India finally gets a broadband policy

When I was out visiting India in April 2004, I met with officials from the Telecom Regulatory Authority of India, and they were busy at work, trying to come-up with a coherent broadband policy for India. I met with the then telecom minister, Arun Shorie, who is one of the smartest and perhaps the most patriotic of all Indians I know. We talked about broadband, and why it is crucial for India. He knew that Indians need broadband desperately, for it would create a lot of opportunities and would also help India stay competitive with its “global trade” rival China.

Since then a lot has happened. The government changed and India has a new telecom minister. Wireless market in India is on an upswing, and now finally a broadband policy has been put in place. So what do I think of the new policy? First of all the current government, despite its noises about free markets, has a socialist agenda, and is trying to protect the incumbent monopolies. In other words, it did not take TRAI recommendations (which I think is a political decision more than anything else) and decided not to unbundle the last mile. I think that is precisely the kind of mess we have in US, and Indians have copied the worst possible example of telecom/broadband regulation.

Having said that, I think the new telecom minister, Telecom Minister Dayanadhi Maran doesn’t have real grasp over the concept of competition and quick adoption. Here is what he said: “Recognizing that last mile copper loop is not a bottleneck facility for broadband services, access providers shall be free to enter into mutually agreed commercial arrangements for utilization of available copper loop for extension of broadband services including content.” He expects two million connections by end of 2005 and they will use the MTNL and BSNL networks. Now having scene how the government monopolies work, it is a really unlikely we are going to see rapid penetration of broadband in India. Lack of last mile competition is going to hamper broadband penetration, and this lame-policy is going to ensure that Indians stay behind the broadband curve.

One of India’s largest privately held telecom companies, Bharti Enterprises agrees on this issue. “We believe that unbundling of the local loop is the ultimate solution, if the country wants to spread broadband at an affordable price,” according toFinancial Express. Not everything is bad. For instance, the government has delicensed the 2.40-2.48 Ghz band for low power outdoor use. Which means that WiFi hotspot operators can finally get into the business and start selling their services aggressively.

The new spectrum includes the 2.40- to 2.48-GHz band for low-power outdoor use and the 5.15″ to 5.35-GHz band for indoor use of low-power Wi-Fi systems. The government is also considering deregulating outdoor use of the 5.15- to 5.35 GHz band, said Dayanidhi Maran, India’s minister for communications and IT. In announcing the new national broadband policy on Thursday (Oct. 14), which allows direct-to-home (DTH) operators to offer broadband services, Maran did not go as far as the industry here had wanted. Demands such as lowering import tariffs on equipment, lowering spectrum charges for broadband use and removing service taxes were rejected.

Here are some other high-points:

Government have recently decided to reduce the licence fee for Infrastructure Provider category-II, who provides end to end bandwidth, to 6% of Adjusted Gross Revenue (AGR).  Further, the amount of bank guarantee for such service provider has also been reduced to Rs.5 crores from Rs.100 crores. Which means with a little money – about a million dollars you can snag a license to become a wholesale bandwidth provider. How you are going to get everything else going: well that’s your problem. I also think setting up of National Internet Exchange of India (NIXI) to ensure that Internet traffic, originating and destined for India, should be routed within India is a very smart move.

India’s vision of a Broadband Economy