2005 South Asian Broadband and Internet Market Report

Pub Time: 2005/07

Table of Contents

• 1. EXECUTIVE SUMMARY
o 1.1 Key developments
 1.1.1 Internet market
 1.1.2 Broadband market
o 1.2 Internet market
o 1.3 Broadband market
• 2. OVERVIEW OF THE BROADBAND AND INTERNET MARKETS IN ASIA
o 2.1 Overview Internet market in Asia
 2.1.1 Market overview
 2.1.2 Cultural and regulatory issues
 2.1.3 Internet advertising
 2.1.4 Asian Domain Name Dispute-Resolution Centre
 2.1.5 Internet access and infrastructure
 2.1.6 ISP market
 2.1.7 Intranets and extranets
 2.1.8 VoIP
o 2.2 Overview broadband market in Asia
 2.2.1 Market overview
 2.2.2 Digital Subscriber Line (DSL)
 2.2.3 Cable Modem
 2.2.4 Fibre-to-the-Home (FttH)
 2.2.5 Wireless broadband
 2.2.6 Satellite Internet
 2.2.7 Powerline Broadband (PLB) / Powerline Communications (PLC)
 2.2.8 Fibre-to-the-Home in Asia
• 3. AFGHANISTAN
o 3.1 Internet market
 3.1.1 Internet cafes
 3.1.2 Internet Service Providers (ISPs)
 3.1.3 Voice over Internet Protocol (VoIP)
• 4. BANGLADESH
o 4.1 Internet market
 4.1.1 Constraints on Internet growth
o 4.1.2 MediNet
 4.1.3 Village Computer and Internet Program
 4.1.4 Bangladesh’s ISP market
 4.1.5 IT development strategy
 4.1.6 Voice over Internet Protocol (VoIP)
o 4.2 Broadband market
 4.2.1 Broadband services
 4.2.2 Internet via satellite
o 4.3 Content and e-services
 4.3.1 E-commerce
 4.3.2 E-banking
• 5. BHUTAN
o 5.1 Internet market
 5.1.1 Public Internet access
 5.1.2 Internet Access Project
 5.1.3 Government online
 5.1.4 ISP market
 • 6. INDIA
o 6.1 Internet market
 6.1.1 Profile of Internet users
 6.1.2 Regulatory issues
 6.1.3 ISP market
 6.1.4 Free Internet access services
o 6.2 Broadband market
 6.2.1 Overview
 6.2.2 Broadband Policy 2004
 6.2.3 Cable modems
 6.2.4 Asynchronous Digital Subscriber Line (ADSL)
 6.2.5 Wireless broadband
o 6.3 Content and e-services
 6.3.1 E-commerce
• 7. MALDIVES
o 7.1 Internet market
 7.1.1 Liberalization
• 8. NEPAL
o 8.1 Internet market
 8.1.1 Constraints on Internet growth
 8.1.2 Top level domain name
 8.1.3 ISP market
o 8.2 Content and e-services
o 8.2.1 E-commerce
 8.2.2 E-communications
• 9. PAKISTAN
o 9.1 Internet market
 9.1.1 Major government initiatives
 9.1.2 ISP market
o 9.2 Broadband market
 9.2.1 Cable modems
 9.2.2 Internet via satellite
o 9.3 Content and E-services
 9.3.1 E-commerce
 9.3.2 E-government
• 10. SRI LANKA
o 10.1 Internet market
 10.1.1 Internet exchange
 10.1.2 Public Internet access
 10.1.3 Data Centres
 10.1.4 ISP market
o 10.2 Broadband market
 10.2.1 Market overview
 10.2.2 Asymmetrical Digital Subscriber Line (ADSL)
• 11. GLOSSARY OF ABBREVIATIONS

Exhibit 1 -- Internet Service Providers licenses -- April 2005

List of Tables

• Table 1 -- Top 5 Asian Internet markets (by penetration) -- March 2005

• Table 2 -- Top 5 Asian broadband markets ranked by penetration -- 2004
• Table 3 -- Internet growth -- 1999 - 2005
• Table 4 -- Top 10 Asian countries by Internet penetration -- March 2005
• Table 5 -- International Internet bandwidth -- 2000 - 2005
• Table 6 -- *VoIP revenue growth - 2003 - 2006
• Table 7 -- Broadband markets -- December 2004
• Table 8 -- Major broadband access types (by subscribers) -- December 2004
• Table 9 -- DSL subscribers -- December 2004
• Table 10 -- Cable modem subscribers -- December 2004
• Table 11 -- No. of WiFi hotspots (selected providers) -- 2004
• Table 12 -- WiFi market forecasts -- 2003, 2008
• Table 13 -- WLAN revenue forecasts -- 2004 - 2009
• Table 14 -- Internet statistics Afghanistan -- 2004
• Table 15 -- Internet provider statistics Bangladesh -- 2003
• Table 16 -- Internet users and ISPs -- 1996 - 2004
• Table 17 -- Internet host computers -- 1997 - 2003
• Table 18 -- Internet provider statistics Bhutan -- 2004
• Table 19 -- Internet users and penetration -- 1999 - 2004
• Table 20 -- Internet host computers -- 1998 - 2003
• Table 21 -- Internet provider statistics India -- 2004
• Table 22 -- Internet subscriber and user growth -- 1995 - 2004
• Table 23 -- Internet host computers -- 1995 - 2003
• Table 24 -- Top 10 Internet Service Providers -- December 2004
• Table 25 -- Broadband subscriber growth -- 2003 - 2004
• Table 26 -- Broadband subscribers by access -- June 2004
• Table 27 -- Broadband Internet subscriber targets -- 2005, 2007, 2010
• Table 28 -- Cable modem subscribers -- 2003 - 2004
• Table 29 -- ADSL subscriber growth -- 2001 - 2004
• Table 30 -- Commercial value of e-commerce sector -- 2000, 2005
• Table 31 -- Internet provider statistics Maldives -- 2004
• Table 32 -- Internet users -- 1996 - 2004
• Table 33 -- Internet host computers -- 1996 - 2003
• Table 34 -- Internet access -- 2004
• Table 35 -- Internet provider statistics Nepal -- 2004
• Table 36 -- Internet users -- 1997 - 2004
• Table 37 -- Internet hosts -- 1995 - 2003
• Table 38 -- Internet provider statistics Pakistan -- April 2005
• Table 39 -- Internet users -- 1995 - 2004
• Table 40 -- Internet host computers -- 1995 - 2003
• Table 41 -- Internet provider statistics Sri Lanka -- 2004
• Table 42 -- Internet users -- 1996 - 2004
• Table 43 -- Internet subscribers -- 1996 - 2004
• Table 44 -- Internet host computers -- 1996 - 2003
Abstract

DSL has become a vital part of the telecommunication operators strategy. However, deployments
have been quicker and more successful in some countries than others. Having said that, DSL is
now the most popular form of broadband access. This research is a new update on a similar report
released in August 2004. It benchmarks the top ten DSL countries in terms of subscribers,
competition and pricing, focusing on the residential market.

• Internet Infrastructure and Developments

• Internet policies, models and concepts
• Regional and International Networks
• Internet Market, VPNs and VoIP
• Vision for a National Policy, Government Policies
• Network Operators, Wholesalers and Retailers, Utilities Projects
• xDSL, HFC, MDS, Satellite, Cable Modems, Cable Telephony
• Wireless Broadband

Abstract

This IDC study presents IDCs most recent forecast of the U.S. broadband services market,
identifies and quantifies the market opportunity within the United States, and presents
recommended strategies for broadband service providers to take advantage of these opportunities.
The analysis in this study includes the following:

• An assessment of the various broadband technologies currently deployed in the United

States and a discussion of recent trends in the U.S. broadband services market
• Forecasts of U.S. broadband services subscriptions and revenue by technology, including
DSL, cable modem, metro Ethernet Internet access (MEIA), and other broadband
technologies, from 2005 through 2009
• Market characteristics and guidance for existing broadband service providers and new
entrants to leverage the growth opportunities in the coming five-year period

"The U.S. broadband services market will continue to witness tremendous growth in subscribers
and revenue through the end of this decade. Service providers remain focused on offering basic
high-speed access to end users. At the same time, they are finally embarking on deploying
broadband-enabled content and applications to leverage the broadband pipe to the home and drive
new subscriber growth, capture new and incremental revenue, and retain existing broadband
subscribers." - Amy Harris, program manager, Broadband Markets and Technologies
Boom time ahead in broadband market

Though a late starter, the Indian broadband market is ready to hit the big time.
Contributing to the growth impetus are the new technologies entering the Indian market
and the fact that the country today utilises just one percent of available bandwidth.
Gaurav Patra & Shipra Arora track the growth avenues of this technology in the Indian
scenario

Currently in a nascent stage, the broadband infrastructure market in India has just
started taking shape. It is still some years before our broadband infrastructure matures
to the level prevalent in the US or some countries in the Asia Pacific region. However,
broadband is now becoming more and more relevant here because of the extent of
infrastructure being laid out in the country, indicating a boom time ahead.

What is broadband?
Technically speaking, it is a type of data transmission in which a single medium can carry
several channels simultaneously. Cable TV, for example, uses broadband transmission. In
contrast, baseband transmission allows only one signal transmission at a time. Today,
most communication between computers, including the vast majority of LANs, uses
baseband transmission. An exception to this is B-ISDN Network, which employs
broadband transmission. However, in general, the term broadband is used by many for
high bandwidth usage. “Broadband is defined as high-speed Internet connections that
have download speeds of 128 Kbps or more,” explains Shekhar Avasthy, head of Internet
Communications and Convergence Research at IDC India.

Typically, broadband users can be classified into two segments: corporate users and
home users. Since multiple machines are required in corporates, they invariably use
broadband connectivity. But while Net-through-cable has become a reality in some
Indian cities, the number of home users using this facility is still very low.

According to Shekhar Avasthy, telcos have started paying attention to the core layer of their network thus boosting
revenues in the optical equipment market

Key drivers
Just like the ISP boom a few years ago, a wave of broadband service providers has now
hit the market. The players include existing ISPs who have begun providing broadband
services, as well as new players like Spectranet, who deal exclusively in broadband.
Apart from these, a number of government entities like GAIL, Power Grid Corporation
and Indian Railways are also in the race. With so many players in the market, is there
enough demand to support all of them?

Before we discuss the issue further, a point to be noted is that the broadband market is
basically of two types, terrestrial- and satellite-based broadband infrastructure/services.
As far as terrestrial broadband is concerned, there is currently a huge glut of bandwidth
in the country. According to industry experts, hardly 1 percent of the total bandwidth
available is being utilised. In fact there is excess of bandwidth even in mature markets
like the US, where only about 3 percent of the total capacity is being utilised. “This is
happening because the service/infrastructure providers are going on adding capacities
while there are not many applications to use that much. What needs to be seen is
whether there are enough applications to use the bandwidth being added,” says Ashish
Chowdhary, vice-president of enterprise sales at Hughes Escorts Communications. Also,
the applications in the Indian context are still very preliminary. Take the case of video
conferencing, which has not yet matured, resulting in users sticking to 36 Kbps
applications. “There is one set of people who don’t feel the need for huge bandwidth, and
another set who want more bandwidth but are not willing to pay for it. So cost also
becomes one of the hindering factors in the Indian market,” comments Chowdhary.

As far as broadband on a fibre optic backbone is concerned, telephony is the major

application. Apart from this there are few other applications which can run on a fibre
optic backbone. Indian corporates have already started looking at value-added
applications like Internet connectivity, Web conferencing, video conferencing,
multicasting, cable TV, etc. “Currently, most of the companies (service providers) are
riding on telephony. However, they can also provide all other services very cost
effectively,” informs Chetan Choudhari, president of Fibre To The Home (FTTP), Aksh
Broadband.

Experts say that basic telephony is one area which has tremendous potential to drive the
broadband market. With so many players in the race, the cost of telephony will go down
further, which will boost the broadband market. This is because most of the basic service
providers are going in for optic fibre. However, it is the Internet and video which will
remain the main drivers as these services will fetch higher RoI for the broadband service
providers. In a competitive scenario like this, value addition is going to be the buzzword.

Apart from corporates, it is the home and SME segments that are going to drive the
broadband market in the metros or A-class cities. In the home segment the drive is
going to be through entertainment and other value-added services.

Future market drivers

• Synchronous Digital Hierarchy (SDH)

• Fibre/Ethernet to home
• Ultra high bandwidth through wireless
• Wi-Fi
• Fibre to the Last Active (FTLA),
• DWDM (Wavelength Division Multiplexing)
• ADM (Add Drop Multiplexing)

The rural segment is emerging as another crucial market for the Indian broadband
sector. However, what is significant and good news for the broadband service providers is
that the demand in this market is not for high-end value-added applications as in the
case of urban areas. The major applications that are expected to drive the rural market
are telephony, Internet, video and various e-governance applications. According to
Choudhari, the growth in the rural segment will be even faster since many villages do
not have an existing copper network and so not much effort will be required in putting
the fibre optic infrastructure in place. Understanding this opportunity, Aksh Fiber Optics
has already started laying optic fibre in 20 villages with another 100 to be covered in the
next few months.

As far as the infrastructure part of broadband is concerned, the market is already abuzz
with a lot of activity. Take the case of investment in broadband infrastructure. If one
goes by recent press reports, something like Rs 30,000 crore is being invested in laying
optic fibre cable within the country, with the largest chunk of it allocated to the creation
of an intercity backbone.

Meanwhile, certain steps need to be taken to boost the demand for broadband services.
Of these, the access network needs immediate attention, otherwise this investment in
the backbone network shall remain unutilised or poorly utilised. “The lack of return on
this capital investment shall be a repeat of what happened in the US. Indeed, the
demand for broadband is tremendous, but you can’t see it in real numbers for reasons of
non-availability of proper infrastructure,” comments Naseem Ahmad, CEO, Broadband &
CATV Networks, HFCL.

Out of sheer compulsion, a few years back Indian Railways introduced computerised
reservation. A similar compulsion will force the government to adopt e-governance, tele-
education and tele-medicine, and business to take up e-commerce. All this will need
broadband, multimedia delivery pipes to homes, offices and wherever one goes. This in
turn will create opportunities for broadband players.

SDH/DWDM market
India has primarily been a switching country as far as telecom infrastructure is
concerned. However, with the fast spread of a telecom network and the introduction of
data communication services in the country, telcos had no option but to upgrade their
network to support ever-expanding voice and data services. “Telcos have started paying
attention to the core layer of their network. This gave impetus to the optical equipment
market, which took off from there,” opines Avasthy. “Today, the optical equipment
market in India is at a stage where there is potential of exponential proportions both in
terms of unit shipments and value,” he adds. With the entry of multiple private operators
in the Indian telecom market, the need for high-speed voice and data infrastructure has
really fuelled demand for SDH (Synchronous Digital Hier-archy) and Wavelength Division
Multiplexing (DWDM). IDC estimates that the SDH market will grow at a CAGR of 66.5
percent for 2001-2006. On account of a higher adoption rate and lower base, IDC also
predicts that the DWDM market will grow at a CAGR of 82 percent for the same period.

Ashish Chowdhary says that under-utilisation of bandwidth is happening because service/infrastructure providers are
adding capacities while there are not many applications to use the bandwidth

Optical Ethernet market

Optical Ethernet enables WAN communication services using the Ethernet packet format
and Ethernet equipment. The technology runs over all kinds of optical circuits—
unmodulated, Dense DWDM and Synchronous Optical Network (SONET). Optical Ethernet
allows such standard Ethernet speeds as 10 Mbps or 100 Mbps. However, so far, the
basic backbone access speed is 1 Gbps, over which users can buy bandwidth in units of 1
Mbps or 10 Mbps. An Optical Ethernet service can be cost-effective compared with other
broadband access technologies like T3/E3, but so far it is limited to areas in which fibre
is already installed.

The strategic value of this new way of using Ethernet goes far beyond cheap access. It
can be used both for last mile access and in local backbones within service provider
networks. This technology can deliver a range of services like high-bandwidth Internet
access, frame relay and leased line service, transparent LAN service, and a packet-based
wide area data service designed to interconnect separated LANs at a data rate sufficient
to carry the full bandwidth of the LAN connected. “Transparent LAN services within MANs
are seen as one of the strong early markets for optical Ethernet equipment,” feels
Avasthy.

With high-speed access as the starting point, service providers can expand their
offerings to MANs, which are usually variable bit-rate services. However, because optical
Ethernet is so closely related to Ethernet LAN, there is particular stress on providing full-
bandwidth connections among dispersed LANs, known as transparent LAN services.
Although there is no reason why optical Ethernet-based networks cannot be national in
scope, the bulk of connections are likely to fall within metropolitan areas, where
companies tend to have many offices. That is where optical Ethernet services can be
offered as MANs—where fibre will be installed both as metropolitan rings and to
individual buildings. According to industry experts, optical Ethernet is likely to have a
vast price advantage over ATM and other technologies in conveying IP traffic. As per IDC,
this market is likely to achieve a CAGR of 43 percent by 2006.

Market trends
It is important to understand that the prime driver for broadband, apart from faster
downloads, will be overall increase in productivity and the overall value proposition of
being connected. The end user is now slightly more mature, in the sense that he is
already exposed to using the basic non-bandwidth intensive applications like chat and e-
mail. Corporates are giving much more Internet-related facilities to users, like providing
everyone with an independent mail ID and a machine that has Internet access.
“Applications like video-on-demand which are bandwidth intensive are still unheard of in
the market. Till applications like these become available, broadband will not pick up in
the home segment,” Avasthy says.

Ashok Juneja says the trend will move in the direction of a small number of users using more broadband capacity,
while a large number of people will be happy with normal capacity

Although the Indian market is currently in a very nascent stage, industry gurus expect
that it will grow significantly in future. This will be largely driven by the corporate
segment. Other key market segments for broadband are retail and finance. The financial
segment is considered a key growth driver because of growth in the ATM segment.
“There is going to be large relevance of retail networks. Keeping this in mind HECL is
about to roll out a retail network of the size of 3,000 to 5,000,” informs Ashish
Chowdhary.

Since the consumer market is not yet mature, the customers who will demand
broadband in India will be large companies. It will take at least two to three years for the
consumer market to take up broadband significantly. From the overall perspective
though, the market is growing. More and more conventional mediums at conventional
speeds are coming up, and they will mature and lead the way to broadband. A price fall
will also make broadband more affordable to users. Fibre and satellite will co-exist and
form the dominant technologies. “The trend will also move in the direction of a small
number of users using more broadband capacity, while a large number of people will be
happy with normal capacity,” opines Ashok Juneja, CEO of Bharti Broadband Networks.

Present situation
According to a study by IDC, ‘Broadband Equipment Market Forecast and Analysis,’ the
Indian broadband equipment market is expected to touch Rs 66.52 crore (excluding
satellites) in 2005. IDC also believes that the Indian market for broadband access is one
of the most dynamic in the telecom space.

The broadband demand scenario can be looked at from two perspectives—last mile and
infrastructure. “If one looks at the first one, the market has not changed much over the
last few years, growth has not been very significant, and even the numbers are not
impressive,” says Avasthy.

The cable modem and DSL (the two leading broadband technologies) subscriber base
would have grown by only around 15-20 percent over the last year. The number of
players also remains the same. One or two players (Dishnet being the primary player)
are offering DSL, so not much action has been witnessed in this space.

But if we look at the second space—the infrastructure backbone—there has been a lot of
activity during the past one year. IP1 licencees like Reliance, Bharti, BSES and Tata
Power have invested huge amounts to lay optic fibre cables across the length and
breadth of the country. Public sectors giants like GAIL, Power Grid and Railtel are also
investing heavily in laying optic fibre cables and connecting various cities. Most of these
projects (or at least their first phases) will be completed by the last quarter of 2002.
With such huge investments, the scenario will change considerably by the end of 2003.

However, one of the important challenges before the Indian market is the availability of
last mile connectivity. Currently, companies engaged in providing last mile connectivity
(through DSL, cable) are focusing on the ‘Golden Square Mile’ i.e. areas which have
clusters of high revenue clients, especially corporates; the service is not available in
most parts of other cities. For example, Spectranet in Delhi has been focusing only on
the corporate segment.

Availability of last mile is what is going to finally decide the future of the broadband
market. Other issues like affordability for end-users, availability of killer applications
(which are bandwidth intensive but of such great interest to users that they opt for it
despite high costs) and demand for these applications become important only after the
availability of the service is there. “For any revenue model, the application/service needs
to have a minimum critical mass, which is possible only if the service is easily available.
Also, the price at which an application can be offered is directly dependent on the critical
mass,” explains Avasthy.

The reason for the slow take-off of cable despite much higher penetration is that the
investment required at the cable operator end to upgrade infrastructure is very high.
Besides, the cable operator market in India is highly fragmented with many small
players; a huge investment is just not feasible for them. Also, the experience of users
who have taken broadband connections from cable operators has not been very good—
there have been problems with bandwidth and slow connections. As a result, the market
for cable-through Internet has just not picked up.

Naseem Ahmad says that though the demand for broadband is tremendous, one can't see it in real numbers for
reasons of non-availability of proper infrastructure

Technologies to look at
To find out whether or not a particular technology suits Indian conditions, one must keep
in mind that India is a land of vast geographical area with highly varying climates. Thus,
to offer connectivity to remote areas, geographically tough terrain like mountains and
deserts, scarcely populated areas like remote villages, and of course the more developed
urban areas, different technology modes are offered in the market by different vendors.
Some of the more popular technology options include jelly filled cables, integrated
service digital networks, optic fibre cables, and very small aperture terminals.

• Jelly Filled Cables (JFCs): With a bit-rate of about 28.8 Kbps, JFCs have limited
bandwidth capabilities, which make them unsuitable for networks meant for high-
speed transfer of multimedia data. Even otherwise, JFCs are susceptible to noise
interference by electrical circuits and also to inducing their own signals into other
circuits, leading to what is known as cross-talk. Moreover, some areas,
particularly rural, have reported frequent thefts of JFCs.
• Integrated Services Digital Network (ISDN): ISDN, digital public telephone
network, is very suitable for moving data. Routed networks are possible using
dial-on-demand between routers in different offices. ISDN finds multiple uses like
voice, data and basic level video conferencing (up to 15 frames/sec). However,
ISDN in different countries use different standards, requiring a translation-
processing step during transmission. It is a good technology for small file sizes
and networks that are not too extensive geographically, but can be an expensive
proposition for a national backbone network.
• Optic Fibre Cables (OFCs): The advantages of fibre optic as a communication
medium is manifold. OFCs do not emit radiation, so they are ideally suited for
computer applications and environments where high voltages and electrical
substations are present. Due to the electrical isolation, the problem of cross-talk
is also not present with OFCs. Their immunity to outside electrical interference is
also very important as it ensures that network synergies with power grids can be
exploited. OFCs have low loss, high bandwidth properties, and can be used over
greater distances than copper cables. The high bandwidth available in OFCs
allows the transfer of multimedia data. Because of low attenuation rates (in data
networks repeaters are required only after every 2 km or so), fibre is ideally
suited for broadcast and telecom use for longer distances. Being lightweight and
small in size, they are ideal for applications where running copper cables would
be impractical. Using multiplexers, one fibre could replace hundreds of copper
cables. OFCs also offer higher security of data transfer/communication as
compared to co-axial cables; an optical fibre has to be broken to tap the signal—
leading to loss of signal—alerting the user immediately.
• Very Small Aperture Terminals (VSATs): The advantages of VSATs are many.
First, they offer easy access to areas which are difficult to access or where
landlines are expensive or not available or not of good quality.

Availability is another key advantage of VSATs. A point that is often misunderstood is

that VSAT circuits are more reliable than terrestrial circuits. Leased lines offer at best
99.5 percent availability (almost two days downtime per year). VSAT circuits can offer
99.9 percent to 99.95 percent, depending on the requirements (99.9 percent = less than
9 hours downtime per year). A third important point which goes in favour of VSATs is
price. Today, the cost of a VSAT network is roughly half to one-third the price of an
equivalent frame relay network. Transmission costs are not distance dependent, and are
also not a function of time on line or volume of data transmitted, unlike terrestrial
networks. Flexibility and scalability too are not issues. A VSAT network can be scaled up
easily according to requirements. A new site can be added to the network by installing a
remote VSAT unit (a VSAT has only one piece of equipment at the far end). Mean time
between failure (MTBF) for some of the equipment used is measured in years, so it is
very reliable. Satellite networks offer excellent security against unauthorised access. All
transmissions in VSAT systems are scrambled in digital format. Gaining access to a VSAT
system is virtually impossible without authorisation. Every remote VSAT earth station is
controlled and monitored. Due to these reasons, banks and financial institutions
predominantly use VSAT systems to carry critical and sensitive financial transactions.

Future market drivers

• Falling prices of cable modems. Experts believe that from a price of around Rs 15,000 a year ago, they will
drop to around Rs 4,000 by end-2002 and Rs 3,000 by Q3 of 2003.
• Falling prices of ADSL modems and DSLAMS.
• Private telcos will start building their access networks with ‘deep fibre’ technology, and we will see FTTC &
FTTB in at least the metros and big towns in 2003/2004.
• International bandwidth prices will also come down.
• The government will increasingly adopt e-governance and thus fuel the requirement of broadband
applications.
• Digital TV will be introduced through DTH; once people become familiar with digital quality, cable TV
subscribers will demand similar performance.
• We have around 44 million cable TV homes; even a 2.5 percent penetration will mean more than 1.1 million
set top boxes/cable modems introduced in the market.
• The falling average revenue per user (ARPU) of telcos from telephony is already making them think of
providing convergent services involving voice, video and data from the single pipe.

How do they compare?

Of the four technologies, ISDNs and JFCs are clearly not suited for the backbone, given
the nature and scale of anticipated data transfer needs and the limitations of the
technologies in terms of their ability to carry high-speed multimedia traffic. The choice is
therefore between an OFC network and a VSAT network. “OFCs thus form a long-term
solution given the huge scale of Internet traffic expected in the future...they will be able
to exploit synergies with the railway networks and power grids,” says Avasthy. “Also,
interconnection between the backbone and ISPs providing the last mile link will be easier.
VSAT networks are comparatively more expensive than FOC networks,” he adds.

Agrees Chetan Choudhari, “On satellite you cannot have so much of bandwidth for video.
In VSAT, bandwidth is a limitation. The equipment cost goes high as you grow the
bandwidth and it is a recurring expense whenever you download. Also, in case of bad
climatic conditions like rain, thunder and dust storms, the connectivity gets bad.” He
further explains that VSAT is good when it is used for remote area connectivity and there
is no other connectivity available. OFCs, on the other hand, are good as a long-term
non-recurring expense. “The cost of fibre has come down by almost five-to-seven times
in the last eight-to-nine months. Hence, the initial investment costs of laying down OFC
have come down drastically. Fibre has therefore turned out to be a cheaper solution than
copper for last mile,” adds Choudhari. These factors have made OFC a popular choice for
Internet backbones in most countries, except when geography makes a terrestrial
network impractical, as in the case of Indonesia with its thousands of islands.

But Ashish Chowdhary feels otherwise. “From the service providers’ point of view, VSAT
has a bit of an edge over fibre in terms of initial investment. There is a huge upfront
investment required in setting up terrestrial fibre optic infrastructure. However, in case of
a satellite, there is a benefit for service providers as the investments are not upfront.” He
adds, “Capacity can be leased as demand grows. From the users’ perspective also they
can easily add and scale up capacity. VSAT allows you to start out low and scale up as
requirements grow. Satellite also has the advantage of reaching the last mile.”

Whatever the pros and cons may be, ultimately both satellite and terrestrial will co-exist
and complement each other, rather than compete. There are certain areas where the two
might overlap, but by and large they address two different markets. While the terrestrial
medium targets core applications (ERP, connectivity for main offices, payroll and HR
applications), satellite targets broadband for mid-tier and end-tier retail applications
(retail point kind of applications).
Government’s role
After opening up this sector, the government has started taking other positive steps. For
example, it has allowed Ku-band to come in. (Ku-band is much easier and cheaper to
install.) The introduction of revenue sharing has also been an encouraging step. This has
given a big boost to the overall broadband market. “We will continue to work with DoT to
lower the size of the antenna from the current 1.2 metres to 0.75 metres, which is the
American standard. This is better because the antenna is easier and cheaper to install,”
informs Chowdhary.

Chetan Choudhari says that the cost of fibre has come down by almost five to seven times in the last eight to nine
months, hence fibre has turned out to be a cheaper solution than copper for last mile

“One of the most important factors which is considered to be a hindrance by players is

the import duty on equipment. The government should do something about it,” says
Juneja. This is also a matter of concern for satellite broadband players. “The duties on
equipment in the satellite industry are relatively high...companies have to pay 35-40
percent. This is presently a barrier to the entry of technology,” complains Ashish
Chowdhary, who however concedes that the barrier will eventually go away because of
WTO. Industry experts also feel that issues relating to the ICE Bill should be sorted out
as soon as possible. “I believe that when the Cable TV Regulation Bill is passed, that will
open up some more issues. The government should take immediate initiatives to sort
these out,” says Ahmed. Predicts Deepak Malik, EVP for corporate services at Data
Access, “International Internet access costs will tumble if the government breaks the
monopoly of access to undersea fibre bandwidth capacity.”

But Chetan Choudhari sympathises with the government. “The government played an
important role when they opened up the whole scenario. However, we want the
government to be even more open in the rural sector. This sector is very important as
almost 70 percent of India’s population lives in rural areas.” The government can indeed
play an important role in encouraging companies to provide broadband infrastructure for
the rural areas. Also, bureaucratic procedures, approvals, etc. need to be taken care of
to speeden the process as technology changes very fast.

What’s in store?
On the terrestrial broadband network front, with more service providers coming in, there
is going to be a very tough competitive scenario in the Indian market. Even in the US,
many companies have not been able to survive the competition and have been forced to
close shop. So what is the logic behind the increasing number of service providers
setting up infrastructure? Quite simply, expectation of demand.

In this scenario, the break-even for Indian service providers will take much longer than
planned. This will also lead to price cutting in the market, so only big players will be able
to survive. Moreover, raw bandwidth will not be enough; players will have to provide a lot
of value addition. In the case of satellite broadband, the value addition can be end-to-
end communication services to customers, video broadcasting and multicasting, ASP
offerings, a bunch of applications which customers can use (CRM, messaging), data
centres and managed network services. In terrestrial networks, the value addition can be
in terms of providing more capacity for doing video conferencing, bandwidth on demand,
etc. These can become the key service differentiators for service providers.
The future of the broadband market in India is still hazy. Infrastructure in general and
access network infrastructure in particular is the need of the hour, and the moment these
start building up, some experts say the market will explode. However, others feel the
glut in capacity may never be matched by demand. The lobby that says broadband
usage will explode says content creation and conversion in local languages of different
regions of the country is an industry which is all set to boom in the coming years.
Application development like distance learning, video on demand, education on demand,
home shopping and interactive gaming will all become big businesses and create a
multiplier effect on the size of the total market.

The lack of proper infrastructure has so far forced the broadband segment to experience
slow growth. However, once things start rolling the subscribers will start coming in too.
The extent of this flow—a trickle or a flood—will determine the future of the broadband
players. Prices will start falling in due course of time, and that will boost demand even
more. Predicts Ahmed, “Since the sky is the limit for applications, I do not see any
saturation in the broadband market for at least the next 25 years.”

Handling tomorrow's broadband bounty

Indian customers may soon be offered a surfeit of broadband options. But can they afford the asking price? Anand
Parthasarathy sniffs around the broadband bouquets on offer, sifting the duds from the real winners.

March 20, 2002: the Delhi-based Bharti Broadband Networks Ltd (BBNL) introduces SkyMantra, `India's first third-
generation broadband Internet service via satellite' across the country.

April6: Hathway Cable Internet, now offers its Cable TV subscribers in Mumbai, Pune, Delhi, Chennai, Bangalore and
Hyderabad, Internet access using the Data Over Cable Services Interface Specification (DOCSIS). The three other
players are In2Cable, Hathway and Zee Interactive.

May 19: A study by consultancy firm CB Richard Ellis, reveals that `below the lush green landscape, lie a plethora of
optical fibres that service two-thirds of India's entire traffic'.

June 10: `BusinessWorld' magazine highlights how WinCable, BSES and Sify are offering Net access in Mumbai using
an unusual technology — CAT5 aka good old Ethernet.
SUDDENLY IT seems, we have a surfeit of infocom goodies... the nation we are told, has more bandwidth than it can
use. All those coloured cables are finally getting connected, and their owners are readying to offer broad bandwidth
applications ranging from high speed Internet access and secure, private intranet to movies and video-on-demand.

Thanks. But will someone please explain, why, with all this bandwidth logging on to one's Internet dial-up account
during office hours, in the main metros can still take several tries... why having connected at last, the link breaks
about three times in every hour... why we are still made to — literally — crawl across the World Wide Web, with
download speeds that oscillate between 10 kilobytes per second ... and 10 bytes per second (no jokes!).

The reasonis this: YES, a whole lot broadband options are already on offer, and are going to become widely available
before the year is out. But, NO, most of us except, a minority of well heeled Internet nuts, are not going to be able to
afford it in the immediate future.

So why bother, here and now? Essentially four broadband technologies will soon vie for our patronage. The term
describes high speed transmission of data, usually over fibre or wireless devices, that will lead to the next rung up the
ladder of Internet.

Rich digital full screen video, fast and clear Internet telephony, the exchange of entire music files and very large
pictures ... all these are samples of content that will ride on top of high bandwidth Internet connections. And what
exactly makes bandwidth `high'?

Anything faster than 1.5 megabits per second otherwise known as `T1' speed is considered broadband. Compare this
with the 56 kilo bits per second which is the best we can achieve with dial up telephone modems.

The earliest digital-all-the-way service: ISDN or Integrated Services Digital Network, achieved 64 KBPS, only slightly
faster than the modems most of us are used to. Broadband networks are at least 45 times faster than dial up modems
— and are all-digital, to boot.

This means they avoid the multiple and wasteful conversions from analogue to digital and back before a chunk of data
moves from sender to recipient.

Today ISDN is passe. There are 3 major broadband digital technologies in competition for the broadband Internet
access market, in India:

-DSL or Digital Subscriber Line is a technology which uses the ordinary telephone line, while dramatically increasing its
digital capacity. The most popular `avatar' of DSL for Internet access is DSL or Asymmetric DSL. It is asymmetric
because it provides fast downloads and slower uploads, which is what we need. Dishnet was the first Indian Internet
provider to offer DSL connections — but because the Indian telephone system is not geared for a change over to
digital use, the company has had to lay dedicated lines to the homes of subscribers rather than using existing
landlines.

-DTH or Direct to Home satellite systems were legalised by the Indian government last year, but there are as yet
hardly any players because the investment expected from the customer is rather high. Entrants like Bharti who have
entered the Internet-through-satellite arena seem to be addressing the corporate customer rather than individuals;
while others like Tata Teleservices who provide basic telecom services in Andhra Pradesh are leveraging satellite
technology to penetrate the rural telephony market.

-With over 80 million Indian homes equipped with television sets, about half of them with a Cable TV connection,
Internet through Cable would appear to be an attractive proposition. Here again, the leading players: In2Cable,
Hathway, Zee and others have been forced to focus on the upmarket areas of major metros because only such
localities can generate the purchasing power to sustain Cable Internet systems which cost Rs 900 - 1200 per month,
with another Rs 10,000 required as a one-time investment on a special modem. Much of the hype created by these
Cable Internet providers is misleading, to put it mildly, at least on two counts:

1. While the Cable is inherently an always-on connection, the monthly charge rarely covers unlimited use of the
connection.In their small print, different providers lay down different limits on how many megabytes one can download
in a month. This severely erodes the main selling point of cable versus telephone-based Internet.

2. The dizzying speeds claimed for Cable based Net access obtainable with a Cable TV connection are highly dependent
on how many others are online at the same time. At peak daylight hours in the major metros, angry subscribers have
reported speeds which are hardly better than what one can obtain with a telephone connection. ``We pay for
broadband and get narrow band'' is a common complaint.
All this has given broadband in India a bad name: it is perceived as either too costly or too hyped or both. One reason
is that the Indian Internet Service Providers (ISPs) are still groping with this new technology. To handle the type of
traffic that broadband requires, they have to upgrade their servers, routers and other hardware in a significant way.
This is now a specialized arena and there are a small number of providers like Cisco, Juniper, Nortel and others who
serve the niche requirements of broadband ISPs.

This correspondent recently had the benefit of a discussion with Adam Judd, Asia-Pacific Vice President of Unisphere
Networks a company headquartered in Massachusetts state, US. Mr Judd joined a roundtable discussion on Indian
Broadband today with four other experts: Amitabh Singhal of the Internet Service Providers Association of India;
Jagbir Singh of Bharti Telenet; Ravin Shrikhande of Hathway Cable and Saurav Adhikari of HCL Infinet.

They agreed that broadband would remain a premium service rather than a mass market for another 2-3 years. So
corporate customersare the prime `targets' . Today the Indian Internet user mainly surfs and emails.

Only after improving the connection speeds should any one try to address richer broadband services to this mass
sector. InKorea, where broadband has been a notable success, one `killer application' has been responsible — like
online gaming. In the UK interactive TV was the stimulant.

What then, is the crucial application that will trigger a `desi' broadband `andolan' here? We all know what we like —
it's entertainment of the `filmi' kind. If only those with the broadband networks can tie up with the content providers
like Pentamedia's Num TV, or the Mumbai-based Sharkstream and the Chennai-based GV films and come to the canny
Indian customer with an offer he or she can't refuse, broadband may take root here too, as the unstoppable,
irresistible consumer technology of the 21st C.