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Puzzling Out India

By any measure, the Indian opportunity is stupendous. It is the world's second largest country, with a population of 1.1 billion – twice as many people as the United States and EU combined. Its economy is growing at 9 percent per year, more than three times the normal rate in the developed world. Most enticing of all, India is a vigorous democracy and has a more open economy than the other mega-opportunity, China, and with a younger population: 700 million Indians are under 30 years old.

But wait one moment: On the core measure of telecommunications development in the 21st century – broadband line penetration – India lags far behind, and development continues to proceed at a snail's pace, despite the rapid economic growth. Indian broadband penetration is just 0.27 per 100 inhabitants, versus 3.37 in Asia as a whole and 5.29 globally. Another developing giant, Brazil, has 15 times the penetration rate of India. And in mobile, true broadband based on 3G and WiMax has barely begun.

So what's going on? That was one of the key questions at Heavy Reading's inaugural Broadband 2.0 conferences in New Delhi and Mumbai last week. And from our keynote speakers, panelists, and in particular from our highly vocal delegates, most of them service providers, we learned one thing above all: India is different.

It's impossible to do justice to all of the differences in just a short column, but one theme emerged very clearly: Regulation on the wireline side of the business isn't working, and if that doesn't change fast, India is set to become the first big economy in which broadband is dominated by wireless connections. Competitive carriers such as Bharti Airtel Ltd. (Mumbai: BHARTIARTL) and Tata Communications Ltd. took to the podium to complain that simply paying authorities for wireline rights of way accounted for 70 percent or more of the cost of connecting customers in major cities, making the business case all but impossible to make. And there seems little chance that the government will force incumbent Bharat Sanchar Nigam Ltd. (BSNL) to unbundle its local loops. In this impasse, Tata, among others, has concluded that the broadband future lies in WiMax, while others see a future dominated by 3G.

Could it happen? India's policy vacuum is puzzling, but it has begun the process of licensing wireless broadband players, and most of the service providers at our events were optimistic about the future of wireless. By the beginning of 2009, there will likely be well over 300 million Indian mobile subscribers, against just 38 million wireline connections and only 5 million broadband customers. And as several speakers pointed out, India is hungry for broadband.

The problems remain hugely daunting, even for the would-be wireless entrants. PC penetration is very low, and only half of the PCs in use are connected to the Internet. One reason: As a result of low broadband penetration, delegates said, there are very few good local content sites – a chicken-and-egg dilemma for which few had an answer. And at current prices, 3G still looks like a very expensive proposition for the average Indian family.

All the same, no one should underestimate the desire for connectivity. India may be different, but Indians are just as enthusiastic about communications and entertainment as anyone else – indeed more so, as any visitor to India can easily attest. In such fertile soil, some providers are surely going to achieve great things over the next five years. And right now, it looks as though their asset base will be dominated by wireless infrastructure.

Whatever happens, Light Reading, Heavy Reading, and our new colleagues at Pyramid Research will be on the spot to find out.

— Graham Finnie, Chief Analyst, Heavy Reading

azminadeem 12/5/2012 | 3:32:14 PM
re: Puzzling Out India Just as the advent of mobile telephony liberated India from the tyranny of landline connections (notoriously hard to get one, even harder to get an often dead line fixed without bribing the lineman!), broadband wireless will hopefully set India on the path of an Internet revolution. It will not be such a bad thing if we jump the wireline access route and go straight to BWA, unlike most developed countries.
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