India Broadband Forum

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Broadband on narrow wicket (Business Line Monday, Sep 18, 2006)
By Kripa Raman


Sometimes, moving a kilometre is only as good as moving an inch. As in the case of broadband services that private telecom operators want to offer us at our doorstep. A status scan.
With BSNL and MTNL not willing to share their last mile, private players are left with two choices: fork out a colossal amount and lay a fresh last mile network or haggle with the local cable operators.
Seen a nice advertisement for broadband connectivity from Videsh Sanchar Nigam Ltd and called up one of its sales agents or filled in your details on their Web site?

There is a good chance that you will be called up and told that they are still talking to your local cable operator and that as soon as they are able to hammer out a deal with him, they will call you up again.

Heard about Reliance Communications' broadband plans? Well, they don't have a service for homes yet. But what about all the fibre they were laying, cutting ducts all across the city? They are for enterprises, you will be told, eventually they may reach you too.

The incumbents, public sector Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd have connected almost 200 districts with broadband and have their own last mile network, having over 4 crore fixed line customers (of which only 10 per cent of the network is capable of carrying broadband). They refuse to unbundle their last mile network for private players. `Unbundling' means allowing the last mile to be used by private players.

India had over 1.3 million broadband subscribers as on March 31, 2006 (still well behind the Telecom Regulatory Authority of India's target of 3 million by December 2005) out of which 4 lakh belonged to private players. BSNL had 5.86 lakh broadband subscribers and MTNL over 2 lakh. As of July 2006, TRAI figures show 1.70 million broadband subscribers; analysts say the private-public sector proportion must be roughly the same as in March.

Bharti, VSNL plans

With BSNL and MTNL not willing to share their last mile, private corporates in the broadband business are now left with two choices: to fork out a colossal amount in capital expenditure and lay a fresh last mile network (the final leg of connectivity that actually connects to the customer's home); or, to struggle and haggle with the local cable operators.

Bharti Airtel has decided to lay its own network. It provides DSL broadband and fixed telephone services in 92 cities across the country, with an aggregate of over 1.59 million customers and 3.97 lakh broadband customers as of end of August 2006. (This, according to sources, includes a component of SME customers as well, and not just residential customers).

The rollout of the last mile being expensive, it is selective as well. "We have looked at rolling out our network in high-yielding segments and our focus is on providing world-class services for a rich broadband experience, backed by a host of value-added services such as gaming, music downloads and video postcards," says a spokesperson.

According to its results statement for the first quarter of the current fiscal, Bharti Airtel has spent Rs 4,003 crore on broadband and fixed line services so far. In the quarter ended July 2006, its investments in this area were Rs 304 crore in existing circles and Rs 92 crore in new circles. VSNL might also go for an expensive option. Its capital expenditure of Rs 1,000 crore for the current fiscal might go up by another Rs 1,000 crore depending on how its retail broadband plans pan out, says an official.

These are huge investments that VSNL and Bharti will take time to recover, notes an analyst. For now, VSNL has tied up with 2,000 cable operators across the country and has over 1 lakh retail broadband customers. (Reliance Communications also, at one time, considered the cable option, currently its exact plans are not known.)
`Not a sustained model'

Tying up with cable operators means augmenting their technology, laying one's own network over or along the operators', and working out a contract on how revenues will be shared.

"Although many local cable operators have consolidated under Multi-Service Operators, they don't function as one when it comes to broadband, and agreements have to be made with each Local Cable Operator (LCO) separately," says E.V.S. Chakravarthy, CEO of YOU Telecom (earlier Iqara Telecoms India), a unit of British Gas. "This can't be a sustained model for a large pan-India company," says a senior official with one of the two largest telecom companies in India. "The building society may say we don't want your switch located here. Another cable operator says this building is my area. Then a dispute arises." To have only 1.7 million broadband connections in a country where there are 300 million young people `is pathetic,' he says. And we are nowhere close to any of the targets which themselves are highly conservative (3 million customers by December 2005).

No dearth of fibre

The sad matter is that India is not lacking in fibre otherwise. Internationally, Reliance and the Tatas, with their global acquisitions, are in control of massive bandwidths. Nationally, Reliance Communications, Bharti, BSNL, Gail, Railtel and PowerGrid and VSNL have their fibre networks. Reliance Comm says it has a 60,000-km network and VSNL over 40,000, both owned and leased. There are even 15 to 20 major cities where more than one intra-city backbone exists. Bharti, Reliance and VSNL have laid a lot of intra-city networks and metro-rings. "Now let us say we have got to the suburb Andheri in Mumbai, how do we get to the homes in Andheri?" asks a senior official with one of these companies. This is the expensive part.

In Mumbai, for instance, digging of roads, acquiring right of way, relaying roads, society permissions could make for expenditure of Rs 20-25 lakh.

Mumbai would require about 1,000 such km of network, that would mean Rs 250 crore. And, how many multiples of Rs 250 crore would a pan-India operator such as Reliance, VSNL or Bharti have to spend if it wants to be present in even 20 to 30 cities, asks a telecom analyst.

An isolated instance

Worldwide there is no instance where creation of new wireline networks drives broadband and each interested operator is laying his own last mile, says Srinivas Addepalli, head of Corporate Strategy at VSNL. "Most countries that have high broadband penetration have either unbundled the local loop and/or have an organised, robust cable infrastructure. Unfortunately in India, we have neither. Our partnership with cable operators has been reasonably successful because it is enabling us to reach end customers in some territories. However, there is a lot that needs to be done before we can achieve desired milestones and benchmarks." So the irony is that with 500 km of fibre in Mumbai alone, a company such as VSNL is not able to reach its customer easily.

`Cable strategy working'

Strangely, it is those players who are not in the telecom access space (mobile, fixed line, long distance) who say their cable strategy has been successful. Sify, with the largest private broadband subscriber base of over 2 lakh in 90 cities, is one company that says that its cable strategy is working. "I think we understand this business best because our specialisation is Internet Protocol, we are not a telecom operator whose primary business is voice," says a senior official with the company. Broadly, cable operators do observe `gentlemen's agreements', he says.

Where the network is not good enough, Sify does the network itself, but with the help of the cable operators. Sify has networked over 171 cities, and is adding broadband 20,000 subscribers every quarter. Chakravarthy of YOU Telecom also says that the cable strategy is reasonably successful. YOU has 1.3 lakh connections in 10 cities and wants to expand to the top 22 cities and is adding at 8,000 a month. YOU, with the cable operator, lays a hybrid fibre and coaxial network and is already offering Internet telephony, gaming and other value-added services. It is investing Rs 90 crore this year. Hathway also claims to be reasonably successful.

Singapore model

Almost every operator in the country is also experimenting with WiMAX (Worldwide Interoperability for Microwave Access) standards technology for delivering last mile as an alternative to cable and DSL.

"But for us this can only supplement our wireline broadband because it cannot deliver those speeds," says said Mr. Addepalli of VSNL.

Reliance Communications is keeping its plans close to its chest. Sources said something might come up `some time next year.' something the company has said every year for a couple of years now. Technology experts said it is experimenting with Canopy, part of Motorola's MOTO wi4 wirless access solution that enables cable operators to quickly deploy wireless extensions to their existing networks, that integrates a `hardened modem' and a pre-WiMax access point hat can perform in all outdoor conditions.

Operators say that the Government should do what Singapore is doing. Call bids for one entity to lay the most modern and scaleable infrastructure available and allow other operators to ride on that infrastructure.