Broadband Gets a Boost
but last mile concerns remain

The long awaited broadband policy is out.While it is not certain whether the target of 20 million broadband subscribers by 2010 can be achieved, the policy is expected to fuel growth in this segment and facilitate faster rollout of wireless and satellite broadband services. The one big gap, analysts point out, remains access to BSNL's local loop...

Is the recent broadband policy in line with operator expectations?

Shantanu Das Gupta
The broadband policy encourages creation and growth of infrastructure through various access technologies like optic fibre, DSL on copper loop, cable TV, satellite and terrestrial wireless. The government has taken certain positive steps like allowing director-to-home (DTH) operators to offer broadband services and delicensing the 2.40-2.48 GHz band for low-power outdoor use.

However, the government has rejected almost all the important and widely supported recommendations made by the Telecom Regulatory Authority of India (TRAI), including unbundling of the local loop, lowering the spectrum fee for broadband services, open sky policy for DTH operators, lower import duties for equipment, and removal of service tax. The policy is therefore not in line with operator expectations. The unbundling of the local loop was the most important issue. It was expected that the government would promote usage of BSNL/MTNL’s existing network for broadband purposes by private operators, as recommended by TRAI. However, its reluctance to make unbundling obligatory has left operators looking for ways around it.

Deepak Maheshwari
The broad vision put forth in the broadband policy is full of exciting opportunities. Recognition of broadband as the basic infrastructure will give a much needed impetus to e-governance, distance learning and tele-medicine while taking care of urban congestion and job creation. The ISPAI has been interacting with the government, the regulator, industry associations and other stakeholders in the evolution of the broadband policy.

Prateek Pashine
If you ask what a pure-play ISP would have expected, then it is not in line. One of the reasons is unbundling of the local loop. At present, broadband presentation in the country is about 200,000 subscribers whereas the total telephone lines or copper pairs available are 40 million. So there is a huge market where this copper can be used to increase broadband penetration. But very clearly, the policy, by stating that unbundling of the local loop need not be mandated by the regulator, does not favour ISPs and the propagation of broadband into homes.

Mohit Saraf
The National Broadband Policy, 2004 fails to address most of the operator’s concerns, and is, at best, indecisive on the rest. It has rejected TRAI’s recommendations on local loop unbundling. Unbundling is the key to rapid rollouts since it enables service providers to immediately start offering services without expending time and resources on recreating infrastructure in the last mile. This reduced capital expenditure would translate into lower service delivery costs, making broadband more affordable and thereby acting as a catalyst in generating demand for broadband services. More importantly, local loop unbundling ensures healthy competition amongst operators, which would ensure the latest technology at the best prices.

The policy has also deferred taking a decision on VSAT operators’ demand for an “open sky” policy. Further, none of the fiscal incentives recommended by TRAI, including reduced import duties for broadband components and change in depreciation norms, finds mention in the broadband policy.

Rajiv Sharma
These are the first few steps taken by the government to drive the penetration of broadband in the country. What we need are policies that would replicate the mobile telephony success in the internet arena. Unbundling of the local loop and an open sky policy for DTH providers are some of the steps that are needed. Also, the recommendations on removing anti-dumping duties on recycled PCs waiver of sales tax one e-commerce transactions, removal of tax and customs duties, etc. need to be considered so as to reduce the cost or providing broadband and boost demand.

Prashant Singhal
The broadband policy is a bid of a mixed bag. The salient features are that India finally has a written broadband policy, and that 256 kbps has been officially recognized as the minimum download speed for broadband. The policy contains several measures that will facilitate faster rollout of wireless and satellite broadband services. Further, the government has promised a fiscal package for ensuring that broadband services are available to rural and urban consumers at affordable rates.

The big disappointment for private operators, however, is that the TRAI recommendation for compulsory unbundling of BSNL’s local loop has not been accepted. This would have given private operators ready-made access to BSNL’s large wireline subscriber base for DSL broadband.

Will the policy guidelines help to achieve the target of 20 million broadband subscribers and 40 million internet subscribers by 2010?

Shantanu Das Gupta
There is good potential to reach the target of 20 million broadband subscribers. However, achieving this will be a function of the initiatives taken by service providers regarding broadband access and by the government to address the challenges.

Deepak Maheshwari
One can view the targets as a wide chasm or an opportunity, depending upon the outlook. No doubt, it will be an arduous task. We believe that the proposed financial incentives would attract more people and investment in this direction.

Usage tariff is probably the single most important factor in the way of driving up usage as well as the user base. According to TRAI, 80 per cent of the cost to provide broadband access is currently on account of international and domestic bandwidth alone. To bring down the price point for broadband access, the charges for leased lines – both within India as well as internationally – have to come down significantly. Recently, consultancy firm Gartner concluded that international bandwidth prices from India are about five times higher than those in other comparable economies, indicating the possibility of 80 per cent reduction in international bandwidth prices from the prevailing levels. The scenario in domestic leased lines is similar. The broadband policy would become really meaningful only if bandwidth charges are notified immediately and, hopefully, they should be at least 80 per cent below the current rates.

Prateek Pashine
The policy should have looked at various enablers to achieve the broadband target of 20 million subscribers in five years. As it stands, the policy defines broadband as internet with speeds over 256 kbps. Today no wireless technology is able to provide these speeds at cost-effective rates for Indian consumers, so the only other option is wireline – copper, ethernet, etc. If copper – that is, 40 million lines – is taken out of the purview of the ISPs, what it would basically mean is that we need to roll out new networks, causing duplication of networks and hence, inefficient utilization of existing infrastructure.

Mohit Saraf
In India, the broadband market is still at a nascent stage. The country has only 0.02 broadband connections per 100 persons, compared to South Korea’s 25. Least year, the Indian broadband sector recorded a growth of 28 per cent whereas most developed countries recorded growths of 200 to 300 per cent. Thus, there exists a great opportunity for broadband service providers to grow. What India needs is complete unshackling of all regulation to ensure that every household and enterprise has access to affordable broadband. First, the regulatory regime should be streamlined and made technology neutral. Second, competition should be promoted amongst service providers so that the latest technology is made available to the consumer at the lower prices. Third, operators should be provided fiscal incentives in the initial period, such as a tax holiday or a reduced rate of taxation. However, the policy fails to address many of these issues.

Rajiv Sharma
The broadband policy takes the first few steps towards the avowed goal. There is a lot that needs to be done in the sector for achieving the objectives that have been laid out. As far a Bharti is concerned, we have plans to provide broadband service across the country.

Prashant Singhal
At present, the PC and internet penetration in the country is only 0.8 connections per 100 persons and 0.4 connections per 100 persons respectively. This will be a constraining factor for the rapid growth of broadband. While we see users in the SME and SOHO segments switching to broadband, growth in the residential segment will be sluggish, as only high-end users are likely to adopt broadband in the near term. Broadband growth will be governed by two key factors: content and pricing. To drive the adoption of broadband, operators have to offer compelling applications and content services at affordable prices.

Has the issue of access to BSNL’s local loop been resolved?

Shantanu Das Gupta
This has already been answered above.

Deepak Maheshwari
Early unbundling of the local loop would have definitely accelerated broadband penetration in the country. The fact is that the incumbent operators have been attempting franchising models for almost two years, but had kept ISPs out of the process. In fact, ISPs should be considered as natural allies even if one is thinking of franchising.

Prateek Pashine
The issue has absolutely not been resolved. ISPs will now have to put up their own infrastructure in the last mile. This is time consuming, requires huge investment and duplication of last mile infrastructure. In the immediate future, only the incumbent access provider would be able to effectively roll out broadband in large number. World over wherever broadband has succeeded, there has been unbundling of the local loop and specification of commercial arrangements between the infrastructure/last mile owner and the ISP. Commercial agreements include specifications of caps on charges, how much revenue has to be shared and collocation of equipment and rentals. This has not been addressed by the broadband policy.

Mohit araf
The policy has not accepted the long standing demand of operators for unbundling of the local loop. The incumbents already have a vast network of copper wiring, which could have been used by operators to provide broadband services without laying parallel equipment. An independent regulator could have regulated access to the last mile, thereby ensuring adequate compensation for the incumbent and preventing anti-competitive practices. The Policy’s prescription of “mutually agreed commercial agreements” fails to improve the situation thereby not addressing the “real” concerns of operators. It also fails to contemplate the repetition of a deadlock similar to the negotiation of “interconnection agreements” in telecom, which is highly time-consuming and commercially infeasible. The only silver lining is the proposed quarterly review of the incumbent’s performance by DoT with a view to achieving the target of 1.5 million connections by end-2005, failing which DoT may reconsider TRAI’s recommendation regarding local loop unbundling.

Rajiv Sharma
As the government has decided against unbundling of the last mile copper cables owned by BSNL and MTNL but allowed the incumbents to enter into specific commercial arrangements with various operators, we feel that, for equitable and less time-consuming agreements, TRAI should step in to decide the basic rules for leasing out the last mile.

Prashant Singhal
The issue has not been resolved, as access to the BSNL loop has not been allowed by the government, at least for the time being. It is possible that later, depending on the development of the broadband market, the government may open up the last mile to private operators to increase competition.

Will the new policy increase data usage?

Shantanu Das Gupta
The new guidelines will drive increased data usage simply because it encourages usage of various access technologies. Taking a look at different technologies, the following scenarios arise…..

Optic fibre: Has the ability to provide huge amounts of bandwidth but is relatively expensive to deploy and use. Also, the applications and content that would justify the kind of bandwidths fibre can offer do not yet exist.

Cable: Provides more bandwidth and speed than phone lines and greater reach to the last mile. However, the current cable infrastructure is not sufficient for reliable high speed bi-directional communication.

DSL on copper: Can make use of the available telephone lines without interfering with regular phone service, but this has not been made available.
Satellite: Gives accessibility to remote regions but involves huge initial investment and high costs of international leased circuits. Moreover, connectivity can be routed only through ISRO.

Deepak Maheshwari
When more people have internet and broadband, local applications will certainly develop. In the emerging broadband scenario, every user has the potential to offer content and become a “prosumer”. People are sharing amateur videos and composing songs on the net. Geographically distributed grid computing is being used to solve problems that would flummox even a supercomputer. Reforms in spectrum usage and delicensing in certain frequency bands would also go a long way in development and adoption of cutting-edge wireless access systems, especially in the rural and hilly areas. Overall, data usage would increase probably faster than the user base itself, resulting in exponential growth in the demand for bandwidth.

Prateek Pashine
I don’t think so. There are two aspects to this issue. Growing the numbers and growing the usage. One is to increase the number of people using data and the other is to make the users who are already using this data, use it more. There are no specific elements in the broadband policy to push this process. While private content providers may actually develop and provide content, the policy does not encourage this practice by giving subsidies for content development or creation of a content exchange, etc. The policy has not taken steps to fuel broadband usage in the country. TRAI had recommended allowing corporates to create a broadband usage allowance to employees, which could be tax exempt. There was talk of removing the 8 per cent service tax on broadband, but the tax has actually increased, resulting in higher cost of usage.

Mohit Saraf
Broadband technology allows for greater convergence of data, voice and multimedia. It is thus an ideal vehicle for driving increased data usage. However, the crucial issue is whether broadband services provided under the new policy would be affordable. At today’s levels, Indians are expected to pay 60 times more than subscribers in South Korea for the same throughput. Unless the cost of access goes down, broadband use will not grow and data usage will not take off. To ensure increased data usage, the policy should have provided measures that reduced the cost of access. One option, which had been suggested by TRAI, would be to provide fiscal incentives like reduction in import duty, change in depreciation norms and reduction in service tax for broadband providers. However, the finance ministry has turned down these incentives. In the absence of any such initiatives, it is unlikely that the broadband policy will drive increased data usage.

Rajiv Sharma
There are many more steps needed to fuel the growth of broadband as well as data usage. Unbundling of the local loop, open sky policy for DTH providers and peering for all at NIXI are some of the steps that would allow better and more cost-effective reach for service providers to their target market segments.

Prashant Singhal
We definitely expect data usage to go up as the penetration of the internet and broadband increases, especially in the enterprise and SOHO segments. Once broadband catches on in the residential segment, the pace of data growth will rapidly increase.

Does the new broadband policy resolve VSAT and ISP operator concerns?

Shantanu Das Gupta
The government has taken some positive steps for VSAT and ISP operators. DTH service providers will be permitted to provide bi-directional internet services after obtaining VSAT and ISP licences from DoT. In the case of receive-only VSAT terminals and DTH with receive-only internet, no SACFA/WPC clearance is required where the total height of such installation is less than 5 metres above the rooftop of an authorized building. The government intends to make available transponder capacity for VSAT services at competitive rates.

Deepak Maheshwari
Allowing use of VSAT outside the closed user group is a positive step. However, as integrated operators become more active in the internet and broadband space, TRAI would have to use tools for economic regulation to ensure sustainable and equitable competition. Already, there are concerns on vertical price squeeze, unwillingness to carry out accounting separation and discrimination in provisioning of resources. Two specific areas warrant immediate attention – voice over broadband and use of broadband for working from homes. The current public policy enables an automobile tycoon in Mumbai to call Detroit for just Rs. 1.60 a minute while a tax driver in the same city has to shell out a minimum of Rs. 2.40 a minute to call his family in Gorakhpur just because he has been denied the benefits of internet telephony. The package of financial incentives needs to be implemented without further delay.

Prateek Pashine
There is some positive movement on the VSAT operators’ front. The policy has removed entry charges for VSAT operators and licence fees for terminals.

Mohit Saraf
VSAT operators are forced to route their connectivity through ISRO, thereby incurring significant “artificial costs”. They have long been demanding an “open sky” approach to enable them to connect to foreign satellites and thus reduce artificial costs. However, the broadband policy while allowing a higher rate of data transmission, simplifying the procedure for government clearances and reducing the antenna size, fails to address VSAT operators’ concerns regarding an “open sky” policy.

The ISPs’ concerns are: high service tax and multiplicity of licences. However, the policy fails to remedy either concern. Instead, it had added another condition of “necessary permission from the competent authority” to provide services through DTH. This has added to the confusion.

Rajiv Sharma
A VSAT operator still has no approach ISRO to get transponders on satellites that are above India. However, the policy notes that DoT will soon propose measures in the direction of an open sky policy for VSAT operators. We hope that what has begun well will end well.

Prashant Singhal
The policy seeks to encourage VSAT penetration for broadband and internet services. The government intends to make available transponder capacity for VSAT services at competitive rates after taking into consideration security requirements. The Department of Space is already interacting with VSAT service providers. DoT, in consultation with the concerned ministries, will soon propose measures for an open sky policy for VSAT operators. For ISPs, the decision to not allow compulsory unbundling of BSNL’s copper loop will remain a concern as they will now have to depend on mutually agreeable tie-ups with BSNL and other wireline operators to get last mile access to subscriber homes and offices.