Monopolies, Arbitrary Prices, and Non-Existent Service: Who's Going to Fix India's Broadband Market?

By Gopal Sathe | Updated: 9 June 2017 14:05 IST

Highlights

Apart from a few areas of big cities, wired broadband is pretty limited
In many areas, you'll only have a single provider you can utilise
Lack of competition leads to arbitrary pricing and poor service quality

In India, there are barely a handful of companies that can claim to offer broadband services across the country. In the big cities, you have a few other local players. Some of these, such as ACT Fibrenet have launched gigabit services, and are growing fast. The company’s broadband services are available in 11 cities, with plans to add two more over the next 18 months.

In practice this means that if you're not living in one of the big cities - or even if you're living in one of them but in an area that falls outside the catchment area of most providers - you'll only have one or two options to choose from, at best. There's limited competition, and as a result, prices have not really improved over time, unlike mobile connections where it’s relatively easier to move from one provider to the other.

Cable providers provide the only real alternative
There are some local providers - cable operators who double up as Internet providers. These connections often don't have any FUP limits, and do offer reasonable prices, but in our experience, downtime is not a rare event, and customer complaints usually take a long time to resolve.

We weren't alone in that experience either - we spoke to a number of customers who have used or are using cable operator-provided Internet connections. The responses we got showed how much the experience varies from one provider to the another, and even one locality to the other.

For example, Anuj Katyal, a doctor in Mayur Vihar, switched to the local provider for his apartment complex two years ago, and says that it was the best decision. "I pay half [Rs. 750 per month] of what my neighbour gives to Airtel, I get 20Mbps to his 40Mbps, and zero FUP," says Katyal. "I'm watching Netflix at full quality like it's regular TV and I've never had any issues. The office is just downstairs in the next building, so if something is wrong, I just walk down and come back up to get my support."

Several others however say that downtime of one or two days at a time is not unheard of, something we can attest to as well based on our experience. Also, the speed varies a lot on a daily usage basis, which can degrade experiences like video streaming, or gaming. And speaking of gaming, ping response (or latency) can also vary a lot.

It's a capital intensive business
Today, the status quo is being challenged by companies like Excitel, Spectranet, and ACT, which are offering far better rates, better download limits (or no download limits), and promising fast service. But they're limited in terms of the cities they're available in, and even if they're in your city, there's a good chance that they may not service your neighbourhood just yet.

The reason for this is pretty obvious - the wired broadband business is extremely capital intensive.

ACT earlier told Gadgets 360 that it looks at expansion from one neighbourhood to the next, not one city at a time. "To build in any city, you need a capital commitment of at least Rs. 200 crores," ACT CEO Bala Malladi explained.

Udit Mehrotra, CEO and MD Spectranet, supported this view, and said, "wireless providers need to put up a tower and you're done. In our case, you have to dig up and lay cable everywhere, then set up base stations, and then get the wire directly into the user's house as well."

"It's extremely expensive, and time consuming," he continued. "That's why not too many people can get into this space, but there's a new wave of growth coming because with 4K video, and video consumption going up, there's more need for wired connections."

Reliance Jio could be a game changer
The Reliance Jio impact on the telecom market has been very evident - every service provider had to drop prices, offer more and more data, and offer free calling. The company is launching broadband services next, and is said to be providing 100GB data at 100Mbps for free as it’s still testing the service. The monthly rental isn't known yet, but expect it to be highly competitive, if the Jio 4G rates are any indication.

The Jio preview already seems to have had an impact in the market. We've seen broadband providers offerings more data at the same price, and prices dropping across the board already. Even so, things are likely to change a lot faster once Reliance Jio gets out of the testing phase.

That's because Reliance is one of the few companies in India that has the financial muscle to take on the problem of quick expansion for wired broadband. Companies like ACT and Spectranet grow slowly one neighbourhood at a time because of the cost involved. Reliance would be able to make its presence felt at a national level, and that's going to have a direct impact on the competition - in fact, it's going to create a scenario where there actually is competition.

Whether or not you're a fan of Jio's customer service - and that's one area where some people do have doubts - it has the potential to really shake up the wired broadband market in India, to the benefit of the customers.

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