The Hindu Business Line : Looking for a head start

Reliance Infocomm is setting up the `mother-of-all broadband projects.' And other broadband operators, big and small, are already up and running. They prefer to ramp up with what they have rather than wait for the race to get hotter.

JUST when Reliance Infocomm is setting up the `mother-of-all broadband projects' (the metro-ethernet service that will fibre-connect around 1 million buildings in the country and ensure the end customer, both home and enterprise, have access to an unbelievable minimum capacity of 1 gbps), other broadband operators, both big and small, appear to be stepping on the accelerator. "It looks as though they want to book their seats before the juggernaut of Reliance gets rolling," says an analyst. While Reliance Infocomm is currently busying itself building a library of content to feed into its monster broadband project which, its officials say, could take approximately 12 months to take off, other operators are starting business with whatever they have, ramping up as they go along.

A few weeks ago, the Tatas-owned Videsh Sanchar Nigam Ltd signed an agreement with the Sterling group-owned Dishnet DSL to buy over the latter's ISP division. This would give VSNL access to Dishnet's dial-up and broadband services across 38 cities and 200 towns, not to mention 600 owned and franchised cybercafes. More importantly, VSNL would, overnight, also acquire broadband assets with the capacity to serve more than 50,000 customers in key cities across the country. At the time of the announcement, VSNL said it was planning a significant entry into the broadband Internet space, having also recently launched `Tata Indicom Total Internet', an integrated solution comprising multiple Internet services. Dishnet's DSL broadband assets and base are precious to VSNL. For a DSL network, the operator has to ride on the last mile copper (from the exchange to the home) that VSNL does not have. Dishnet, as is well known, has faced considerable difficulty in negotiating with BSNL and MTNL to allow use of their last mile copper, and this would spare VSNL a lot of grinding initial work. VSNL's group company, Tata Teleservices, and its subsidiary, Tata Teleservices (Maharashtra), also have their own broadband Internet services.

The Bharti group also aims to be "the leader" in the broadband space. The group's retail and SME customers are handled by its fixed telephony company Touchtel and the corporate business by `Bharti Broadband and Data group' whose current annual turnover is Rs 500 crore.

Bharti's broadband service is also through DSL technology. "We have more than 30,000 DSL customers in India, and are adding between 3,000 and 4,000 every month," says an official with Bharti. On the enterprise front, Bharti has 500 large customers. With terabit capacity international bandwidth available through its Network i2i under sea cable and with 25,000 km of domestic optic fibre, Bharti is an integrated player with last mile access in its fixed circles.

The Bharti Broadband Data group claims that it has acquired a 50 per cent share in the Indian enterprise IPLC space within just six to eight months of starting the service. "With the commercial launch of data services on i2i, the Bharti group is uniquely positioned to provide customised solutions to corporates using a combination of terrestrial, VSAT and Internet solutions." The company says it already enjoys a prominent position amongst the best banks and financial institutions in the country and expects significant ramp-up in the government, public sector and SME segments, into which areas it will expand its thrust this year.

The best-positioned operators with the potential end customer already in their pockets are state-owned Bharat Sanchar Nigam Ltd and Mahanagar Telehpone Nigam Ltd. Standalone DSL or ADSL operators would have to rely on these companies' last mile connectivity to "ride" their services on. The Telecom Regulatory Authority of India is bringing out regulations allowing for unbundling of these 42 million last mile connections, but that is easier said than done, say private operators. "When both are going to offer their own broadband services, they will not easily allow their last mile to be used by us. They can simply cause delays in sanctioning." Both BSNL and MTNL have started pilot ADSL services in the country, with BSNL aiming at 1 million customers by year-end.

Smaller players are becoming active as well. The Rajan Raheja group company Hathway Cable Internet, which offers broadband internet services through television cable networks in eight cities in the country, recently introduced a broadband package of 128 kbps for as low as Rs 300 per month and also slashed cable modem prices by 50 per cent, to Rs 3,333. Its aim is to "increase cable Internet penetration" in its eight cities of presence. "These offers are aimed at lowering the entry price of Broadband Cable Internet to attract mass subscribers," says a statement from the company.

Another cable broadband player is Broadband Pacenet (India) Ltd (BPIL) started by Jagjit Singh Kohli, known for having partly nurtured the cable industry in India. It is a company that has just 10,000 broadband cable Internet subscribers in Mumbai, but is now busy launching in Delhi, Hyderabad, Bangalore, Nasik and Nagpur. Pacenet signed a contract with Thailand-based Shin Satellite only last month for 1,100 user terminals on the satellite IPSTAR. "This will help Pacenet roll out an IPSTAR high-speed broadband Internet service throughout India over the next twelve months," says S. Ravindran, Chief Executive Officer of the company. Boasting technologies like satellite broadband, the company feels it will be able to roll out its network much faster than if it had to roll out or lease physical networks. In addition, Pacenet has developed a set-top box that will be compatible with many modes of telecommunication access such as cable, DTH, Ethernet, GSM, CDMA and suchlike. "We are talking of the cable which is a 4-gigabit pipe capacity coming into the home, there are 50 million such in the country which already exist," says Ravindran, adding that companies such as Reliance are planning to lay fresh last mile access, which involves money as well as time.

Once the IPSTAR bandwidth becomes operationally available, it can even tap the non-PC market. Pacenet can provide light Internet browsing, e-mail facilities right through the television itself. With the Pacenet owners having deep associations with the cable industry, tie-ups with them would not be difficult, says Ravindran.

According to Pradip Baijal, Chairman of the Telecom Regulatory Authority of India, 2004-2005 will be the year of broadband explosion, just as 2003-2004 was one of mobile telephony explosion. Currently, broadband penetration in the country is 0.02 per cent, one of the chief reasons being that PC penetration in the country is very low and the other being that broadband is still too expensive. This is one matter in which other operators fear Reliance may hold a trump card. It could crash into the market with attractive introductory offers just as it did with its mobile service. Since Reliance's project will provide telephony, cable access (both last mile access segments currently), Internet access, cable access, audio-streaming, video-conferencing and other facilities all at once, others fear that it could road-roll over them all.

The big question is whether the market is big enough for all the others as well as Reliance Infocomm. Expanding operators say it is, citing Baijal's illustration of low broadband penetration. But Kobita Desai, Principal Analyst (Telecom), at Gartner India, says, "It is related to a large extent on the feeling that the big market is big enough. That is a dangerous perspective. No market is ever big enough. There would be tremendous pressure on the access fee." She points out that already there are packages as low as Rs 300 and Rs 500. Broadband-through-cable is also a slightly uncertain business, she says. "If you are looking at cable, it is a very, very fragmented market. Operators have to ride piggyback on someone else's cable network. There are redundancy and quality-of-service problems. Also there is the question of whether or not a good commercial agreement exists between the broadband provider and the cable operators."

On the other hand, those who are not utilising existing cable or copper (because BSNL and MTNL do not make it easily available, they having their own plans) end up laying parallel last mile networks. This is crazy, says Kobita, because it is so expensive. In DSL, she says, globally, if you own customers you are king. Incumbents BSNL and MTNL are in a very good position, so too are other integrated fixed service providers (such as Tata Teleservices and Bharti). According to her, analysts worldwide have been asking what it is that operators are going to offer on broadband. The global uptake is from enterprises that use high-speed Internet and e-mail. "It really starts becoming sustainable when it gets into retail customers. But for them there is no real killer application yet."

If one is talking about movies and television programmes, then how will operators such as Reliance compete with cable operators on price? One of the biggest impediments to Reliance's broadband plan could be cable operators. Says another industry analyst: "If it were one big cable company, Reliance could buy them out or negotiate, how are they going to have to talk to all of the cable operators India-wide and take away their business?" Cable operators are local entrepreneurs and they are not going to take kindly to it, he says.

On the other hand, if they are going to be the second cable provider in the locality, then how will they fight cable operators on price, and what are they going to add to the entertainment that cable already provides? Operating expense is also lower for a cable operator. If Baijal's prediction is true, then the year of the broadband will yield the answers.

kripram@thehindu.co.in

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