India Broadband Market Set for High Competition in 2020

India’s home broadband market is likely to see higher competition in 2020, as India’s state-owned telecom operator BSNL introduced two new broadband plans to its customers just before the end of 2019. The plans are priced at INR299 (US$4) and INR491 (US$7). While both plans support 20 Mbps broadband speed and unlimited calling to any network via BSNL landline, the former plan comes with a 50 GB data cap and the latter with 120 GB data cap. These recently announced broadband plans are among the operator’s moves to compete against Reliance Jio’s recent entrance to the market with fiber-optic broadband deployment. Reliance is rolling out fiber-optic broadband access and started commercial launch of its JioFiber service in September 2019.

The Indian broadband market is very limited, with only 6% of households having broadband access. Digital Subscriber Line (DSL) is the dominating technology, followed by cable broadband. Key operators such as BSNL own more than half of the country’s broadband subscriber base, followed by Bharti Airtel with 12% market share. Low fixed broadband penetration results in most of the population of India accessing the internet via mobile networks. Low Average Revenue per User (ARPU) is limiting the service providers’ interest in investing in and expanding the fixed line network or deploying fiber-optic broadband access. Fixed broadband users in India spend around $16 per month.

Fiber-optic broadband is served by major operators including BSNL and Bharti Airtel but with very limited coverage. According to the Telecom Regulatory Authority of India (TRAI), only 6% of total fixed broadband users have access to fiber-optic broadband at present. Reliance Communication launched a fiber-optic service in select cities in the second half of 2019. It is planning to cover 20 million households in India with fiber-optic broadband. Reliance has not set any particular time frame in which to complete its target. However, its plan is to roll out based on demand. The company is now accepting the pre-registration of users who are interested in getting fiber-optic broadband service, and then expanding deployment based on the demand and economic feasibility in different geographical areas. 

One unique characteristic of broadband services in India is that it is quite complex for consumers to compare and select the best fit plan or best value plan. While many other markets are providing unlimited data to fixed broadband services, India still has data limits. The majority of fixed broadband services in India support speeds between 8 Mbps and 1 Gbps. Monthly service fees vary depending on the broadband speed and data limit. The data limits are usually between 120 GB and unlimited data usage per month. Since multiple packages with different speed and data caps are available, it is quite challenging for consumers to make a decision.

The largest broadband operator, BSNL, offers more than 20 broadband packages in total. BSNL’s popular fiber broadband package costs US$10.50 for 50 Mbps speed with 300 GB monthly data. Airtel fiber optic broadband packages start from US$11 per month supporting 100 Mbps and 150 GB monthly data.  Reliance’s fiber broadband packages are priced competitively to existing broadband packages by other operators. It offers only 6 options of packages which simplifies the selection process for consumers. The lowest package from Reliance’s JioFiber supporting 100 Mpbs and 100 GB monthly data costs US$10 per month. The highest tier package supporting 1 Gbps with 5,000 GB monthly data cap is priced at US$120 per month. While a US$120 per month broadband service fee may not be appealing for most of the broadband households in India, the starter package is reasonably priced considering the speed and data limit provided.

BSNL’s recently launched plans are not comparable to Relaince’s JioFiber service in terms of service quality, however; BSNL seems to be trying to attract low budget customers. This also indicates that there can be intense price competition among the operators to gain market share. When Reliance entered the Indian mobile market in 2016, service providers aggressively lowered their tariffs to compete against each other. However, the price war resulted in operators with unprofitable business models and forced operators to hike back their prices by as much as 40%.

Operators in India should take this example and avoid repeating the same mistake in the fixed broadband space. Instead of focusing on lowering the price, operators can focus on Quality of Service (QoS) by providing higher speed and data caps. Providing incentives such as internet security services or lower priced video streaming services to bundle with broadband packages can also attract and retain customers to achieve targeted market shares while providing additional revenue. Even in price sensitive markets, price is not the only differentiating factor for telecommunication services. QoS is what matters most when the price is comparable to or even slightly higher than their competitors’. Operators need to focus on reliable QoS with the right price points to maintain long-term business profitability. Considering the low household penetration, the fixed broadband market in India certainly has room for expansion. Such strategies will enable operators to spend more Capital Expenditure (CAPEX) for infrastructure expansion to improve market shares and increase revenue over time.