Broadband cost to be 50% less in India

Eric Auchard and Shailendra Bhatnagar

NEW DELHI: Broadband Internet access growth is due to explode in India next year to one million subscribers, as plunging prices make high-speed Internet service affordable, the head of a big equipment supplier said.

Ruchir Godura, country manager and director of South Asia operations for Nasdaq-listed UTStarcom Inc., said India could soon see monthly consumer prices of around Rs 500, half the current price of around Rs 1,000.

"I expect one million lines over the next 12 months," Godura said of the broadband hook-ups to be sold across India in 2005.

"I'm estimating it will be at least two million lines in 2006." Only 50,000 broadband lines have been sold so far in India, but the market broke open this year with two big contracts.

State-run Bharat Sanchar Nigam Ltd., India's largest telecom firm by sales, first placed an order for 500,000 lines, and Godura said BSNL's smaller sibling Mahanagar Telephone Nigam Ltd. would buy another 200,000 to 300,000 lines.

"I think Rs 500 is a very good price point that many people can afford," Godura said in an interview, adding that BSNL was ready to charge that price to jumpstart the market.

"There's at least three to four million people every year who can afford a broadband connection," Godura said. "Four to five million subscribers is not a difficult task in the next three years."

By way of comparison, some one million new cars are sold per year in India, while five million consumers buy scooters or motorcycles.

China, the world leader in broadband subscriber growth, plans to add around 10 million lines next year, Godura said.

Analysts believe India, the world's second-most-populous nation and a leader in software development, is poised for similar growth in coming years, only with a later start.

"That (10 million lines) is the kind of growth you can expect in India in the next four to five years," Godura said.

LOBBYING FOR DUTY CUTS

India's telecom regulator is lobbying the government to cut import duties on broadband gear to lower costs and boost usage. India has a target of 20 million broadband connections by 2010.

Market research firm Gartner estimates broadband accounts in Asia, led by China, Japan and Korea, grew 55 percent in 2003 to 27.1 million, or 40 percent of all Internet service accounts.

By 2008, Gartner Dataquest forecasts broadband Internet accounts will total 68.5 million, or 58 percent of all accounts.

Digital subscriber line (DSL) connections are the main route by which India expects to increase high-speed access. UTStarcom sells DSL equipment, which sends data over phone lines at high speeds, to virtually all of India's carriers, state or private.

Its big selling attractions are its cost and its gear's capacity to be upgraded from so-called narrowband, or dial-up Internet links, to DSL connections. Operators simply install a new card with DSL chips into existing UTStarcom boxes.

India's market attracts all manners of players in the global communications equipment market. Godura said it was hard to break down market share, but his firm was a significant player in data gear, especially for the telecom arms of the Reliance and Tata groups and Bharti Tele-Ventures Ltd.

Pricing competition, especially in the public sector, has grown as rival Chinese equipment makers Huawei Technologies and Zhongxing Telecom Co. Ltd. (ZTE) have put tremendous price pressure on Western suppliers in the Indian market.

"It seems like they are picking up more and more market share," Godura said.

In India's state-owned segment, only UTStarcom and Huawei have so far won broadband equipment contracts, he added.

Arriving in India in 2001, UTStarcom has grown to where it is targeting $50 million in revenue this year, out of a market worth $2.5 billion last year for both fixed and wireless equipment.

UTStarcom, founded by two Chinese entrepreneurs in the United States in the mid-1990s, made its name selling low-cost wireless phones that proved a hit in China's teeming cities.