November - 2000 - issue > Cover

In India, the height of frustration these days is waiting 15 minutes to check Yahoo mail, even when one has set the browser to not display any animation, audio, or video. And this problem plagues not just home users on dial-up connections; executives at corporate offices face much of the same. It is well nigh impossible to operate on three to five dial-up accounts for 50-plus employees. Leased lines, the faster options, are often down. Without any service agreements with Internet service providers, quality of service is a myth, leaving corporate and home users at a complete loss. All of these indicators point to the painful truth that India’s tryst with being part of the online future falters in the face of acute lack of sufficient bandwidth.

Growing Demand

out of Step with Supply

Indians signed on to the Net for the first time in August 1995 when Videsh Sanchar Nigam Limited (VSNL), a government monopoly for international telephony, launched India’s first Internet services. By late 1998, although India had opened up its ISP segment to private players, bandwidth still remained under VSNL’s monopoly. Unlike the earlier examples of licenses, high entry fees and strict regulation in terms of number of players in a segment, the ISP policy was a watershed in India’s policy-making history. The ISP policy announced that there would be no fee for the first five years and a token fee of Re. 1 for the next five years. This policy ushered in the expected: Companies big and small moved in to become ISPs. Since late 1998, the number of ISP wannabes has grown to 397 while 72 players have actually started their services.

However, VSNL’s bandwidth-providing capacity remains slow. In the past year, for example, the country’s sole bandwidth provider has ramped up its capacity to 325 MB. Fuelled by increased Net usage in the country, falling access costs due to competition among ISPs, and continuous demand for improvements in access speeds, the demand for Net access has exceeded expectations, growing by 100 percent year over year. This unprecedented growth has crimped per capita bandwidth availability at as low as 4 Kbps. Compare this with the per capita US consumption of 2 MB.

Plus, the high rate of growth in India’s Internet usage will ensure unabated growth in demand for bandwidth. Nasscom projects a demand for 10GB by the end of the year, an awesome figure that will leapfrog 300 percent to about 40 GB over the following year. According to a recently released report, “Indian bandwidth requirement for Internet services (2000-2005)” by Frost and Sullivan, demand is pegged at 2.4 Gbps by the end of March 2001, up from 1.3 Gbps in March 2000. These projections take into account only the bandwidth requirement of ISPs and the provision of Internet services, and not the demand from data centers and IT exports segment, as assumed by Nasscom. VSNL’s current Internet bandwidth holds steady at 325 Mbps.

Delays in Relieving Scarcity

Can VSNL, which claims that it takes about 153 days to procure international bandwidth, be blamed?

According to a high-ranking VSNL official who spoke to us on the condition of anonymity: “The huge time lag is due to adhering to the rules and regulations set up by the government.” Since private players are not legally allowed to negotiate directly for their bandwidth requirement with India’s only submarine cable entity (FLAG), and must instead route their demand via VSNL, it’s easy to understand the huge bandwidth scarcity in the country. Says R. Ramraj, managing director and CEO of ISP Satyam Infoway, “We have seen time and again that government control of infrastructure results in delays and insufficient supply to meet demand.”

The bandwidth scarcity also ensures “artificially” high prices in India, making it one of the high bandwidth cost regions in the world. The cost of one STM-1 (155 Mbps) link from India to the UK ($25 to $28 million) is 14 times higher than a link between the UK and US (which costs only $2 million). Another reason for the high price is the low volumes India (read VSNL) purchases from the international market. Internationally, the trend is that as volume increase, price decreases. For example, in the US, coast-to-coast connectivity of 56 Kbps costs around $600 to $1,000 per month. The cost of a 1 MB link is about $4,000 per month. In India, however, private players pay Rs. 4.2 million ($93,000) for a 2 MB shared circuit. For a cleaner International Private Leased Circuit (IPLC), the cost moves to upwards of Rs. 15 million for a 2 MB circuit. The steep cost stands out especially sharply when one considers that private players are promising to bring down the cost to about Rs. 200,000 per 2 MB.

The Indian government now permits private players to set up their own Internet gateways and also negotiate with the satellite players for bandwidth. Allowing companies to bypass VSNL in this manner is bringing down costs of private ISPs. Atul Kanwar, CEO of Bharti BT Internet agrees, “Bandwidth through the gateway has scaled down bandwidth costs by over 50 percent against the cost of a dedicated IPLC through VSNL.”

Says Ramraj, “International gateways are only part of the answer, due to their speed and capacities. What India will need is a quantum jump in high-speed, high-quality bandwidth through submarine cables in addition to satellite gateways.” However, the only submarine cable with landing stations in the country, FLAG, has an agreement with VSNL. It is hotly disputed whether FLAG has the ability to negotiate with private players (See side bar).

The bigger issue facing a country trying hard to increase its Internet penetration is the lack of a good domestic infrastructure. While in the US and the UK private players are setting up a robust national Internet backbone, India is still struggling. Other Asian countries like Singapore and Malaysia have deployed a state-of-the-art national Internet backbone (NIB) within their countries. Although the Department of Telecommunications (DoT) was charged with building a NIB to be completed by January 2000, the much-hyped project now seems to be in limbo. Moreover, if and when it is completed, the NIB will not provide a long-term solution to the growing Internet needs of India. For example, although VSNL would typically require an STM-2 link (155 Mbps) to connect its international bandwidth to domestic points, the NIB has provision for only 34 Mbps on the major routes. Says Mehta, “Thus there is a complete mismatch between demand and supply of the Internet in India.”

Indeed, the demand for international bandwidth could be considerably reduced if India had her own strong high-speed backbone. In this event, a majority of the demand for e-mail and Indian Web sites could be routed within the country with lesser reliance on international bandwidth. Comments Mehta, “Our projection of 300 Gbps by 2005 can come down by about 100 Gbps if we have a good internal infrastructure.” Private telecom players who are wiring up the various states with optics have accepted the task of wiring the country. Although this will go a long way in solving local bandwidth issues, it will take some time before the whole thing can actually take off. Says Sharad Jain, country manager at Teleglobe, “The existence of a broadband domestic Internet network is essential to growth of the Internet in India as well as it is a must for solving the bandwidth problem.”

Can India React Quickly?

Because bandwidth is a serious issue, policy makers are only too aware of the problem. According to a report by Nasscom-McKinsey, India could lose well over $22.5 billion in revenue and more than 650,000 jobs if adequate and reliable bandwidth is not provided in time. Furthermore, India can potentially lose its right to compete in at least 30 percent of its target export markets because of the inability to link with the global telecom infrastructure. Says Ramraj, “The opportunity loss for e-commerce if the bandwidth problem is not addressed on a war footing will be enormous for commerce with other countries as well as within the country.”

The problem is not that the government isn’t doing anything. Recently, in fact, it set up a high-power committee to ascertain the burgeoning demand for bandwidth and leased circuits in the country. In addition to overseeing and forecasting demand for bandwidth, the committee will assess availability of bandwidth, both international and domestic, and recommend steps that should make up for any shortfalls. On the international bandwidth front, it is just a matter of time before we gear up to the actual requirements. By December 2000, VSNL is expected to ramp up its international Internet bandwidth from the current 325 Mbps to 775 Mbps. The government has also allowed private players to negotiate directly with satellite players, and recently, permitted private ISPs to have their own cable landing stations in India for international submarine cables. Says Jain, “The bandwidth situation in India, especially for ISPs, is undergoing change.” VSNL too has been gearing up to meet the challenge; recently it announced ‘bandwidth on demand’ for private ISPs. Private players like Bharti BT, Dishnet, Reliance and Enron are exploring the option of setting up their own submarine cables touching India.

However, the bigger issue remains the domestic bandwidth problem and challenges of setting up the NIB. The government’s announcement regarding opening up the national long distance to private players may be a long-term solution for India’s domestic bandwidth requirement.