India's Internet sector underutilising bandwidth

MUMBAI: The availability of Internet bandwidth in India has shot up in recent years, but its usage is far below supply as Internet penetration has not kept pace, according to the National Association of Software and Service Companies (Nasscom).

India had 1.2 gigabytes per second (Gbps) of international bandwidth in October 2001, but its use by Internet Service Providers (ISPs) was much lower, according to Nasscom's strategic review of the information technology sector for 2002.

So, paradoxically, even though there is a surplus of bandwidth -- the measure of the volume of data capable of being transported in a communications system in a given amount of time -- Indian consumers have to make do with low access speeds, which deters them from increasing usage.

Nasscom says most ISPs are not profitable and many are undercapitalised and therefore are loath to spend on improving infrastructure and prone to cutting corners by loading more subscribers onto limited facilities.

Against a norm of eight subscribers per port, a number of ISPs are plugging in far more -- some as many as 30-35 per port, Nasscom said. Indian Internet users spend about 30 rupees (62 US cents) an hour of connectivity, out of which 24 rupees goes to the telecom service provider and only six to the ISP, Nasscom says.

The actual cost per subscriber to the ISP is 14-16 rupees, which means that in the race for market share, most ISPs end up subsidising the user.

Of the 470 licensed ISPs in 2001, only 130 are operational and only one -- Videsh Sanchar Nigam Ltd., which is also the country's overseas telephony monopoly -- is reportedly profitable in the financial hub of Bombay, Nasscom said. Other leading ISPs include Satyam Infoway, Dishnet DSL, Tata Internet Services and Data Access. Nasscom estimated total investments by all ISPs in 2001 was 55 billion rupees ($1.13 billion), while industry revenue was likely to have been only a fifth of that.

Internet penetration

Amitabh Singhal, general secretary of the Internet Services Providers Association of India (ISPAI), told Reuters ISPs had contracted to use just 750 mbps of bandwidth compared with 600 mbps a year earlier, whereas availability had shot up far more in the same period.

"There has been a definite slowdown in Internet subscriber growth in recent months," he said.

"Compared to 54 percent quarterly growth last year, now there is less than 10 percent quarterly growth in subscriber base."

India's Internet subscriber base is not growing fast enough for several reasons -- low penetration of personal computers, near saturation of Internet penetration among existing PC owners, high access costs, poor Internet experience from low speeds and lack of sufficient localised content.

India's active Internet subscribers are projected to touch 1.5 million by March 2002, up 30 percent from 1.1 million in March 2001. But this is slower growth than a year earlier, Nasscom said.

Increasing the rate of growth will be difficult unless PC penetration improves, as 80 percent of existing PC-owning households already subscribe to the Internet, it said.

Nasscom forecasts the number of Internet subscribers will rise to 7.7 million by the year 2004/05, with the user base rising to 50 million. ISPAI's Singhal expects India's bandwidth usage to increase as prices come down. VSNL recently announced a 35-40 percent cut in the rates of international bandwidth. "Once prices come down, even small businesses will think of going online and that can give a big boost to usage," he said.

(C) Reuters Ltd.