Segment Analysis of Data Services: ISP's Tough Existence

With the end-user bandwidth costs constantly on the decline, it has become extremely challenging for players to survive, who had jumped in to the opportunity of being ISPs, especially the Cat B and C ISPs. Though they still continue to value add in the entire telecom ecosystem, especially in small towns and very remote villages, where the only other option is BSNL, to keep with the advancements in technology is becoming ever increasingly challenging.

What has been witnessed in the case of telecom operators, where consolidation and exits have left very few players but stronger competencies, is now the route for ISPs to follow. There have been already instances like that of Tikona selling its 4G spectrum to airtel being a major one.

As the industry trends suggest, it looks very difficult for ISPs to exist with profitability. Although, Voice over WiFi (VoWiFi), gives them a way out to offer voice services, especially in areas where the mobile connectivity is very poor, but, might not turn out to be a substantial opportunity as a business case.

Current Challenges

Internet is still an urban affair. Having said that, it does not mean that there is not an opportunity in the rural sector. For instance, Jio added 25% of its subscribers from rural India. Though, they are technically on Internet, they may not be using it for the same, but require basic voice connectivity.

The scope of ISPs to exist in urban category A and category B cities are fading with the rampant growth of cellular broadband. At the same time, with the emergence of operators like Jio, which have a pan India coverage, the rural subscribers are also latching on to their network. This is shrinking the opportunity for the pureplay ISPs in the market.

Declining revenues is also not letting them invest to expand and reach to newer markets that are now in deep pockets of the country.

Future Opportunities

This is one of the segments where the things are looking very bleak. They have to either infuse huge money to be able to offer new services like content and IoT to their customer base. But the issue would remain that they may not be able to compete on the pricing as they would not get the desired volumes.

This translates in to the fact that only large integrated telecom players will double as the ISPs in times to come.