The rise of Internet access via cable - Company Business and Marketing

Telecommunications, March, 2001 by Aparna Achar

INDIA -- New Delhi has become the first Indian city to have full-blown commercial Internet access service via cable, thanks to extensive piping done by two service providers -- Punj Lloyd's Spectranet and Bharti BT's Mantra Online.

Although several cable television operators have been offering Internet access over cable on a trial basis to customers in major metros (such as Mumbai, Bangalore, and Chennai) over the past 18 months, this is the first time commercial services have been launched for both corporates and households.

Atul Punj, chairman, Spectranet (New Delhi), claims that 'nearly 60 to 75 subscribers are signing up everyday'. The company, which has already laid a 600 km fibre-optic cable network linking Delhi and neighbouring Gurgaon in the state of Haryana, claims to have over 6,000 cable customers.

There are already about 30 million Indian households which subscribe to cable and satellite services and this figure is expected to go up to 46 million by 2004, according to studies done by financial institutions. In comparison, there are only 24 million telephone connections and just 5.8 million PCs installed all over the country. Therefore, if a range of broadband services -- such as high-speed internet access, video-on-demand and interactive television -- are to reach the largest number of customers, transmitting through the cable operator's pipe is the only option.

The five major cable operators in India are Siticable, Indusind Media, Hathway Cables, RPG Netcom and Sumangali Cable Televsion -- each determined to control this turf. In addition, there are ISPs such as Mantra Online, Satyam Infoway and Aptech Internet, as well as infrastructure providers like BPL and Spectranet, who are also keen to tap the last mile as part of a larger convergence game plan.

Already these players are offering internet access in a limited way. Today the subscriber uptake is low but once the service becomes affordable, the industry expects nearly 15 million homes to access the internet via the cable route.

However, internet access services raise a series of issues. First, the cable networks laid down in the early 90s in India were originally meant for voice and video transmission -- not for data. To offer value-added services such as internet connectivity, the local cable operators who reach the homes of millions of households directly will have to upgrade their networks for two-way multimedia transmission. It is estimated that it would cost at least US$6,520 ([epsilon]7,170) per node and US$65.2 ([epsilon]72) for wiring up each subscriber. The small-time local operators are unwilling to invest this amount when they are already getting as much as 80 per cent of the revenues from regular TV services.

This, in turn, translates into higher costs for the service. The extra costs include US$325 ([epsilon]360) for a cable modem and US$45 ([epsilon]50) per month as a service charge. By contrast, a monthly subscription to a regular TV package is US$2 ([epsilon]2.2) per month.

Meanwhile, the government is planning to amend the existing Cable Television Network (Regulation) Act 1995 to permit cable operators to offer basic telephony services. But the telecom industry players are insisting that the cable operators will have to follow the same rules and regulations applicable to other basic service operators to maintain a level-playing field. What excites the cable operators, however, is the prospect of providing a gamut of high-value services. "Subscribers can get telephony, internet and entertainment television channels through one single pipe entering their homes," says Spectranet's Atul Punj.