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Monday, October 22, 2001
Lead Article

Net access — cheaper, not better
Peeyush Agnihotri

AN NRI caught in a traffic snarl-up in Delhi once commented: "Roads and Net connectivity are both the same in India —choked and irritating."

This statement seems to contradict the official statistics. There are more than 120 private ISPs (Internet Service Providers) in India at present, around 2 million Net subscribers and 6 million users. The networking market has grown significantly by 63 per cent and most of the major cities of India have been dug up at several places by those who promise broadband.

The number of Internet subscribers are on a rise in our country. India will be the second largest Internet-user market in the Asia-Pacific region with the Net users increasing to 40 million from the current 6 million by 2005 end, Gartner, an Internet research firm, says.

If everything goes on the right track then probably the highest growth rate would be witnessed by DSL (digital subscribers line) and cable connections though dial-up connections would still account for the largest share of Internet connectivity options.

Yet the moot question remains —when will the Net stop behaving like a snail?

Till this day more than 300 licences have been issued and 120-odd ISPs have started their operations. Each week a new company joins the market and the ISP community is growing fast. The scene at present is that all ISPs are competing with each other to grab the largest chunk of the subscriber cake.


Most of the ISPs agree that the Indian market is attractive though every one has his cup full of woes. ISP tariffs have fallen sharply with better economies of scale and lower costs for international leased lines. There has been a fall in the hardware prices and a fierce competition is on.

It’s a typical case of too many riders on a narrow highway. Agreed, there are 6 million Net users in our country but 75 per cent of these are limited to New Delhi and metro regions alone and tragically the Internet reaches just 6 per cent of Indian citizens.

The lack of proper telecom infrastructure is proving to be the nemesis for low Internet penetration and the market is moving, like the Net connectivity, in a slow and erratic manner. "Though our subscriber base has not gone down, yet the market is static and is not growing as projected. This could be attributed to the recent slowdown in the sales of PCs—a catalyst for Net connectivity. That is why we have shifted our focus to value addition that has enabled us to increase the price as much as three times," Anil Kaura from Satyam, a company that claims to have 65 per cent of the market share in Chandigarh, says.

As far as the mode of Internet access goes, 72 per cent of the subscribers used dial-up as on March, 2001, while cable and DSL, account for 2 and 1 per cent of access. This means that they are yet to catch up, as per a survey conducted by MAIT.

A major bottleneck for all kinds of Internet-related services is the poor telecom infrastructure. The government has set up a national telecom backbone so that cities apart from metros could benefit from it. Right now those in the nearby towns face a major problem connecting to the WWW. "With the introduction of the ’95 access code, STD connections have become a major problem for some of the larger towns of Haryana and other cities near Chandigarh," Pradeep Abrol from Glide says. He feels that the days of single player dictating the market would soon be over and the thrust would be more on revenue sharing now with the coming in of more ISPs.

Right now, the players are competing on prices. However, it is a game of not just lowering the prices but trying to arrive at various kinds of price packages. India has a huge untapped market. The PC penetration, though on a rise, is still low as compared to other countries.

Inadequate penetration of PCs and the Internet in homes as well as limitations in access are mainly responsible for the growth of cyber cafes. The situation is such that today they are cheek-by-jowl phenomenon in all big and small cities, infested with those who are eager to access the Net. This business is growing by more than 200 per cent a year and in most of them either a DSL or an ISDN line is connected to a LAN to allow multiple users to access through just one phone line.

As the cost of PCs and the Internet access continues to fall, most of the ISPs are expecting the market to boom. The corporate access is also bound to grow with domestic computerisation measures in government sector.

The demand from the corporate sector is increasing and no ISP has been able to satisfy this in true sense of terms. Ditto for the educational sector and private schools that have interestingly come up as major purchasers of accessibility. Dial-ups cannot cater to all and broadband is still a distant dream. "Not only schools, even some big coaching centres are going in for Net connections," says Virender Macchral from Emmtel, an ISP, and adds that poor connectivity is sticking out like a sore thumb.

The use of the Internet in India began as a government’s baby. The government installed a network for educational and research institutions, encouraged a private consortium called the Software Technology Parks of India to provide low-cost services and linked government departments together. Paradoxically, it is the government now that is dragging its feet over the issue today whereas the private sector has stolen a march over it.

Satish Mahaldar from Dishnet says that all talks on e-governance are just confined to the government files. "The government is not serious about it. The demand from the government sector is not as much as was made out to be. It is all gas. Had the government been serious it would have resolved the bandwidth issue by now. The VSNL lacks bandwidth and no ISP is getting a throughput. The companies are more dependent on their gateways. Even we at Dishnet are contemplating to bring more connectivity through submarine cable, may be by May, 2002."

Market watchers feel that there is no reason to rejoice. Due to high dial-up charges and low PC penetration at the end situation may boil down to too many ISPs fighting for the elusive major market share. The situation could remain so for a long time to come, industry pundits feel.

Poor Internet connections continue to inhibit the market growth for the time being but with intense competition there will no doubt be rapid improvements to network quality. Cable TV and Web TV promise new access media to provide the Internet services since the number of households passed with cable currently exceeds the number of main phone lines in service.

As per an IMRB study there is a great scope for TV and cable as an alternate solutions for adoption of the Internet. The study says in the relevant target audience, PC penetration is just 8 per cent and that of telephones 49 per cent. "Cable in a short span has achieved 77 per cent penetration across the relevant audience even among lower socio-economic groups. TV penetration among the relevant audience is close to 100 per cent," the study reveals.

In major cities like Chandigarh, a few companies have laid optical fibre cables to make Net a better experience (see box). Then this may come with a hefty price tag attached and few home-users would be willing to pay as much as Rs 1,500 to 2,000 per month to use the same. That could be until too many players enter the market to level down the inflated prices.

"Even broadband is not going to help much as who would take care of the last mile connectivity," an employee of WiproNet says. He feels that most of the clients won’t have purchase power, as this would be directly proportional to the number of users. "What about those where the number of users is less. So dial-ups are going to stay for a long time to come because of the price factor," he avers.

The past has been pretty bad for those who used the Net. The present is no better either. However, the future holds some promise with all those talks about Net through TV and broadband. Whether it’s going to be a reality or another set of tall promises is yet to be seen. Wait on that one too!



"Net-over-cable experience for India is a few years away"

HFCL Connect is one of the companies busy laying optical fibre cables in the city to usher in better connectivity through broadband. Connect, in Punjab, is a key player both as enabler through telephone access infrastructure as well as an Internet Service Provider (Comeconnect). By next month Connect claims it would commission its own international bandwidth gateway thereby eliminating dependence on third-party resellers like VSNL and having full control on gateway access for our subscribers. Mr Vijay Kaul, Vice-president, Connect, answered a few questions posed by Login…Tribune on broadband. Excerpts:

1) What potential does the market hold for the broadband segment at present?

The potential for broadband services is very promising. However we must remember that in India the natural consuming segments for such services are relatively underdeveloped today as compared to more developed markets in the West that is the government, universities, media and the corporate segments. Even the corporate segment that has the purchase power has been rather slow in harnessing the potential of broadband services to enhance their business efficiencies and competitive advantages.

2) Do you think that Net through cable would be a reality soon? How soon would that be?

Net through cable is in a test-marketing phase at the moment in some metros like Delhi, Mumbai and Kolkata. Given the evolution of new technologies on one hand and not so successful implementation in the more developed markets of the West, I suspect the Net-over-cable experience for India is a few years away in real terms. We must remember that we are talking about residential markets here where the basic need for the Internet applications are largely for narrowband applications and are being adequately met with existing technology using home PCs or cyber cafes. Also, there will be very few homes with cable TV where the need for the Internet usage will override the existing consumer need of using the cable medium for family entertainment.

3) Net penetration is kind of static. What is holding the market from growing? Is slow bandwidth the sole villain?

Net subscriptions are growing at 80-90 per cent per annum in Punjab as well as in the national market. However, the penetration levels per unit of population are not impressive by any standard. Net penetrations in the large and medium industry or business segments are quite impressive for a country like India. Where we need to penetrate much more is in the small-scale industry or business segments and the home segment. Here the barrier does not lie in the bandwidth problem but the take-up is limited on account of PC penetration. The solution for us in these segments lies in proliferating public Internet access points (cyber cafes) and PC pricing. We need to get away from this hang-up of measuring penetration to the concept of affordable public access — the mantra should be to provide access and not ownership necessarily.

4) Do we lack proper infrastructure here in our country and within what time span would the Net be ubiquitous in most of the houses?

I think we already have adequate infrastructure in the urban sectors and to a certain extent in the semi-urban areas in terms of telephony access and ISP access services. The telephone access medium has become more relevant for the Net access after the reduction in call rates in the 200 km zone and the ’95 access facility for such zones. Given such developments in the telecom area and the mushrooming of public cyber access points, I would imagine fairly ubiquitous coverage would be available in most urban and semi- urban areas of the country by 2005. The fate of coverage in the rural areas will be entirely determined by government policy and incentives for rolling out basic telecom services in such areas to attract the necessary investment — PA