Could digitized cables ease India’s broadband woes?

By Deepak Kumar

Industry watchers will readily vouch for the fact that India’s broadband numbers have miserably fallen short of the targets set by Broadband Policy of 2004. As against the initial targets of 20 million subscribers by 2010, the country had achieved less than 11 million. That too, when broadband used to be defined as a connection with a speed of 256 kbps!

Yes, that was just before the 3G rollouts started taking place and significantly accelerated the pace of broadband penetration and also before the new guidelines revised the threshold speed for broadband to a minimum of 512 kbps. As per data published by Telecom Regulatory Authority of India (TRAI), there were 85.7 million broadband subscribers at the end of CY 2014, of which 70 million were on wireless.

The target is to achieve 175 million broadband subscribers by 2017 but at the same time the broadband speed is also due to be redefined in 2015 from the current 512 kbps to 2 Mbps.

In other words, the broadband targets would continue to be elusive as before, even with 3G and 4G playing the catalysts. Indeed, mobile broadband is good but not enough.

Mobile broadband is a means, not an end

It is a no brainer that while smartphones are good enough for accessing a number of media, entertainment, communication and e-commerce apps, they are not viable substitutes for the larger PC screen. The overall user experience as well as productivity goes up sharply when the same sets of applications are accessed through a larger screen.

True, the fact remains that the broadband access goals could not be realized for years through a combination of the PC and the wireline—so low has been the installed base of the PC and the penetration of the wireline in India. (Low PC literacy rates and relatively higher cost of the device as well as the data subscription have posed to be significant entry barriers.)

By comparison, combination of the smartphone and 3G has turned out to be highly effective. Not only the cost of the device has kept coming down, the number of features it supports has been going up at the same time. The value for money that the smartphone shows to the average Indian user has been unprecedented—be it the camera’s megapixels, MP3 support, the sound quality, the amount of storage, juiciness of the battery or simply the processing power of the underlying processor.

Also, the 3G tariffs are among the lowest globally, which, along with the largely prepaid nature of the market, makes it possible for the average user to control the spend and keep it affordable.

Indeed, the smartphone has been a great first access device for many and wireless has been a great catalyst for broadband in India. This also has led to empowerment of many a people and community and has consequently contributed to the development of the economy.

Yes, that broadband development contributes to economic growth is an established fact.

That said, it is also notable that some of the most developed economies globally not only have moved to 4G LTE mobile services or beyond but also have high levels of wireline broadband penetration and adoption.

In an earlier recommendation on National Broadband Plan, TRAI had noted that countries like the US, Japan, Australia, Canada, Portugal, South Korea, Germany, Singapore and Finland had identified broadband as a potential infrastructure, enabling the national economic and social growth. In a more recent recommendation paper, in 2015, titled “Delivering Broadband Quickly: What do we need to do?” TRAI has offered international comparisons in terms of wireline and wireless broadband penetrations.

The developed economies like the US, UK, Australia, Germany, France and Japan have relatively much higher levels of broadband penetrations, both in terms of wireline and wireless. The lesser developed economies are lower on the broadband penetration fronts as well.

Can India’s wireline broadband leapfrog?

History has shown that India has repeatedly failed when trying to achieve its broadband targets through the wireline route, so it is fair to be sceptical about the possibility that it could succeed a next time around.

But before we jump to conclusions, let’s try and understand why the earlier attempts failed.

Actually, it’s a no brainer—the factors that made wireless broadband a success were all missing in the case of wired broadband. While India had a large and growing base of hundreds of millions of mobile phone users even before 3G auctions were held, the installed base of PCs was insignificant by comparison.

Moreover, fixed-line broadband tariffs were high and unaffordable for masses. And of course, PCs have never been the “Swiss knives” that the mobile phones have been, thus making it harder for the average consumer to see PCs as value-for-money devices.
What has changed now? Not much really, when it comes to drawing a comparison between the PC and the smart phone. In CY 2014, according to IDC, PC shipments for India stood at 9.6 million units, down 16.5 percent year on year.

By comparison, the mobile phone shipments were more than 64 million units in the fourth quarter of 2014 alone, with the smartphones accounting for 35 percent of the shipment. For the full calendar year of 2014, mobile phone shipments exceeded 261 million units, which was more than 27 times the shipment of mobile phones in the year.

The opportunity lies in the TV screens

India is home to an estimated 169 million TV households, comprising a mix of cable connections and DTH subscriptions, among others. What if these TVs could double up as PCs?

This opportunity didn’t exist until recently, as the mass technology that could turn a TV into a PC wasn’t really there. Now suddenly, the market is abuzz with PC-on-a-stick announcements and offerings from players like Google and Intel and also from OEMs like Dell and Asus.

These sticks or dongles have been designed to convert a display screen like an LCD TV into a full-blown PC. While Google’s dongle has been named Chromebit, Intel’s offering is called Intel Compute Stick. The Google Chromebit, which is expected to become available later in 2015, is expected to be powered by a Rockchip 3288 SoC and come with 2GB of RAM and 16GB of eMMC memory. It would also have a USB 2.0 port, Wi-Fi 802.11 ac support, Bluetooth 4.0, and an ARM Mali 760 quad-core GPU.
Intel’s Compute Stick houses a quad-core Intel Atom processor and a choice of operating systems: Windows 8.1 with Bing or Ubuntu 14.04 LTS.

Intel says the Windows version includes 2 GB memory, 32 GB of on-board storage and comes with McAfee Antivirus Plus for comprehensive protection. The Ubuntu version has 1 GB memory and 8 GB of on-board storage. Both devices come with Wi-Fi and Bluetooth for connectivity, a USB port to connect peripherals and a micro SD card slot for additional storage. While the Windows version has been launched in the US, it is yet to reach the Indian market. The Ubuntu version is scheduled to become available in June 2015 in the US.

Can the unorganized cable industry gear up?

India had embarked upon its phased cable digitization journey in 2012, and the first two phases of digitization have been completed. Industry estimates say around 25 million homes have been digitized while another 75 million or so will need to be digitized in the next phases, given that around 100 million of the 169 million TV homes are on cable.

The opportunity for multi-service operators (MSOs) and last-mile cable operators (LMOs) is to upsell broadband into the digitized homes, where there now is a potential to double up the existing TV units as PCs via the computing sticks from Google, Intel, et al.

The obvious pitch for users would be that MSOs/LMOs could give users broadband experience on larger-than-PC screens at a fraction of the total cost of ownership of a PC. The MSOs could also consider being channels for the stick OEMs, thus giving themselves an additional revenue stream.

Since the first two phases involved the metros and some of the leading cities, where the average revenue per subscription (and hence the disposable income) is relatively higher, upselling broadband into these homes would be relatively more rewarding than what may be expected in the next phases.

In the next phases of digitization, where low-ARPS cities and towns will be involved, will the existing cost of equipment be sustainable? Is subsidization partly a way out? What role could other stakeholders play? These are some of the questions that MSOs will need to think through in a strategic manner.

Cable digitization has also been considered a key to the success of the government’s Digital India program, given that digitized cable could also become a key vehicle for delivery of broadband in the last mile. As such, MSOs and other cable TV stakeholders may see a value in working together with various government agencies towards the fulfilment of a common goal.

The author is Founder Analyst at Business and Market, which focuses on ICT market research and advisory.
(Inputs: Sanjeeb Kumar Sahoo)