India's Broadband Future

Ajit Balakrishnan, CEO, Rediff gave a keynote in IIT Delhi earlier today. His talk suggested that Indian telecommunication operators and the government should not be concentrating at delivering niche multi-Mbps broadband services but should instead concentrate on delivering reasonably good service (100s of kbps) to a larger population. Ajit flashed a slide which showed that 86% of 3G users use their smartphones to access their email, a relatively low bandwidth application, but only 6% use 3G to download and watch videos. Ajit's point was to recognize the importance of broadband as an "always on" connection rather than a high-bandwidth connection in India.

There is a analogue in India's history to this choice that Indian telecommunication operators and the government has to make. The government of India created top notch higher education institutes - IITs, RECs, and IIMs - in the 1950s (after Indian independence). It spends tens of thousands of dollars per year on each student enrolled in these institutes, arguably at the expense of thousands of primary education schools in backward areas of the country. The thinking at the time of creation of these institutes was that this creme de la creme would catalyze the growth of industry and technology in the country. Similarly, it may be theorized that by providing high-speed Internet connectivity, early adoptors will drive applications and create demand in the general population to upgrade their connectivity.

Countries like China or South Korea concentrated on their primary education institutions rather than creating world-class higher education institutes. It is safe to say that both these countries are significantly ahead of India, measured via any human development index. But does this analogy suggest that India should concentrate on democratization of (relatively low speed) broadband rather than creating small pockets of high speed broadband?

I think that the market forces will decide the balance between broadband services in India. The ARPU on low-speed broadband may not exceed $5, but this will be compensated via large volumes. I also believe that low-speed broadband will be served via wireless in India. With mobile phones outpacing fixed line connections by a 12:1 ratio in the country, there is limited scope for technologies like DSL to be widely deployed. Fortunately, 3G, LTE and Wimax are nicely poised to fill in for the lack of fixed line infrastructure in India. As for the niche multi-Mbps broadband, I expect FTTX being deployed in highly urbanized areas where western ARPUs (10s of dollars) are possible.