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India Telecom 2010 Report titled Broadband for All


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Article titled: Broadband for All

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India Telecom 2010 Report titled Broadband for All

  1. 1. 25Broadband for allVarious studies have credited broadband as a catalyst for economic and socialdevelopment of a country. Availability of broadband services at affordable pricelevels contribute to higher GDP growth rates1, provide for a larger and morequalified labor force, and make that labor pool more efficient. It has been proventhat the multiplier impact of broadband growth on GDP is significantly higher thanmobile telephony growth.Growth effects of ICTs: Percentage point increase in GDPper capita for every ten percentage point increase in ICTpenetration, 1980-20061.6 1.381.4 1.21 1.2 1.12 1 0.81 0.770.8 0.73 0.60.6 0.430.40.2 0 Fixed Mobile Internet Broadband High-Incom e Econom y Low -Incom e Econom ySource: Qiang and Rossotto, World Bank, Information and Communication forDevelopment Report 2009The successful auction of 3G and BWA spectrum has laid a good foundation for apush towards achieving pan India broadband infrastructure; which will lead us tothe dream of providing “Broadband for all” This vision demands a synergetic push .across technologies (DSL, Fiber, Cable, and wireless), amongst telecom operators(public and private) and across the broadband value chain (device manufacturers,service providers, content providers & regulators); so as to provide this “universalservice” to residents living anywhere in the country (urban or rural) and to thematch the customer expectations across all segments (Enterprise, Government andRetail).1 Consultation Paper on National Broadband Plan, TRAI, June 10, 2010© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
  2. 2. Section or Brochure name | 26 24© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
  3. 3. 27The key challenges in broadband Quality of Service (QoS)adoption Broadband growth has been partly constrained owing to poor QoS in terms of throughput speeds experienced byThe broadband penetration in India has been low despite customers. The contention ratio4 (number of subscribersthe presence of 104 broadband service providers. The accommodated in a given bandwidth) in India is high i.e.broadband penetration is less than 1 percent2, which is low service providers provision an average 130 subscribers in 52compared with overall tele-density of 59.63 percent3. Of the Kbps bandwidth, whereas internationally the same ratio isapproximately 17 million (fixed) internet subscribers only not more than 50. Due to this phenomenon, bandwidth per10.08 million are broadband users3. This implies that India still subscriber reduces dramatically, especially when severalhas some way to go in terms of achieving the original target subscribers log in at the same time.of 20 million broadband subscribers by the end of 2010, asset by the Broadband Policy 2004. The number of broadband Contention ratio (number of subscribers accommodatedadditions is only 0.1 to 0.2 million compared to 16-18 million in given bandwidth)per month for mobile additions2. 140 130Uptake of broadband has been limited so far on account of 120multifarious factors: 100Inadequate wireline infrastructure 80Inadequate wireline infrastructure has resulted in the “last 60 50 50mile” challenge in providing access. The absence of local 45 48loop unbundling (LLU) further restricts competition in this 40space by not allowing a regulatory framework wherein 20alternative service providers can use the existing local loop oflicensed service providers to offer broadband services. Both 0 Czech Slovakia UK Ireland Indiathese factors have predominantly undermined the growth Republicof fixed broadband services currently being provided using Czech Republic Slovakia UK Ireland IndiaDSL technology. Global examples suggest that the DSLpenetration has been significantly higher in countries adopting Note: The contention ration specified are for download speed of 512 Kbps except for Slovakia for which 1.5 Mbps has been consideredLLU: Source: TRAI, CRISIL Research, May 2010 DSL Coverage2 Broadband 1 GDP per capita Country Year of LLU penetration (USD PPP 2008)3 , percentage Source year (Dec 2009) France 2001 98.5% End 2008 30.4 43,453 Germany 1996 95.0% End 2008 30.3 43,484 Italy 1998 95.7% End 2008 20.5 37,936 Netherlands 1997 100.0% End 2007 37.1 50,868 UK 2000 100.0% End 2008 29.5 42,275 Australia 1999 91.0% June 2008 23.3 44,223 Canada 2001 89.3% End 2007 29.6 42,945 Japan 2001 98.6% Sept 2008 24.8 39,081 United States 2003 82.0% End 2007 26.4 46,008Source:1 OECD, Working Party on Telecommunication & Information Services Policies, Developments in Local Loop Unbundling, 20032 OECD, Indicators of broadband coverage, 20103 OECD, December 20092 Consultation Paper on National Broadband Plan, TRAI, 10th June 20103 ‘Monthly Telecom Scenario – August 2010’, DoT, October 20104 TRAI, CRISIL Research, May 2010© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
  4. 4. 28Support for efficient broadband infrastructure Growth of internet and broadband users (in Millions)deployment 180 10.5Right of Way (RoW) procedures and charges are fairly 160 9.47 9.5 140 8.77complicated and have concerned the service providers to 120 8.5 7.82venture into creation of new infrastructure (especially optical 100 7.21 7.5 80 6.62 6.62 6.5fiber cables) for broadband and telephony services. Lack 60 5.52 5.5of adequate power supply (or alternative energy sources) 40 4.9 4.5 20 4.38especially in the rural areas has also been one of the key 3.87 0 3.5factors for the sluggish penetration. Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- 08 08 08 08 09 09 09 09 10 10Cost of customer premise equipment (CPE) Fixed Internet Subs Wireless Internet Subs Fixed Broadband SubsThe relatively higher cost of CPE is another hindrance forbroadband penetration. Also, the PC penetration in the Source: Indian Telecom Services Performance Reports, TRAI, 2008-2010country, especially in the rural sector, is low. In the wirelessspace, while CDMA operators have launched EVDO basedservices that provides high speed access, the uptake hasbeen limited due to expensive end user device. Key drivers of broadband accelerationNotebook sales in India (in thousands) It is broadly accepted and proven internationally, that Broadband growth depends on availability, affordability and3000 perceived useful applications or usage.25002000 Availability 14101500 795 7701000 318 500 55 1027 1099 22 747 377 532 0 155 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 E st abl i shment Househol dsSource: IT Industry Performance Annual Review: 2009-10, MAIT-IMRB, 28th July2010 Applicability AffordabilityThe falling prices of laptop and greater availability in termsof features and pricing has led to a 65 percent growth in sale Availability – broadband services at the rightof notebooks. In 2009-105, the household users accountedfor a modest 56 percent of the sales; while the rest was placescontributed by business users. Also, the consumption in Although 70 percent of Indian population lives in rural areas;household users has grown by 83 percent. This is expected broadband facility is limited to metros and major have a continued positive impact on uptake of broadband Availability of broadband is critical for development of ruralservices. areas as much as it is for the urban areas. Out of total 10.08 million broadband subscribers6, mere 5 percent are rural subscribers. The low broadband penetration in rural areas is attributed to unavailability of transmission media connectivity up to village level. Due to high initial investment and expected low returns, operators are hesitant to invest in small cities/ villages or remote areas. Considering the enormous power of broadband, it is essential to concentrate on availability of the broadband to every citizen.5 ‘IT Industry Performance Annual Review: 2009-10’, MAIT-IMRB, 28th July 20106 ‘Monthly Telecom Scenario – August 2010’, DoT, October 2010 © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
  5. 5. 29Affordability – Broadband tariffs at the right price Internet is largely in English and to an extent in Hindi, and is not customized as per local needs and diversity. The contentThe entry level tariff7 for broadband services has come down in Indian vernacular languages will increase relevance anddrastically from INR 1,500 per month in 2004 to INR 200 consequently interest of the local population in broadbanda month in 2007 which is still higher than most countries. , uptake and utilization. Therefore considering specific regionalThe ICT Development Index report of the International requirements, content development in vernacular languagesTelecommunications Union (‘ITU’) indicates that the needs to be encouraged. Large numbers of softwaresBroadband rates are higher at 7 percent of GNI as compared .7 are available to translate the content from one languageto the price basket for mobile telephony which stands at 2.2 to the other. Conversion from speech to text and text topercent. speech is also available for different languages. Though theHigh Cost of PC and other access devices commonly accuracy of such software depends on the product andknown as CPEs is one of the major impediments in spread actual requirement, there is sufficient scope to further workof broadband. Economical options like use of thin client, on these areas to boost the development of the contentrecycling of old PCs / Laptops will make CPEs more affordable in Indian vernacular languages. Given India’s strengths infor the masses. One of the measures to make CPEs more IT and the recent trend in the traditional entertainmentaffordable may be to provide incentives through fiscal policies. industry, infotainment can be a big booster for broadband.Incentives could be in the form of reduction of taxes and Entertainment content can be targeted to boost broadbandlevies on CPEs and financial incentive in terms of rebate in demand. This can be a high growth driver which may requireincome tax to encourage affordability of CPEs. The broad some initial nurturing but may enhance broadband demandobjectives of providing fiscal incentives are to make CPEs especially to the non English literate subscribers.affordable to the consumers and to stimulate investment Accessibility to applications - Increasing the scope offor the domestic manufacturers for boosting indigenous broadband from just e-mail to more value added applications,production. effective use of broadband in automation of operations and functions, innovative use of technology in imparting educationGrowth of internet and broadband users (in Millions) and increasing literacy is likely to drive the penetration of broadband in India. Few of the areas/applications which hold United States Canada UK Netherlands Japan India France Brazil Russia significance to the broadband popularity and growth are:Mobile cost as %age of per capita GNI 8 Overall telephony cost 7 (as a %age of GNI) high in Brazil 6 5 Email Internet Surfing High Significant difference in 4 Broadband and Cellular costs broadband cost and 3 Uptake/Popularity are similar for most of the cellular cost for India developed markets Voice Clips 2 Moderate Voice Chat 1 Video Video 0 Gaming Voice & Streaming 0 2 4 6 8 10 12 Video Chat Broadband cost as %age of per capita GNI Low Tele-Education HD Tele-Medicine Video Source: ‘ICT Development Index Report’, ITU, 2009 0 64 Kpbs 256 Kpbs 512 Kpbs 2 Mbps >4Mbps Minimum Bandwidth RequiredApplicability – broadband services supporting theright applications • Education: In education, virtual classrooms (TeleLocalized Content - India poses a unique challenge in terms Education), where students do not have to travel distancesof diversity in spoken languages. Though Hindi and English are to schools and colleges, will be in demand. Onlineprincipal and secondary official language respectively, there courses, tutorials and examinations will be necessaryare 22 official languages recognized by the Constitution, and for empowering universal education where broadbandhundreds of additional languages and dialects spoken across can be used to impart knowledge. Video conferencing isthe county8. To ensure end-to-end local language delivery, a very useful tool, however initial equipment cost is stillapplications as well as content need to be provisioned in viewed as prohibitively high. In keeping with the “Rightlocal languages. The content that is available today on the to Education Act” of the Government of India that came into force on April 01, 2010, broadband can help in bridging this scarcity of adequate schools and teachers to provide effective education at affordable costs 7 Consultation Paper on National Broadband Plan’, TRAI, June 2010 8 ‘Constitution of India’, National Portal of India, © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
  6. 6. 30• Healthcare: Another sector which can be benefited from Hence, the scope of broadband can be enhanced from broadband penetration is healthcare. A significant problem just e-mail to more value added applications. Effective use plaguing the nation’s health care system is the fact that of broadband in automation of operations and functions, there are significant disparities in availability of reliable innovative use of technology in imparting education and health care facilities between urban and rural areas. Rural increasing literacy will drive the penetration of broadband in India, for example, experiences higher mortality rates due India. to non-availability of expert advice and timely treatment. A lot of development is taking place within the e-health field. Many gadgets are now available, which can assist in remotely capturing vital parameters of the body which can be utilized by people living in rural areas to provide information and seek timely expert advice of doctors available in any corner of the world at a fraction of the costs• E-Banking & E-Commerce: Broadband is also useful for various utility services like online banking, bill payment, rail ticket booking, online application filing and trading. It allows job seekers to effectively search for employment opportunities. New content creation and distribution systems have enabled millions of people to distribute their contributions online with least expenditure. There are significant financial as well as social benefits of online shopping. It helps ensure the cheapest deal and also helps to save time when using price comparisons on the web. Broadband services in rural and remote areas can also be a very cheap and effective medium for providing banking services to the “unbanked” population of India and further the financial inclusion agenda of the Government• Entertainment: There is dramatic increase in consumer behavior towards real-time applications i.e. “experience now” Share of real-time entertainment traffic (video and . audio streaming, Flash media, peer casting, place shifting) is increasing. Thus, entertainment seems to be key driver for generating huge demand for broadband especially in rural and computer literate population• Utility: Remote management of security for homes and business premises, and an increasing number of household appliances and machines communicating over IP networks, is expected to drive the demand for broadband• E-governance: For any technology to go main stream and find maximum applications and utility, one of the biggest customers is the government. Broadband can be an important lever in helping government realize its objectives laid out under “National E-governance Plan” . With e-governance being the new mantra, it has significant potential to bring about convenience, transparency and efficacy in government functions and take these services to the doorstep of the citizens. © 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
  7. 7. 31Achieving the vision of The rural push“Broadband for All” To support the broadband infrastructure roll-out in the rural areas, the Department of Telecommunications (DoT)11 hasDespite the historical challenges identified so far, the regulator also proposed to offer a slew of freebies at the panchayatas well as the government has shown willingness to reignite level. This includes giving three broadband connections tothe broadband growth, and provide a platform to support every gram panchayat free of charge for three years along“Broadband for all”. with free installation of computer and printer; three telephone connections and one cable TV connection without any charge.National broadband plan The incentives will cost about INR 2,000 crore, which will beTRAI has suggested the roll-out of a national optical fiber cable funded through the Universal Services Obligation which will act as a backbone to broadband servicesacross the country. The robust national infrastructure wouldbe scalable to cater to our future requirements not only inurban areas but also in the villages. For making all villages Conclusionbroadband-enabled, an option is being explored to take optical Broadband is the much needed catalyst to bring about thefiber cables to 3.74 lakh villages having a population of 500 or socio-economic growth in the country. India, therefore, needsmore (basis Census 2001 data). The regulator has suggested a National Broadband Plan encompassing initiatives acrossthat funding for such a project could be considered from the various ministries which would provide a platform for provisionMahatma Gandhi National Rural Employment Guarantee of quality broadband services across the country. It wouldScheme (MGNREGS) for non-skilled work and from the take a holistic view covering various aspects like customerUniversal Services Obligation Fund (USOF) for material and requirements (demand drivers), customer segment (urbanequipment cost9. India is taking a step in the right direction as well as rural), technologies (wireline as well as wireless);as global references suggest that developed countries like nature and type of CPE; regulatory aspects. The regulatorsJapan, Singapore and Australia have taken similar initiatives to as well as the government and the industry players acrossproliferate high-speed broadband services to their masses. the value chain need to join hands so as to provide the best3G/BWA spectrum auction possible support to this national vision of “Broadband for All” .India is poised to see both 3G and BWA services beforethe close of 2010, BWA services like WiMax (or LTE) has anopportunity of reaching out to the rural masses in a cost-effective manner. WiMax and 3G will help in delivering thegovernment’s target of achieving 100 million broadbandsubscribers by 2014. Wireless Broadband technologies byleveraging (or sharing) the existing wireline infrastructure(available to the public and private operators) can immenselycontribute to the broadband proliferation in the country.Low cost tablet PCIndian government (Ministry of HRD) has unveiled a prototypetablet computer that would sell for an affordable INR 1,500 orUSD 3510. This highly affordable touch-screen device wouldin times to come, play a critical role in providing high-qualityconsumer broadband experience across the country. Thetablet also comes with a solar-power option that could makeit more feasible for rural areas. The Linux-based Tablet PCfeatures most of the basic functions one might expect in aTablet: Web browser, multimedia player, PDF reader, Wi-Fi,and video conferencing ability.9 ‘Consultation Paper on National Broadband Plan’, TRAI, June 201010 ‘An IIT, IISc-designed laptop for just INR 1,500’, Times of India, 23rd July 201011 ‘Special purpose vehicle planned for broadband push’, Hindu Business Line, 24th July 2010© 2010 KPMG, an Indian Partnership and a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.