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Good news from Indian Government to cheerup. We are getting free broadband connectivity!. Here is the answer to when,how and why?...

The government proposes to offer all citizens of India free, high-speed broadband connectivity by 2009, through the state-owned telecom service providers BSNL and MTNL. While consumers would cheer, the move holds the potential to kill the telecom business as we know it.

You have heard of free municipal broadband — many cities in the US have drenched themselves in wireless broadband connectivity which is freely accessible to residents. The idea is to boost economic activity in general. The government of India plans to achieve free broadband connectivity at a speed of 2 MB per second across the country, with a similar goal. Senior government officials expect to be able to achieve this goal spending only a portion of the corpus of the Universal Service Obligation Fund (USOF).

All telecom operators contribute 5% of their revenues every year to USOF. It is estimated that the unutilised sum from the USOF has touched Rs 9,194.12 crore by March, 2007-end.

The current technological trend is for voice calls also to shift to the internet, using voice over internet protocol (VOIP). The quality of VOIP calls, patchy to start off with, has been improving steadily over the years and by 2009, is likely to be as good as current analogue calls that establish a circuit between the calling and called parties. When that happens, revenue streams from calls would dry up and telecom companies would need to develop value-added applications to make money from the connectivity they provide for free or virtually free.

The department of telecom (DoT) will be taking a series of steps to make its plans for free broadband a reality. These include, using the USOF to set an extensive optic cable network across the country, opening up the long-distance sectors to further competition, allowing free and fair access to cable landing stations, permitting the resale of bandwidth, setting up web hosting facilities within the country and asking all internet service providers to connect to the National Internet Exchange of India (NIXI).

With international bandwidth rates in India being between two-to-five times higher than the global standards, the DoT will also go all out to break the monopoly of existing national and international distance players in a bid to induce cut throat competition in this sector. “India has only a handful of NLD/ILD operators while small countries such as Singapore and Taiwan have over 30 and 60 long distance operators respectively.

With limited players, they control the bandwidth gateways and form a cartel and this ensures that tariffs remain high. The entry of new players such as AT&T, British Telecom amongst others has started creating an impact,” the government source added.

Importantly, the ground work for this project is already being laid. This comes as telecom regulator Trai had recently proposed that access to submarine cables be made cost-based and independent companies be given free and fair access to cable landing stations. (Cable landing stations connect submarine telecom cables with data and voice networks in the country.) Additionally, Trai had also recommended that bandwidth resale be permitted in India. Industry analysts estimate that these two steps by Trai alone will lead to a 30% reduction in bandwidth costs, when implemented.

In a related move, the DoT will also issue norms which mandate Indian companies, including state-owned BSNL and MTNL to begin large scale web hosting services. “This is because, most of the internet traffic generated in India is currently routed out of the country and re-routed back, resulting in the increased use of international bandwidth,” the government source said.

Additionally, the plan also includes asking all internet service providers to connect their networks to NIXI. This will also ensure that internet traffic, originating and destined for India, is routed within India resulting in optimum domestic bandwidth utilisation. Currently, the very purpose of establishment of NIXI has not been served as only 27 ISPs out of 135 operational ISPs have joined it, the source explained.

Thanks IBEF & The Economic Times.