New Report Shows Lag in India’s Broadband Growth

HONG KONG, March 16: A new report from MPA (Media Partners Asia) shows that despite the large amount of cable TV penetration in India—71 million homes—less than 2 percent of homes are receiving a broadband connection, compared to 13 percent broadband penetration in China and 8 percent in Brazil, with a large influx of capital needed to upgrade the country’s broadband digital cable network.

The report, Broadband Digital Networks: The Role of Cable in Accelerating India’s Growth, is supported by Liberty Global, Macquarie Media Group and STAR Group. It notes that of 71 million cable TV homes, only 350,000 have access to broadband and hardly any subscribe to a bundle of broadband and cable TV. While India’s cable sector is one of the largest in Asia, generating US$4.3 billion in annual turnover (subscription and advertising), less than US$100 million flows from broadband digital services.

However, India’s cable TV industry is booming and is currently growing at an annual rate of 14 percent, with almost 60 percent of television households subscribed to cable TV by the end of 2006. In 2006, India overtook the U.S. and currently ranks as the second-largest cable power in the world by number of subscribers, trailing only China.

Broadband digital networks are crucial to India’s growth, says the report, but capital is the main constraint holding back the country’s cable industry, with the cost of upgrading a broadband digital cable system with 10 million subscribers estimated at approximately US$2 billion. According to the report, this level of infrastructure investment is not within the range of the typical local cable operator (LCO), which serves just a few thousand homes in India and does not have the sufficient cash flow to fund broadband digital network upgrades.

“Cable in India is underdeveloped and consumers are underserved – especially within the digital context,” commented Paul Aiello, the CEO of STAR Group. “The stakes are high for policymakers and the regulator to get it right, ensuring progressive policies that facilitate investment and growth.”

Other factors, such as the restrictive regulatory framework in India, have also made some investors wary of funding long-term broadband digital network upgrades. The cable industry has become of India’s most closely regulated industries, with the Telecom Regulatory Authority of India (TRAI) intervening in almost every aspect of the industry’s value chain since 2004. Investors are particularly concerned about the regulation for deployment of digital conditional access systems (CAS) in India, which may provide a significant impetus to the deployment of broadband digital networks, but only within a tightly regulated context.

Investors such as Shane O’Neill, the chief strategic officer and board member of Liberty Global, notes: “The market in India is very attractive in terms of sheer size and growth potential, but could be held back by ‘over regulation’ in key areas such as channel rate regulation, mandated revenue shares between industry participants and FDI caps. A lighter approach might be necessary to encourage the significant investment required to develop the broadband and digital industries both of which are very important for India’s future development.”

— By Irene Lew