Strong business model to boost India’s broadband growth

by Sohini Bagchi    Jun 06, 2013

broadband growth

India has witnessed significant growth in telephone connectivity over the past few years, with tele-density increasing from 17.2 per cent in December 2006 to 73.3 per cent in December 2012. The Internet penetration level, however, remains a challenge at 10 Internet users per 100 people that needs to be addressed, believe experts.

A new report released by Confederation of Indian Industry (CII) and KPMG on the role of broadband for inclusive growth in India explores how using the national fibre infrastructure, commercially feasible business models for relevant e-services in areas such as education, healthcare, banking and agriculture can be built on the foundation of a Public-Private-Panchayat ecosystem. As there are strong economic linkages between broadband penetration and GDP, with the World Bank estimating a 10 per cent increase in broadband penetration would yield a 1.38 per cent increase in GDP growth, the report titled ‘Creating viable business models for inclusive growth through the National Optical Fibre Network’ examines that both private and public bodies in the country should leverage the national fibre network asset in the country to ensure a robust broadband growth.

Connectivity facilitates inclusiveness. But services will need to be relevant and affordable to the rural masses, and commercially viable for the service providers. This calls for robust Public-Private partnerships.
-Jaideep Ghosh, Partner, KPMG India

Public-Private-Panchayat ecosystem

Providing relevant broadband-enabled services through a Public-Private-Panchayat ecosystem requires strong business models with clear returns for each stake holder. While the state bodies would demand tangible social returns in the form of employment generation and skill-building for the rural population, private sector enterprises would seek long-term commercial viability, says the report.

Sectors such as education, healthcare, banking and agriculture have been identified as requiring exceptionally high-speed broadband connectivity and services. Jaideep Ghosh, Partner, KPMG India states that “connectivity facilitates inclusiveness. But services will need to be relevant and affordable to the rural masses, and commercially viable for the service providers. This calls for robust Public-Private partnerships. The task now is to implement business models that create win-win value for all stakeholders.”

The Government of India has commissioned the National Fibre Optic Network to connect 2,50,000 Gram Panchayats with a speed of 100 Mbps and almost all states have agreed to provided their support through Triparte agreement between Centre-State-NOFN. “The potential of connecting the relatively under-connected rural areas with high-speed broadband is especially high,” says Chandrajit Banerjee, Director General, CII. He believes that high speed Internet access will not only establish connect to the bottom of the pyramid, but will also generate skills and employment, thereby delivering empowerment to the rural population. This is turn is also expected to increase the country’s GDP. He believes that with the NOFN implementation running well in the background, and the high intent expressed by governments and the private sector – this is the right time to deliberate on the possible models that could work in those identified business sectors.

Creating practical business models

According to the report, there are certain basic prerequisites to creating practical business models for rural areas. For instance, the availability of basic infrastructure, such as continuous power supply and uninterrupted connectivity, is imperative for delivery of e-services to rural consumers. Furthermore, building scale for these services is vital to ensure commercial viability of these initiatives. Wide availability of the G2C services that were envisioned in the NeGP would be important to attract footfall at the CSCs, says the report.

“The availability of G2C services such as issuance of birth and death certificates, land records, Right to Information (RTI) services, etc. would attract people to the CSCs, thereby, giving them an opportunity to look at other low cost e-services such as e-learning modules, online banking, to name a few. Business models that involve delivering broadband to the household level also necessitate last mile connectivity – a subject which still awaits clear decisions and policies,” says Ghosh.

The report also points out that the government and the industry have been trying to address many of these issues for a while and progress has been made in some areas. To improve the availability of power, for instance, some states such as Maharashtra are concertedly trying to exploit renewable energy sources to broaden power-supply. It is understood that BBNL plans to make alternative renewable sources of power (mostly solar) available to Gram Panchayats to meet the needs of the fiber network. Various initiatives are underway to utilize alternative power sources to run telecom towers in rural areas. The Telecom Regulatory Authority of India’s (TRAI) recommendations on green energy applications have been approved by the Government and TRAI has issued directives to the service providers to adopt green energy measures, with targets laid out till 2020. Eventually, these alternative energy resources can also be used to power broadband services in rural areas, says Banerjee.

Despite efforts from various quarters, it is unlikely that all these issues will be resolved completely in the immediate term, he says. However, with the given fiber infrastructure soon to be in place, and around 1 lakh CSCs operational in the country, it is possible to give a head start to the NOFN ecosystem and build business models that factor in the drawback and ensure minimum dependencies.

High speed Internet access will not only establish connect to the bottom of the pyramid, but will also generate skills and employment, thereby delivering empowerment to the rural population.
-Chandrajit Banerjee, Director General, CII

A positive outlook

On the whole, experts believe India’s broadband growth has a very positive outlook. In an earlier report CII noted that proactive steps are being taken to enhance broadband penetration in India, which is set reach the level of 600 million from the present 20 million by 2020, so as to cover the entire breadth and length of the country. Cisco has also indicated in its recent Cisco Visual Networking Index (VNI) Forecast (2012-2017) that the Internet Protocol (IP) traffic in India is poised to grow six-fold through 2017 with a CAGR of 44 percent. As Robert Pepper, Vice President, Global Technology Policy, Cisco notes that Internet traffic growth in India is the fastest globally. While there is great willingness from the government and industry to drive broadband penetration and ensure internet access, there is a lot more that needs to be done when it comes to implementation and sustainability of innovative business models . However, he also believes that people, devices and data get connected, the possibilities it opens up are immense.

Government initiatives to bridge the digital divide and a focus on data services will ensure the rapid growth of broadband services. High mobile subscriber base, commercial third-generation (3G) and pilot fourth-generation long term evolution (4G LTE) projects will further drive the growth of fixed and mobile broadband services in India. In addition to this, the rise in the demand from the domestic and business segments rising popularity of social networking applications will also expedite adoption of mobile broadband services in the country. For all these development to takes place Ghosh therefore substantiates that the need of the hour is a concrete action to create the facilitative environment which will make broadband and ICT intervention impactful, inclusive, immersive and sustainable in India for growth and inclusion.