Broadband in India

People can’t sleep because they have insomnia. I can’t sleep because I have Internet connection – Member of Internet Users Anonymous

Although there may not be an official group called the Internet Users Anonymous, the day is not far when this would be a reality. Internet has revolutionized the way we think and perceive the world around us, and it is still rapidly evolving and converging to a point where all forms of communication will be through data, and hence through the Internet. However, this day seems quite distant in India where Internet speeds still lag considerably behind other countries.

History of Internet connections in India

Internet services in India were first rolled out in 1995 by VSNL. However for the next 10 years Internet in the country remained very slow till 2004, when the Government formulated its Broadband policy, which defined Broadband thus –

An always-on data connection that is able to support interactive services including Internet access and has the capability of the minimum download speed of 256 kilo bits per second (kbps) to an individual subscriber from the Point Of Presence (POP) of the service provider intending to provide Broadband service where multiple such individual Broadband connections are aggregated and the subscriber is able to access these interactive services including the Internet through this POP.  The interactive services will exclude any services for which a separate licence is specifically required, for example, real-time voice transmission, except to the extent that it is presently permitted under ISP licence with Internet Telephony.

Internet penetration gained acceleration 2005 onwards, starting off with only PCs as the Points of Presence, and later moving on to mobile devices.

Broadband and 3G penetration in India

Source: Telegeography Press Release

Following the auction of the 3G spectrum and subsequently the 4G spectrum, the scene was set for the Indian market to move beyond the existing wired-line technologies to a more competitive and challenging wireless broadband market. As of December 2011, India has around 121 million users, which is the world’s 3rd largest Internet user base. Around 60% of these users access Internet only through mobile devices.

So what’s the problem?

Even though the growth of Internet users might look good, they are actually short of what the Govt. expected in its Broadband Policy, especially the growth in the broadband sector of retail customers and small enterprises. Typically the demand for Internet bandwidth within a country is driven primarily software exporters, information technology enterprise solutions (ITES), banking, software service providers etc. most of which could be classified under the BPO sector. However, it’s the retail customers and small enterprises provide the biggest source of access users that lead to voluminous growth and Internet proliferation, thus leading to an e-lifestyle. This has remained low in India, thus leading to a low level of penetration of broadband. Despite the Indian economy maintaining a 7-9% p.a. growth which results in a reasonably large market for Internet Service Providers (ISPs), the retail segment has not blossomed to entail creative, competitive, and cumulative business, mostly due to very slow Internet connections. According to 2007 statistics, the average download speed in India was around 256 kbit/s which was the minimum speed set by TRAI, whereas the international average was 5.6 Mbit/s during the same period. This implies that prevailing applications are restricted to e-mail and Web browsing with limited multimedia content. The pricing structure of broadband in India is arguably one of the highest in the world, making it an elite or luxury item. Which brings us to the main question – Why is there a scarcity of bandwidth in India?

Country Normalized price per Mb/s per month

South Korea






United Kingdom










Sri Lanka








Source: On the State and Guiding Principles of Broadband in India – Ashwin Gumaste, Prasad Gokhale, and Asheesh Dhar, IIT Bombay

Where is all the bandwidth?

The scarcity of bandwidth in India can be attributed to multiple factors. One of the reasons could be the near-monopolistic policies which have been exhibited for the past decade at the landing points of submarine links. When it comes to bandwidth there is a near monopoly by Tata and Reliance. Attempts have been made to break this monopoly, with MTNL buying bandwidth from Tata and Reliance a few years back. How it came to be like this in the first place, even though BSNL was present is because the government thought that the submarine cables and the landing stations is a low profitability business. However, since then the Government and BSNL has built its own landing station in West Bengal. Indian enterprises use high orders of statistical multiplexing that cater to a large number of internal users with a minimum dedicated bandwidth, which combined with the monopolistic policies ensure that bandwidth remains either inaccessible or expensive, or both at the same time.

Another reason could be the usage-based pricing model which is currently deployed for retail customers in India, for broadband. It dissuades them from using Internet multimedia services extensively like voice over IP (VoIP), video sharing, streaming media, and social networking portals. Hence, retail users use less bandwidth-consuming services such as browsing, e-mail, and chat, because of which there is no demand for high speed Internet connections. This leads to next-generation Internet applications, content providers, and data centers that require more bandwidth becoming wary of putting up shop in India. This feedback loop creates the fallacy of local intranetworking, which explains the rise, penetration and success of cellular services for both voice and short message service (SMS) texting applications, significantly higher than other countries. In comparison, the flat-rate pricing has many advantages for both service providers and retail customers. Service providers save the overhead of deploying a system for tracking and billing usage. With a flat-pricing model, the ISP knows the amount of payments it will receive from its subscribers and can budget accordingly. For retail customers, this model provides convenience and a predictable fee. The flat rate pricing model has been an important factor in the growth of the Internet.

Growth of flat pricing model for broadband

Source: ICT Regulation  Website

To make matters worse, a unique provider-vendor business model has emerged, one that brings in the vendor to lease equipment to a provider, thereby sharing profits (between the vendor and the provider). This implies that the network is at the mercy of the vendor in terms of technology roadmaps, as long as the vendor can provide for the basic business needs of the provider. This also implies that the provider is more focused on its marketing and sales strategies than on the actual ownership of the network. In fact, most of the overhead is in sales and marketing, neither of which is directly responsible for good network planning.

Various telecommunication operators are deploying optical fibre-based national networks offering services like MPLS (Multi-protocol label-switched) core, IP-VPN and so on, but the benefit of this infrastructure isn’t reaching the end users because of poor “last mile” infrastructure (connecting the service providers to the end users) except in metropolitan areas. In select tier 1 cities, the incumbent provider has begun some basic deployment of fiber to the home (FTTH) and fiber-to-the-curb (FTTC). Although this is a good sign, at par with deployment in the developed world, the deployments are far too little to make a business impact. The key again is the absence of a comprehensive return on investment (ROI) model, due to the current broadband pricing strategy as a result of bandwidth choking.

What can be done about it?

We have seen that the growth of broadband in India has been severely impeded by factors such as prohibitive costs at the submarine links for service providers, a flawed pricing model, weak “last mile” infrastructure and a weak demand for high-speed Internet services. These should be tackled by unbundling the international cables, government stimulus for infrastructure development, and competition through regulation by employing a flat pricing model, thus fuelling the much needed rise in demand for broadband.

However, in the long run, the future of broadband in India is all about mobile. A rollout of fixed broadband will only be viable in high-density metros and not on a mass market and pan-India scale. As such, mobile broadband is the only feasible way forward and preferred by consumers due to the ease of getting a connection and the option of mobility. This probably explains the extremely prohibitive pricing displayed at the spectrum allocations of 3G and 4G. The entire world is moving towards an integrated device for all needs – phone, computer and entertainment, and hence mobile broadband will gain importance. Although India may be a few years behind schedule compared to the rest of the world, the situation is not going to be too different in India.


References –

On the State and Guiding Principles of Broadband in India – Ashwin Gumaste, Prasad Gokhale, and Asheesh Dhar, IIT Bombay

Broadband Policy 2004 – Govt. of India

3G Breaks India’s Bandwidth Bottleneck – A Telegeography press release, July 19th 2011

By – Achyuth Sanjay