Mouse moves @ Snail Speed

Internet penetration is inching along. What is needed is a big policy push for broadband, say industry watchers..


Snail's pace — there could not be a better phrase to refer to the growth of Internet penetration in India. The former Information Technology minister, Dayananidhi Maran's target of 40 million Internet subscribers by 2010 set five years ago appears a dream. “We are no way near the target,” says an industry observer.

India has at present only 14 million Internet subscribers (not counting users accessing the Internet through mobile phone). In other words, the country added just 7 million subscribers in the last five years. “While we are adding nearly 10 million mobile connections a month, after ten years, we have just about 14 million Internet subscribers,” says an official of a leading Internet Service Provider (ISP).

For a country lauded as an information technology super power, we have a poor level of Internet penetration — just about 2 per cent of the population, for PCs at home connected to the Net, says Raju Vegesna, CEO, Sify Ltd, a Chennai-based ISP.

Consider the Internet penetration of the BRIC (Brazil, Russia, India, China) countries of which India is a part. China, with a population of 1.33 billion, has over 20 per cent penetration. Brazil, with 191 million has 26 per cent penetration and Russia with a population of 143 million has 20 per cent penetration. And, more significantly, all of them have a penetration growth rate that is higher than India's. “We do not have free and open competition for Internet services by ISPs as well as telecom companies. This has resulted in the rapid decline of ISPs,” says Vegesna. Telecom policies are oriented towards large telecom companies as evident in the pricing of spectrum for WiMax services, which have also been conveniently clubbed with spectrum for mobile use, he adds.

Broadband push, globally
Broadband penetration is today accepted as a measure of the ability to compete economically and is known to accelerate growth. A recent World Bank study shows that for every 10 per cent growth in broadband penetration, the economy grows by 1.3 per cent. A study by the Boston Consulting Group and Telenor shows that for every 10 per cent growth in broadband penetration, GDP can grow by 1.55 to 2 per cent. Developed countries have initiated concerted efforts to accelerate growth in broadband penetration and download speeds, Vegesna says.

The US President, Barack Obama, has provided $7.2 billion to build high-speed access to homes and businesses in the US. Australia recently announced its National Broadband Initiative under the leadership of a Minister for Broadband whereby the country will spend A$47 billion to enable 100 mbps connectivity to every family and business in Australia, he says.

The Indian government has failed to make policy amendment keep pace with technology advancement. For fast proliferation of the Internet, the year 2004 was announced as ‘Broadband Year' but there has been no result; as against the target of 20 million by 2010 “we are still struggling to cross even 8 million,” feels Rajesh Chharia, Founder, Director and CEO of C J Online Pvt Ltd, a Ghaziabad-based ISP.

New applications such as Internet Telephony, Internet Protocol TV have been developed. But despite regulators' recommendation on allowing these applications to ISPs, policy makers have not taken a decision for the last two years. “We have to understand the Indian situation where 22 official languages are present and the Internet needs content in one's own language while application does not need any such thing and also the application can make rates much lower compared with existing voice rates,” he says.

Even as the government has liberalised the mobile sector, it should allow ISP application on broadband to private ISPs to increase Internet penetration, says Chharia, who is also president of the Internet Service Providers Association of India (ISPAI), which has 44 members. Poor Internet penetration is affecting all, including government service provider and consumers, he says.

Unbundle local loop
The total Internet users are 81 million, including those using cyber cafes against a total population of 1.1 billion people. The number of subscribers is at around 14 million. The low Internet penetration is because the government does not allow Unbundling of Local Loop — ISPs cannot utilise the huge last mile copper in the form of telephone lines that are already available to customer homes to provide broadband, says S.P. Srihari, Director and Chief Financial Officer, Zylog Systems Ltd, a Chennai-based ISP.

The government does not exempt duties on equipment procured by ISPs and is not allocating 700MHz spectrum for Broadband Wireless Access. Further, the government imposes a spectrum reserve fee of Rs 1,250 crore for WiMax spectrum auction. Most ISPs tend to restrict themselves to the dense urban areas due to the pressure to achieve return on investment, given the high cost of entry and operations, he says.

Ambivalence
Col H.S Bedi, CMD, Tulip Telecom, an ISP, says for a knowledge-based society to grow quickly and for various economic opportunities to become a reality, the spread of the Internet and broadband is now being given top priority.

India, however, has embraced the Internet with a degree of ambivalence. There is tremendous enthusiasm among the retail users and an estimated 60 per cent of users regularly access the Internet through cyber cafes. However, when it comes to high-speed broadband access, there is reluctance, and the rate of adoption has been slow.

India has an Internet penetration rate of only 3.5 per cent. But relatively small percentages in India are big numbers, compared with the rest of the world. With 40.7 million total users, the country already has the ninth most Internet users in the world and by 2012 will have the fourth most users.

Forrester Research predicts that by 2013, India will be ranked third in the list of countries with the most number of Internet users, surpassed only by China and the US. The report states that the number of people online around the world will grow more than 45 per cent to 2.2 billion users over the next five years, with Asian countries driving the growth.

Internet penetration is low in India due to two main reasons. First, more than 70 per cent of India's population resides in rural areas and has limited access to PCs. The socio-economic conditions and lack of education have led to a strong urban-rural divide, and, in turn, slow penetration of the Internet in India. Second, there has been a lack of infrastructure and availability of the Internet in the rural parts. Given the geographical diversity of India, last-mile connectivity has always been a challenge for telecom operators, says Col Bedi.

Neglect of rural areas
Amrita Choudhury, Director, Cyber Cafe Association of India, says the low Internet penetration can be attributed to these factors: high cost of PC and Internet bandwidth, low penetration and poor connectivity of the Internet in rural areas where more than 70 per cent of the country resides, lack of content in vernacular language (as only 140 million understand English out of whom only 80 million are English-literate), and most importantly, lack of people-oriented services such as VoIP (Voice over Internet Protocol).

Cyber cafés — through 1,80,000 Cyber Cafes, 50,000 CSCs and 11,000 e-Commerce Service Retailers in India — are the only solution, wherein the user is provided assisted service and pays only for actual usage. However the rules and regulations governing them have been discouraging their growth, she says.

K.K. Raman, Executive Director, KPMG, too feels that lack of infrastructure, accessibility and awareness are some of the main reasons for the low Internet penetration. More services should be provided to consumers that could bring business opportunity for multiple players.

Broadband, a National Priority
Small and medium businesses (in addition to large enterprises) should be empowered with broadband connectivity. Every student at school and university should have the opportunity to access content online for which broadband should not be looked as a licensing or spectrum issue, but as a national priority, says Vegesna of Sify.

According to Srihari of Zylog, the Government should allow ‘unbundling of local loop' so that other ISPs can ride on the last mile copper network of BSNL/MTNL to offer their own ADSL services. The other steps include subsidising the rollout of broadband infrastructure with the Universal Service Obligation (USO) Fund and allocating 700 Mhz spectrum for Rural Broadband Wireless Access. The private sector will play a dominant role in increasing Internet penetration and bring in the required technology and infrastructure. The government will help by subsidising the rollout with the help of the USO fund which has grown to over $5 billion now.

Private players should be given tax holidays to roll out in semi-urban to rural areas. Companies such as Zylog have created availability of broadband Internet access in over 52 towns of Tamil Nadu in the space of three months and at 1/10th the cost of WiMax or 1/100th the cost of 3G infrastructure, by using unlicensed spectrum, he claims.

For broadband to have reach across the country, service providers will have to look into various emerging technologies, mainly wireless.

All the available broadband technologies should be promoted by the Government. Some of the emerging technologies that are expected to make a huge impact in future are Wi-Fi, WiMax and 3G, says Col Bedi of Tulip Telecom.

raja@thehindu.co.in

http://www.thehindubusinessline.com/ew/2010/03/22/stories/2010032250040100.htm