New Broadband Policy

People’s Democracy

Organ of the Communist Party of India (Marxist)


No. 43

October 24,

Broadband Policy: Action Required, Not Just Wishes




most important part of the new Broadband policy announced by the minister of
communications and information technology, Dayanidhi Maran is not what it
contains but what it does not contain. The contentious recommendation of TRAI
that the last mile connection of the telephone companies be “unbundled” and
allowed to be used by others has not been accepted. Instead, the policy
envisages commercial arrangements by service providers amongst themselves for
providing broadband services. While not accepting the unbundling of the last
mile by TRAI is welcome, there is little positive measure that one can see in
the new policy. It has largely good intentions, but apart from lifting the
requirement of outdoor licensing of frequency spectrum for WiFi broadband, there
does not appear to be any concrete steps that the government is proposing.


broadband means a high bandwidth (throughput) connection to the Internet. The
policy declares this to be more than 256 KB. While this definition is a matter
of semantics, the real issue is what technology supports high bandwidth
connections to the Internet. For this, it can be different variants of DSL
(digital signal loop which uses the existing copper cable connecting the
telephones), wireless, or even a fibre optic direct connection to the
subscriber. The easiest to rollout is the DSL route, in which the exiting
cabling can be used and therefore installation of broadband does not require new
cabling. In India, this is the easiest way to go, particularly if we want rapid
penetration of broadband services.




broadband rollout in India has been extremely slow, with a number of Asian
countries being ahead of us in this area.

The recent TRAI Consultation Paper and its broadband recommendations have
identified how other countries are ahead of India with respect to broadband
connectivity. TRAI had based its recommendations on CII’s study, which had
predictably demanded a number of concessions from the government to help private
companies in providing broadband services. The most important amongst them was
“unbundling” the local loop: that is a allowing other Internet providers to
use the cables laid by the incumbent telephone companies (read MTNL and BSNL) to
provide their Internet services.


the government has backed away from this CII demand and TRAI recommendation.
This last mile unbundling had led to a host of problems wherever it has been
tried. Both in UK and in the US, this has been tried. As incumbent telephone
companies are also Internet service providers, regulatory action to open their
local loop leads to physical obstruction by the incumbent. After continuous
wrangles and litigation, things are now sorting out in these countries as
companies are commercially settling these issues amongst themselves. We have
only to see the long regulatory battles that we have had with interconnections,
WiLL and cellular companies not to embark on a path that leads at every stage of
the regulator or the dispute settlement tribunal, TDSAT, to intervene. It is
very very surprising that TRAI, after the bitter interconnection battles which
finally sorted out once unified licensing was introduced, should again suggest a
path which would open the doors to further legal and regulatory wrangles.


key to broadband connectivity is having telephone companies follow an aggressive
policy of providing broadband services. The competitive pressure on them is to
make wireless broadband easier using the WiFi route or other fixed wireless
routes. The measures taken in this policy of de-licensing the frequency bands
for outdoor use of WiFi is to be welcomed as it provides an alternate broadband
path to the more popular DSL route. The fibre optic direct cabling alternative
is a matter of policy by Internet service providers or telephone companies
offering broadband services and there is little regulatory or policy initiatives
that can be taken in this regard.





key to popularising broadband services is the cost of broadband services. The
TRAI recommendations pats itself on the back on how regulatory action ha led to
explosive growth of cellular services. What it forgets is that TRAI was a major
barrier to growth of cellular services by keeping cellular rates artificially
high. Only when MTNL and later BSNL entered the picture, did the cellular rates
drop. The delay in MTNL and BSNL entering cellular services was due to the
direct obstruction of the NDA government, who wanted the private cellular
companies to hold a privileged position in the mobile sector. Only after MTNL
and BSNL introduced low cost mobile services followed by MTNL introducing WiLL
services, the mobile rates came down. With Reliance entering the competition,
the rates have dropped even further.


high cost of broadband services shows an exactly similar pattern. The major
players in broadband should have been the telecom companies. Unfortunately, here
BSNL and MTNL have played a marginal role.

MTNL never used their strong user base to push for high bandwidth Internet
services. Its ISDN Internet was very poor; similarly, it lagged well behind
Bharati’s and Tata’s for the DSL route. It is only when it found a steady
churn in its customer base, with high-end users moving towards their competitors
due to higher bandwidth Internet connections being provided by them using DSL
that MTNL has woken up and is now offering DSL connections too. MTNL has thus
squandered its entrenched position as the premiere telecom player in the two
major metros. BSNL has still to offer similar services across the country, where
again it is the major if not the overwhelmingly dominant player.


 The key here for the government was to push MTNL and BSNL in
committing to DSL in a big way and making the necessary investments. For both
MTNL and BSNL, the investments required are much smaller as they have spare
bandwidth capacity within their system. In the fibre optic cables that BSNL has
laid, even today there are dark fibres available to augment the backbone
It is deliberate obstruction or criminal
negligence by the NDA government that high capacity Internet services should
have been neglected in the last 6 years.




privatisation of VSNL was a big blow to expansion of Internet usage in this
No new technology pays for itself in the
first instance. Internet is no different. Only when necessary infrastructure
exists, does such new usage pick up. What it means is that the infrastructure
has to be created first before the users start paying for it. VSNL followed this
model initially and even though its revenue from Internet usage was never out of
the red, it played a major role in popularising Internet usage. With the
Tata’s taking over VSNL, they have been siphoning off money to Tata Telecom.
In any case, the real revenue of VSNL came from overseas communications. It is
this part of VSNL that Tata’s have looked after, letting VSNL lag well behind
others in areas such broadband.


TRAI and CII have highlighted the Korean achievements in Internet usage. The
figures are remarkable: Korean companies routinely use broadband services to
transact business. Almost 80 per cent of the households have Internet
connectivity and almost entirely using broadband! The charges for broadband are
60 times lower than in India. In India, a 512 KB unlimited time and download
broadband connection costs around 1000 dollar per month as against 30 dollar in
Korea. However, both the government and TRAI have not focussed on how the
Koreans reached this position. The main thrust here came from the government who
intervened to put up the necessary backbone infrastructure. This coupled with
government Korean Telecom making an aggressive entry into offering broadband
services brought about the broadband revolution in Korea. Korean Telecom has
been able to recover its investments in broadband in about a year! The key for
successful introduction in new technology has to be the government. It is only
when the infrastructure picks up that there are subscribers. And only when there
are a large number of subscribers that the costs drop. If we want the market to
create the subscriber base, this takes much longer as private companies go for
quick profits with low investments. This keeps the prices high. While this is a
good strategy for private players looking to maximise profits, it is bad
strategy for a country.


is this area that Maran needs to push if broadband connectivity is to be
advanced. Pious wishes will not lead to a higher penetration. Only action on
the ground will. And action on the ground consists of making MTNL and BSNL
follow an aggressive policy of introducing DSL services. If they do not, it is
clear that the existing voice services are not going to sustain telecom
The new services, voice over internet, audio and video
conferencing, a whole host of other services will be bundled in which the
exiting voice services will only be an add-on. All this is also flat
connectivity based: the distance of the voice call will increasingly be not
relevant in generating revenue. It is this new world of flat rates, audio/video
over the Internet, DSL connectivity and other new services that MTNL and BSNL
have to aim for if they want to survive in the long term. This is no longer a
luxury but a necessity.
If the NDA government
deliberately obstructed the state run telecom companies from being competitive,
the success of the current communications minister will depend on the sense of
urgency that he is able to bring to MTNL and BSNL to meet the challenges of the