People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 43

October 24, 2004

New Broadband Policy: Action Required, Not Just Wishes


Prabir Purkayastha


THE most important part of the new Broadband policy announced by the minister of communications and information technology, Dayanidhi Maran is not what it contains but what it does not contain. The contentious recommendation of TRAI that the last mile connection of the telephone companies be “unbundled” and allowed to be used by others has not been accepted. Instead, the policy envisages commercial arrangements by service providers amongst themselves for providing broadband services. While not accepting the unbundling of the last mile by TRAI is welcome, there is little positive measure that one can see in the new policy. It has largely good intentions, but apart from lifting the requirement of outdoor licensing of frequency spectrum for WiFi broadband, there does not appear to be any concrete steps that the government is proposing.


Generally, broadband means a high bandwidth (throughput) connection to the Internet. The policy declares this to be more than 256 KB. While this definition is a matter of semantics, the real issue is what technology supports high bandwidth connections to the Internet. For this, it can be different variants of DSL (digital signal loop which uses the existing copper cable connecting the telephones), wireless, or even a fibre optic direct connection to the subscriber. The easiest to rollout is the DSL route, in which the exiting cabling can be used and therefore installation of broadband does not require new cabling. In India, this is the easiest way to go, particularly if we want rapid penetration of broadband services.




The broadband rollout in India has been extremely slow, with a number of Asian countries being ahead of us in this area. The recent TRAI Consultation Paper and its broadband recommendations have identified how other countries are ahead of India with respect to broadband connectivity. TRAI had based its recommendations on CII’s study, which had predictably demanded a number of concessions from the government to help private companies in providing broadband services. The most important amongst them was “unbundling” the local loop: that is a allowing other Internet providers to use the cables laid by the incumbent telephone companies (read MTNL and BSNL) to provide their Internet services.


Fortunately, the government has backed away from this CII demand and TRAI recommendation. This last mile unbundling had led to a host of problems wherever it has been tried. Both in UK and in the US, this has been tried. As incumbent telephone companies are also Internet service providers, regulatory action to open their local loop leads to physical obstruction by the incumbent. After continuous wrangles and litigation, things are now sorting out in these countries as companies are commercially settling these issues amongst themselves. We have only to see the long regulatory battles that we have had with interconnections, WiLL and cellular companies not to embark on a path that leads at every stage of the regulator or the dispute settlement tribunal, TDSAT, to intervene. It is very very surprising that TRAI, after the bitter interconnection battles which finally sorted out once unified licensing was introduced, should again suggest a path which would open the doors to further legal and regulatory wrangles.


The key to broadband connectivity is having telephone companies follow an aggressive policy of providing broadband services. The competitive pressure on them is to make wireless broadband easier using the WiFi route or other fixed wireless routes. The measures taken in this policy of de-licensing the frequency bands for outdoor use of WiFi is to be welcomed as it provides an alternate broadband path to the more popular DSL route. The fibre optic direct cabling alternative is a matter of policy by Internet service providers or telephone companies offering broadband services and there is little regulatory or policy initiatives that can be taken in this regard.




The key to popularising broadband services is the cost of broadband services. The TRAI recommendations pats itself on the back on how regulatory action ha led to explosive growth of cellular services. What it forgets is that TRAI was a major barrier to growth of cellular services by keeping cellular rates artificially high. Only when MTNL and later BSNL entered the picture, did the cellular rates drop. The delay in MTNL and BSNL entering cellular services was due to the direct obstruction of the NDA government, who wanted the private cellular companies to hold a privileged position in the mobile sector. Only after MTNL and BSNL introduced low cost mobile services followed by MTNL introducing WiLL services, the mobile rates came down. With Reliance entering the competition, the rates have dropped even further.


The high cost of broadband services shows an exactly similar pattern. The major players in broadband should have been the telecom companies. Unfortunately, here BSNL and MTNL have played a marginal role. MTNL never used their strong user base to push for high bandwidth Internet services. Its ISDN Internet was very poor; similarly, it lagged well behind Bharati’s and Tata’s for the DSL route. It is only when it found a steady churn in its customer base, with high-end users moving towards their competitors due to higher bandwidth Internet connections being provided by them using DSL that MTNL has woken up and is now offering DSL connections too. MTNL has thus squandered its entrenched position as the premiere telecom player in the two major metros. BSNL has still to offer similar services across the country, where again it is the major if not the overwhelmingly dominant player.


 The key here for the government was to push MTNL and BSNL in committing to DSL in a big way and making the necessary investments. For both MTNL and BSNL, the investments required are much smaller as they have spare bandwidth capacity within their system. In the fibre optic cables that BSNL has laid, even today there are dark fibres available to augment the backbone required. It is deliberate obstruction or criminal negligence by the NDA government that high capacity Internet services should have been neglected in the last 6 years.



The privatisation of VSNL was a big blow to expansion of Internet usage in this country. No new technology pays for itself in the first instance. Internet is no different. Only when necessary infrastructure exists, does such new usage pick up. What it means is that the infrastructure has to be created first before the users start paying for it. VSNL followed this model initially and even though its revenue from Internet usage was never out of the red, it played a major role in popularising Internet usage. With the Tata’s taking over VSNL, they have been siphoning off money to Tata Telecom. In any case, the real revenue of VSNL came from overseas communications. It is this part of VSNL that Tata’s have looked after, letting VSNL lag well behind others in areas such broadband.


Both TRAI and CII have highlighted the Korean achievements in Internet usage. The figures are remarkable: Korean companies routinely use broadband services to transact business. Almost 80 per cent of the households have Internet connectivity and almost entirely using broadband! The charges for broadband are 60 times lower than in India. In India, a 512 KB unlimited time and download broadband connection costs around 1000 dollar per month as against 30 dollar in Korea. However, both the government and TRAI have not focussed on how the Koreans reached this position. The main thrust here came from the government who intervened to put up the necessary backbone infrastructure. This coupled with government Korean Telecom making an aggressive entry into offering broadband services brought about the broadband revolution in Korea. Korean Telecom has been able to recover its investments in broadband in about a year! The key for successful introduction in new technology has to be the government. It is only when the infrastructure picks up that there are subscribers. And only when there are a large number of subscribers that the costs drop. If we want the market to create the subscriber base, this takes much longer as private companies go for quick profits with low investments. This keeps the prices high. While this is a good strategy for private players looking to maximise profits, it is bad strategy for a country.


It is this area that Maran needs to push if broadband connectivity is to be advanced. Pious wishes will not lead to a higher penetration. Only action on the ground will. And action on the ground consists of making MTNL and BSNL follow an aggressive policy of introducing DSL services. If they do not, it is clear that the existing voice services are not going to sustain telecom companies. The new services, voice over internet, audio and video conferencing, a whole host of other services will be bundled in which the exiting voice services will only be an add-on. All this is also flat connectivity based: the distance of the voice call will increasingly be not relevant in generating revenue. It is this new world of flat rates, audio/video over the Internet, DSL connectivity and other new services that MTNL and BSNL have to aim for if they want to survive in the long term. This is no longer a luxury but a necessity. If the NDA government deliberately obstructed the state run telecom companies from being competitive, the success of the current communications minister will depend on the sense of urgency that he is able to bring to MTNL and BSNL to meet the challenges of the future.