|Topic:||Broadband, a revolution-in-waiting|
|Title:||Vice President, Corporate Strategy|
Srinivasa Addepalli is VSNL’s Vice President for Corporate Strategy, responsible for formulating and executing strategy at this international telecommunications services provider. He is also responsible for Regulation and Media Relations at VSNL. Mr. Addepalli is also a Director on the Boards of VSNL International and a few other VSNL subsidiaries. Mr Addepalli has considerable experience in developing strategies and business plans, particularly in the Indian telecom sector, both wireless and broadband. Prior to joining VSNL, he co-ordinated the various telecom activities within the Tata Group for the Tata Group Chairman’s Office. Mr Addepalli had previously served as a Senior Consultant in the telecom and media practice at the Tata Strategic Management Group. Mr Addepalli holds a Master’s degree in Business Administration from the Indian Institute of Management, IIM, Ahmedabad.
From business process outsourcing to education, broadband is seen as the way forward for India’s development and growth. Despite extraordinary gains in the telecommunications sector, mostly in wireless communications, broadband growth is limited to some 100,000 lines per month – far below the rate needed to catch up with countries such as China. India’s poor access infrastructure and the lack of a forceful government policy pushing broadband network growth are the main obstacles to the aggressive broadband roll out needed.
Several thousand BPO, business process outsourcing, outfits are being opened in small and medium towns across India, providing employment to millions and reversing urban migration. On election day, citizens all over the country login to a secure portal at their convenience – from homes, offices, cybercafés, schools, kiosks – to cast their votes. Every Friday, movie producers reach out to a billion-strong audience in several thousand theatres with their new releases, without having to worry about prohibitive print costs and piracy. Dream or reality? What separates the two is the availability of a nationwide, robust and affordable broadband network and a suite of appropriate services and applications riding on that network. What are the issues and how can we provide an action plan to turn the dream into reality? India is marching confidently into the future. With a GDP growth rate of nine per cent, and the promise of double-digit growth soon, it appears inevitable that India will emerge as one of the largest economies in the world, perhaps by the end of this decade. Record foreign investments – both inflows and outflows – have positioned ‘India Inc.’ as an integral part of the global economic equation. The past five to six years have been characterized by considerable improvement in the quality and reach of infrastructure, although it can be argued that infrastructure investments have not kept pace with investments and growth in other sectors of the economy. Telecom subscribers have increased from less than 30 million at the turn of the century to over 190 million – a six-fold growth in six years. Nearly 5,000 towns are covered by wireless signals and tariffs are amongst the lowest in the world. There are at least four national optic-fibre backbones that cover most parts of the country, and the eight submarine cables that land in India have nearly one terabit of available capacity. If there is one statistic that shows that India is lagging far behind international benchmarks, it is broadband penetration. There are only two million broadband subscribers in India – a penetration of just 0.2 per cent. With the current rate of additions (100K per month), it is unlikely that India will catch up with China’s 75 million broadband subscribers anytime soon. Why is India, an IT powerhouse and aspiring global superpower, doing so poorly when it comes to broadband penetration? The major reasons are not hard to find: • poor access infrastructure; • policy (non)initiatives; • broadband wireless spectrum policy; • regulatory and fiscal support; • national fibre-based broadband network; • eco-system of service providers; and, • rural broadband networks. Poor Access Infrastructure – It is evident from studying countries with high broadband penetration that high fixed line density with local loop unbundling and/or a robust cable infrastructure are prerequisites. India has a fixed line density of just under four per cent, and unbundling has not been implemented although the regulator recommended it two years ago. Largely unregulated and unorganized, the cable industry in India is a tribute to the entrepreneurship of several thousand operators who have created 60 million cable homes in just over ten years. However, it also speaks loudly of the poor quality of the cable plant that requires an estimated US$5 billion investment to make it two-way and digital. The recent regulatory interventions and the entry of direct-to-home satellite TV could encourage restructuring, consolidation and investments in the next few years. Policy (non)Initiatives – The focus on improving the mobile market has led to a neglect of the fixed access network, both by the operators and by policy-makers. The incumbent operators have focused all their attention on creating their cellular infrastructure at the expense of fixed line connections. While the national broadband policy aims to provide a broadband connection with a minimum of 256 Kbps velocity to 20 million people by 2010, there have been no policy measures to promote the creation of broadband infrastructure. Wireless broadband, which could have been used to roll out networks economically and rapidly, is still mired in uncertainty over the spectrum policy. Lack of sufficient spectrum and the possibility that spectrum allocation will be in bands that are not globally harmonized, create further difficulties. Is the dream really worth the effort it will take to resolve the issues and constraints outlined above? Preliminary indications from various projects seem to suggest an optimistic outlook for broadband and the benefits that it can provide. During 2006, nearly five million passengers booked their tickets online (up 150 per cent from 2005), potentially freeing up at least two million man-days in wasted time. Given that nearly 400 million passengers reserve their tickets annually, online ticketing could add over US$500 million in value to the Indian economy. The GramIT project has created employment for a few hundred villagers in three Andhra Pradesh villages, a model that can be extended to many of the 600,000 villages across India. The village outsourced employment model could add over 50 million jobs in the services sector – a US$100 billion opportunity, at the least. Last year, a Hindi movie created a record of sorts by releasing its music on iTunes even before the tapes and CDs reached the stores. The $100 billion Indian media and entertainment industry growing at over 20 per cent p.a. provides interesting opportunities for digital innovators. Already this year, digital music sales, including mobile downloads, ring-tones and online sales, will surpass sales of music in the physical format. While there are no quick-fix solutions to increase broadband penetration, the following could constitute an action agenda for the policy-makers, industry participants and users: Broadband Wireless Spectrum Policy – The TRAI recommendations for allocation of broadband wireless access, BWA, spectrum – mainly for WiMAX – are in the right direction and should be implemented immediately. In addition, efforts should be made to vacate spectrum in the 2.5GHz band and make allocations during the course of this year. Each operator should be assured of at least 30MHz allocations, albeit for an appropriate fee. BWA spectrum charges should be on the basis of revenue share, as with all other services, and not the existing link or site-based charging. Regulatory and Fiscal Support – There is a need to create a level playing field between ISPs and other providers of access to broadband services. The former are allowed to offer only Internet access and limited Internet telephony services on the broadband infrastructure, whereas access providers can provide a full range of voice services, including PSTN and Internet telephony, on the same last mile network. TRAI’s – the Telecommunications Regulatory Authority of India – recommendations regarding unified licensing should remove such anomalies. TRAI had also made several suggestions regarding fiscal support to encourage broadband investments and adoption; these must be adopted immediately. National Fibre-based broadband Network – It is widely accepted that true broadband (10 Mbps and multiples) can only be delivered on a fibre-based (FTTX) access infrastructure. From a medium to long-term perspective, most of urban India will require such networks. The broadband policy should reflect this and encourage investment in fibre-based infrastructure. It is inconceivable that the creation of such multiple networks by all the operators would be economically viable; in fact, going by the experience of some North American operators, even one such network may have to be subsidized by the government. The Singapore National Broadband Network model may be worth emulating. Some other policy initiatives could include: • nominal, and consistent, right-of-way charges should be mandated for digging and laying ducts and cables; • building laws should make it mandatory for all new buildings to install an Ethernet network within the building during construction; and, • cable networks, in addition to being made addressable, should be regulated on quality and service level parameters. Eco-system of Service Providers – The chicken-and-egg problem of access and content can only be resolved by investing in and encouraging the creation of an eco-system of content, application and service providers, even while broadband access networks are being rolled out. In particular, there is a need to focus on local language content, which has yet to be affected by the digitization wave. Innovative business models are a must for a market that appreciates content, but is unwilling to pay much of a premium for creativity and originality. Large service providers and telcos would need to provide incubation support to the small creative shops and start-up application providers. Rural broadband Networks – Contrary to popular perception, rural India is not all poor and destitute. Rural telecom infrastructure, however, is poor mainly because of the large distances between towns and villages. Wireless networks, particularly WiMax, can play an important role in bridging the distance and connectivity gap. It may be advisable to connect rural India with broadband wireless rather than rolling out narrowband cellular networks. Universal Service Obligation Fund support should be made available to such initiatives. Further, spectrum allocation for rural networks could be planned for coverage purposes – 450MHz and 700MHz should be considered. The availability of good-quality, affordable broadband is a national imperative. With adequate policy support, service providers would be encouraged to roll-out robust networks and innovative business models. If the first half of this decade was characterized by explosive growth in mobile subscribers, the next five to six years in India could very well be the years of broadband.