhakrishna and Bhavish Sood from Mumbai)
