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Is India determined to increase broadband penetration?

 

 

Is India determined to increase broadband penetration? The latest National Telecom Policy (NPT) at least says so. However, the recent action of increasing broadband costs  do not indicate determination of the government.

From this month of July, the Internet and broadband consumers will pay 7 percent more every month. This is because of increase in revenue share imposed on Internet Service Providers (ISPs). Worse still, the levy will increase to 8 per cent from April next year.

The decision to increase access cost is driven by the government’s intent to address the “arbitrage,” arising out of the differential revenue share payable by large companies against their multiple licences, leading to the alleged underreporting of revenue. Companies tend to earn revenues under licences which attract a share of 6-10 per cent, but report them under their Internet licence that enjoys a lower levy.

This comes amid reports that the government is moving to impose Rs.1,594 crore in penalties — in a related matter — on Bharti (Rs. 292 crore), Vodafone (Rs. 254 crore), Idea (Rs.113 crore), Tata Teleservices (Rs. 273 crore), Tata Communications (Rs. 120 crore) and Reliance Communications (Rs. 551 crore). The operators are contesting these findings.

The broadband space is skewed in favour of large players: of the 155 operational ISPs, just three — BSNL, MTNL and Bharti — control 82 per cent of the subscriber base. The decision will likely worsen the competitive landscape.

The government’s decision will impact the viability of standalone service providers. Consequently, competition will come down, since ISPs now have diminished ability to compete with big telecom companies, whose resources and bandwidth they usually hire for providing services in districts and cities. Even cyber cafés — used by a large and growing population of students and the middle class for Internet access — will suffer because of the cost increase. Small and mid-size ISPs are already complaining bitterly. “For ISPs, this is the last nail in the coffin. We are being punished for the government’s failure to audit big players,” says Internet Service Providers Association of India (ISPAI) president Rajesh Chharia.

 As per the NPT “Affordable and reliable Broadband on demand by 2015 and to achieve 175 million broadband connections by the year 2017 and 600 million by the year 2020 at minimum 2 Mbps download speed and making available higher speeds of atleast 100 Mbps on demand.”

Compared to other developing countries India is having one of the lowest Internet and broadband penetrations. The number of Broadband connections provided by the end of December 2011 are 13.35 million.  It has missed many of its own targets, including the one to reach 40 million broadband users by 2012: it hit barely 14 million connections this year. Furthermore, the decision will aggravate the problem users face because of low speed, high cost and unpredictable quality. All this, because the government is unable to check the financial misdemeanours of powerful telecom companies.

As per a study by the World Bank, with every 10% increase in broadband penetration, there is an increase in GDP growth by 1.4%.  India is in a desperate need to increase broadband access to deliver public services, banking services, healthcare and the government’s flagship projects like Aadhar, and eventually for disbursement under schemes like the Mahatma Gandhi National Rural Employment Guarantee Scheme.

In order to reach the interior pockets with Internet, the Government is going to set up a National Optical Fibre Network (NOFN) to provide broadband connectivity to 2,50,000 Gram Panchayats with an investment of about Rs. 20,000 crores. The scheme of NOFN is being implemented, for providing Broadband connectivity to Panchayats. The objective is to extend the existing optical fiber network to Panchayats by utilizing the Universal Services Obligation Fund (USOF)

Thinking of starting a series on “how to kill a growing telecom market”. Any suggestions?

(source: (1) The Hindu (2) Press Release date 26-June 2012 PIB, )

 

 

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  1. August 3, 2012 at 3:39 am

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