India lags behind in mobile broadband penetration

by Sohini Bagchi    Sep 23, 2013

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Mobile broadband as predicted by analysts is set to witness tremendous growth in India. However, the latest figures released by the United Nations Broadband Commission are appalling. According to the State of The Broadband 2013 report, India is at the 106th position in the world as far as mobile broadband penetration is concerned, even lagging behind countries such as Lithuania, Libya and Saudi Arabia. Analysts believe innovative services and pricing model as well as an overall sustainable ecosystem can improve the mobile broadband penetration in the country.

The report shows that mobile broadband penetration in India stood at 4.9% in 2012 against China’s 17.2%, 123.3% Singapore, 113% in Japan, and 74.7% in the U.S. With just 4.9% of the population having access to mobile broadband services, India is behind countries such as Lithuania, Libya and Saudi Arabia. According to the report, Although India’s penetration has improved from 1.9% last year, it has not moved up the rankings due to better performance by other countries and also the challenges facing the Indian broadband industry.

Umpteen challenges

Experts believe India’s 2G and 3G offerings by telecom operators are yet to empower India’s 100 Crore plus population. “The mobile market in India will continue to face challenges if average revenue per unit (ARPU) does not grow significantly. If the prevailing conditions do not change in the Indian telecom market, India will account for 12% worldwide mobile connections, but just 2% of worldwide mobile services revenue in 2013,” says Shalini Verma, principal research analyst at Gartner.

Furthermore, there seems no end to the regulatory hurdles to the country’s broadband sector. Recently, the apex court had ordered telcos to stop offering 3G services to their subscribers in circles where they do not hold the requisite spectrum, by having intra-circle arrangements with other telcos.

According to analysts, differentiating strategies that appeal to a wider customer base can enhance the scope for the adoption of mobile broadband solutions. But even though service providers are striving to extend their reach, the poor quality of service, slow connectivity, and lack of localized vernacular content threaten to slowdown the uptake of mobile broadband services in the Indian markets. At the same time, lack of innovative pricing models may further impede penetration.

State of wireline broadband

In the wireline broadband space too, India has dropped to 122nd spot compared to 112 last year. The report raised doubts over the use of Universal Service Obligation fund for rolling out broadband services. India was one of the first countries to extend the mandate of its USF to include broadband in 2008.

“The downside is funding broadband from operator levies may mean that these levies need to be raised, thereby increasing the cost of services, and potentially pricing the program out of the market,” says the report stating that an effective balance has to be achieved in this regard.

Potential to increase GDP

The UN report has also acknowledged the positive impact of the increased broadband penetration from last year, albeit the figures are insignificant.” In India, broadband has already generated nearly 9 million direct and indirect jobs, while a 1 per cent increase in broadband penetration could add $2.7 billion or 0.11 per cent to Indian GDP in 2015,” it said.

Sunil B Mittal, Chairman, Bharti Airtel, has written in the UN report, “it is vital to ensure affordability and create the necessary supportive ecosystem, including: a conducive regulatory environment; reduced disparities in access, speed, and functionality; improved availability of spectrum at reasonable cost; affordable devices; more local language content; and a range of new apps.”

Verma too believes that India has a phenomenal pent up demand for mobile broadband and local mobile apps that solve everyday problems for consumers. “It will be imperative for telcos to think of growing the top line through innovative services. With social and video apps doing extremely well, it is time to look beyond these and deliver apps that can have a sustained business model,” she says suggesting that telcos should ideally look at offering smaller mobile broadband plans using a sachet-style usage pattern which appeal to Indian consumers.