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Digital Revolution in India

Tuesday, March 8th, 2011
broadband

Can the Indian government declare 20102020 as the Digital Decade and achieve fresh broadband targets?

Considering the mobile phone surge in India, which boasts around 8-9 percent GDP growth, the performance of the broadband segment is dismal. Despite the known benefits of broadband, India had just 10.29 million broadband connections in the country at the end of September 2010. The main broadband growth is still coming from urban areas and the rural population is a neglected one.

The Indian broadband revolution has a history of more than six years. The revolution started following the announcement of a broadband policy in 2004 by the telecom regulator TRAI (Telecom Regulatory Authority of India). The Broadband Policy 2004 set a target of 20 million broadband subscribers by 2010. Thanks to our lack of focus, the country missed its 2010 target.

The Telecom Ministry, which is undergoing too many challenges in the wake of the 2G spectrum scam probe, is yet to announce a broadband target for 2020. The industry may be okay even if it does not have any target, but the country can not afford to miss 100 percent broadband penetration. Can we have “broadband for all”?

According to TRAI, the net broadband addition per month is just 0.2 to 0.3 million in contrast to around 15-18 million mobile connections per month. Mobile took off because the telecom sector could remove the entry barriers. Costs came down in recent years to further support the growth. Plus, operators enjoyed great incentives from the government.

Indian operators did not focus on the broadband market despite the potential that the access market offers to the country’s economy. A World Bank report says that a 10 percent increase in broadband penetration helps in increasing the GDP of a developing country by 1.38 percent. The European Commission estimates that broadband can create more than two million jobs in Europe by 2015, and an increase in GDP of at least EUR 636 billion. According to a study in Brazil, broadband added up to 1.4 percent to the employment growth rate. In China, every 10 percent increase in broadband penetration is said to be contributing an additional 2.5 percent to GDP growth.

Spectrum management and reduction of administrative barriers to network expansion will be key enablers of mobile broadband in South Africa, according to Analysys Mason’s latest findings published in a report for the GSMA.

The report forecasts that mobile broadband and related industries will generate 1.8 percent of South Africa’s GDP (ZAR 72 billion) and as many as 28,000 jobs by 2015, highlighting the vital contribution of this sector to the country’s growth.

“The challenge for policymakers, regulators and operators is to ensure that data access becomes faster and cheaper, and a critical part of this is responsible spectrum management,” explains Robert Schumann, Manager at Analysys Mason.

Had we taken care of our broadband network, we could have enjoyed a better GDP. Thanks to their efforts, countries such as China and the U.S. have done well. China and the USA had about 120 million and 85 million connections respectively by June 2010 as compared to India’s 10 million. In India, the industry is disputing the number of mobile subscribers since many operators are sharing the number of SIMs sold in the market and several scores of subscribers are not active users. Is the 10 million broadband user-base real?

Global Broadband Markets

According to ITU, while high-speed Internet access is now available in almost all countries, fixed broadband penetration in the developing world remains as low as 3.5 percent compared to 23 percent in developed countries.

India has been trying to catch up with several global markets and ensure that it will be a superpower in the next 10-20 years. It has set several benchmarks which can not be broken by many nations. But in the Network Readiness Index, India is nowhere. As per data available from the World Economic Forum, India is ranked 43rd out of 133 economies in the Network Readiness Index (NRI) during 2009–2010. The only silver lining is that the country has an impressive 11th place improvement since 2008. But it’s not enough for improving the broadband subscriber-base and giving access to all.

Besides this, India is in 22nd position among 133 countries in Government success in ICT promotion. We need to do more to improve our ICT promotion and broadband access to ensure broadband is for all the 1 billion plus of our population.

China is becoming our role model for mobile phone growth. India is the 11th biggest economy in the world and second fastest growing behind our rival China. According to a study by Morgan Stanley, Indian GDP is likely to grow at 9-9.5 percent over 201315. This will be a remarkable period for a matured, but developing country like India. The middle class population will support the ICT growth in the country.

Several leading nations such as the US, Japan, Australia, Canada, Portugal, South Korea, Germany, Singapore and Finland have identified broadband as a growth area. Most of them have witnessed exciting broadband growth in the recent past since many of them are considering broadband as a potential infrastructure for national economic and social growth. They have invested in broadband after developing national plans for creating a nationwide broadband network for reaching the unconnected areas. India is currently discussing the national broadband plan and is expected to meet its new goals over a period of time. Broadband for all will depend on the country’s regulator’s latest broadband guidelines. These guidelines can be modified depending on the further debate / suggestions from the telecom ministry.

India is yet to adopt a strong model for broadband growth. That’s why Indian operators such as BSNL have subscribers in the queue to get broadband access. Look at Korea. It can be the benchmark for a country like India which is struggling to convince the operators to tap the rural broadband market with cost effective solutions. The Korean government launched Cyber Korea 21, a program that offers cost effective IT education to groups like housewives, the elderly, and the disabled. To support this, Korea had also announced e-government programs, investing US$ 24 billion in a national fiber backbone that provides more than 28,000 government departments and agencies with fast broadband access.

For some countries broadband access is a life line. For instance, Finland has declared Internet as a legal right.

Broadband for all: What It Can Do?

According to a recent FICCI-KPMG Report ‘Broadband for All’ reveals that telecom companies, whose operating margins are under pressure due to usage of multiple SIMs, multiple tariff corrections and rising competition, are keenly awaiting the rollout of 3G and BWA services. According to FICCI, the present phase is exciting for the telecommunication industry. The industry feels that 3G and BWA rollout will help reinvigorate the aggressive growth that the industry has witnessed in the past two years. “The rural market is expected to drive the next round of growth for the voice-based services, while data services will create the much needed churn within the maturing urban markets,” Amit Mitra, Secretary General, FICCI, said.

“Improving broadband penetration in the country has emerged as the need of the hour. Strong government support coupled with key initiatives from the private operators will help ensure connectivity for the remotest parts of the country and will further the government’s agenda of providing basic healthcare, banking and e-governance facilities to all,” Romal Shetty, Head of Telecom, KPMG India.

The primary aim of the ‘Broadband for All’ movement is to ensure that all Indians are able to connect with the world and are able to remotely access basic facilities like health, education, banking, commerce, entertainment, utility and e-governance services to enhance their quality of life, according to KPMG.

Can it deliver?

The Indian market has huge potential if the government has the right policies. According to TRAI’s broadband policy recommendations, the broadband growth is slow and biased in favor of urban areas. More than 60 percent broadband subscribers are in the top 10 metros and tier-I cities and over 75 percent connections are in top 30 cities. Around 5 percent of the connections are in rural areas which is very low as compared to 31 percent of total mobile telephone connections in rural areas. Internet services through non-broadband connections have penetrated well in smaller cities and towns (with populations of less than 0.5 million). In these cities, Internet usage has grown from 5 percent in 2000 to 36 percent in 2009. Smaller towns have overtaken the top 8 metros in terms of Internet usage.

India needs huge investments. The U.S. and U.K .governments have committed huge funds for broadband development. Since many private service providers are going slowly on their broadband roll outs in India, the investment should come from the government. “The investment to roll out broadband network (core/middle-mile and access infrastructure) to cover all 250,000 villages in India will be Rs 39,700 crore,” according to Analysys Mason report.

A GSMA study says that increasing broadband penetration by 1 percent will contribute Rs.162 billion to India’s GDP by 2015. There are several hurdles in the way of achieving the growth. Delivering widespread mobile broadband access across rural and urban areas of the country will be important for the government to reach its national broadband target of 100 million subscribers by 2014, especially as India has already missed the 20 million broadband user-base target for 2010.

“India is one of the growth markets for mobile broadband. GSM-based Mobile Broadband technologies have built a global ecosystem and vast economies of scale that will deliver affordable internet access, spanning rural and urban areas of India,” said Jaikishan Rajaraman, Senior Director, Asia Pacific, GSMA.

According to Analysys Mason, allocating an extra 5MHz of 3G spectrum per licensee could increase mobile broadband penetration by more than 35 percent, resulting in 160 million 3G users by 2015. This will also increase broadband penetration by 3.3 percent which will result in an additional Rs. 538 billion to India’s GDP by 2015. By this time, mobile broadband could contribute Rs. 2,190 billion to the domestic economy.

To ensure that broadband is consumed by all in the next few years, the government can step up its efforts on ICT education. At present, around 14.25 percent schools have computers, while only 6.01 primary schools have computers. The industry feels that all the upper primary and higher secondary schools may have computers by 2012. All these schools will require at least 2 Mb broadband connections. India needs more visionaries to support broadband growth.

DETAILED BRIEF

India is looking for broadband for all in the next few years. This can be done if the government steps up its investment in broadband, releases spectrum as per operator needs, offers incentives to equipment vendors, ensures affordable gadgets and Internet packages to consumers. The present system is not encouraging operators to go for massive roll outs. BWA and 3G may be helpful to achieve its next goals. There are several overseas countries which have implemented national broadband plans. Korea can be a benchmark for India.

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