The Indian government seems to be favouring companies specialising in wireless broadband over wired. There are 345 million wireless broadband subscribers today compared to 18 million wired. The Indian government has been accused of starving the state-owned wired telecom BSNL of growth capital to allow wireless operators to prosper; in turn, the government has accused BSNL of incompetence. Whether it is deliberate, accidental, or apathy, the Indian government has failed to understand the critical importance of wired broadband for India’s growth, jobs and wealth creation.
According to the industry regulator TRAI, there are about 1.5 wired broadband lines for every 100 people in India. There are 10 such lines in Brazil, 20 in Russia and China, 30 in the US, and 40 in South Korea, whose population is comparable to the average Indian State. In fact, India is comparable only to Africa and Pakistan. India is clearly not in the same league as the other BRIC nations.
There are technical reasons why wired is a superior choice. India’s population density is without parallel for large countries.
The 2011 census reports that it was 8.3 times the world average. Even in rural India, people live in dense clusters. Limited wireless bandwidth must be shared by all subscribers near mobile towers and this slows speed and usability for critical applications in dense environments.
Further, most dwellings are made of brick and mortar through which wireless signals of frequency greater than 1.6GHz, which is, nearly all LTE and WiFi, are difficult to penetrate. Wired broadband is not subject to any of these limitations.
BSNL is not the answer here. Unlike cable television which is in half of Indian homes, only 10 per cent of homes have a wired telephone, and that number continues to fall. Telephony-based wired broadband, or DSL, as well as fiber-to-the-home broadband has many of the same technological disadvantages as wireless: it is complex, proprietary or expensive.
A potential solution is Cable Broadband. While wireless bandwidth capacity at each cell tower of 20MHz is shared by the entire local population, the existing coaxial TV cable into each home has a capacity of 856MHz. Cable television is currently accessible to 120 million or 50 per cnet of homes in India with an observed average of 200 cabled homes per existing fiber-optic node.
Also, every commercial center is wired for Cable TV and businesses use wired broadband. Unlike wireless, Cable Broadband technology is highly standardised, mature, all-weather reliable, and can currently support 10Gbps broadband speed into each home or business on top of its television service.
Cable subscriptions are shown to be linked to almost every literate home with electricity in India. With the penetration of both at 75-80 per cent, and expected growth of each over the next several years, Cable TV should further penetrate the Indian countryside. There is nothing on the horizon in India that has the potential of Cable Broadband for universal access; but it has been pushed aside in favour of wireless broadband.
Financial factor
Cable Broadband is very affordable in India; yet, wireless companies are the ones investing heavily in capital expenditures to increase coverage. Recently, one wireless company spent nearly $30 billion in capital expenditures to launch a service that added more than 100 million subscribing phones within six months. They are not finished; the top two wireless companies just announced plans to raise another $6 billion through bonds for capital expenditures.
This is wonderful for the mobile industry and for India, but India’s entire wired Cable TV network can be upgraded to deliver broadband within a year for about $8 billion and can reach many more people reliably. That investment can produce more than $10 billion in annual EBITDA from the local cable industry at an average subscription of $10 per month for broadband.
Cable Broadband has a complicated history in India. The Indian government withdrew plans to regulate the industry in the mid-1990s. This lack of regulation may be why the country was quickly cabled. However, the result is a fragmented local cable industry with 50,000 operators and no scale economies. So many local cable operators, who assert various proprietary rights, make it challenging to try to develop national policies, standards and structures.
A non-transparent industry of more than 50,000 local independent operators cannot attract institutional capital. Nonetheless an attempt to regulate cable service, improve its offerings and monitor the use of these assets that are on government property would have many beneficial effects.
As part of this plan to normalise cable service, the government can facilitate the upgrade from one-way cable to two-way broadband by authorising rights-of-way for cable and providing access to capital to operators, subject to two conditions: (i) operators organise as cooperatives or mergers in minimum blocks of 100,000 cabled homes in compact, geographically contiguous areas; and (ii) complete the upgrade within six months under a national cyber-security framework. The government can auction networks that don’t upgrade.
Policy proposal
Prime Minister Narendra Modi has been presented with a detailed proposal to deliver Cable Broadband for India.
The Prime Minister’s Office sponsored an Inter-Ministerial Committee on Cable Broadband Policy chaired by the Cabinet Secretary in 2015 and the report was presented to it in 2017.
Since the submission of that proposal, had it been adopted, the entire country could now be using wired broadband through cable.
Economists say that once upon a time, India and China were half the world’s economy. China is devoted to reclaiming its place in the commercial world.
India’s manufacturing and agriculture are stymied by regulation and vested interests as well as an unsustainable market structure. The growth of India is dependent on its growth in IT-enabled services.
While mobile broadband is important, Cable Broadband can deliver reliable service at a fraction of the capital cost with a far greater delivery system. In fact, the future of 700 million young Indians under-30 depends on it.
Takhan led investments from the US into India’s cable operators in partnership with some of the world’s largest industry companies. Pinzler is an attorney based in New York.