India’s broadband push

The country will require investments of over 40,000 crore to build infrastructure to provide 214-million broadband connections by 2014 that can reach a base of over 700 million, says a study by the Confederation of Indian Industry (CII). While India has over 600 million-cellphone connections and close to 500 million active mobile phone users with 60% penetration, the country has a mere 10-million broadband customers. The broadband market in India is at a nascent stage of development with household penetration of broadband limited to approximately 4% at the end of last year, and the top 10 cities account for 60% of all customers who have high-speed internet connections. The government has fallen behind its target of 20 million broadband connections by half at the end of 2010 .Bharti Airtel CEO Sanjay Kapoor, who heads CII’s national committee on telecom and broadband, said the industry had identified seven different business models to enhance broadband penetration, but said these initiatives were unlikely to take off without active support from the Universal Service Obligation Fund (USOF). All telcos contribute 5% of their annual revenues towards this fund, which is used to support rural telephony, and the unutilised amount in USOF is estimated at over 20,000 crore.
According to the CII study, the investments for building this network could take three forms — the ‘ownership model’ where the government deploys and owns the broadband infrastructure, the ‘public private partnership’ system where government jointly rolls out the infrastructure along with private players and ‘financial incentives model’, where the government acts as a facilitator for providing incentives and grants to public and private companies for deploying broadband infrastructure, but without having any ownership. The country currently has about 10.4 lakh kms of optic fibre, by various service providers combined, which covers the entire urban area but has only limited presence in rural areas.
The incumbent public sector operator, BSNL, accounts for over 60% of the existing fibre infrastructure. According to our study, to cover the 2,50,000 gram panchayats, an additional fibre deployment of 3,01,000 kms will be required at an investment of approximately 17,500 crore, explained Kunal Bajaj, director and partner at telecom consulting firm Analysys Mason India.

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