“Given the current ARPU levels, and considering the household breakup by income, there should be at least 50 million households in India who should be targetable for home broadband solutions (more than double of the current 20 million households that have fixed broadband connections).”

After adding ~ 100 K customers between the quarters June 2019 to June 2020, a leading Indian telco added ~ 130 K home broadband customers in the quarter ending September 2020 alone which is more than the cumulative customers that were added in the preceding four quarters. Also while capex to sales has hovered around the ~ 20 per cent range, this went upto ~ 53 per cent in the quarter ending September 2020.

The reasons for this are understandable. COVID has been a catalyst in increasing the demand for home broadband in India and other markets. According to Deloitte’s Consumer sentiment survey, 70 per cent of participants believe that they will work from home more often, 84 per cent are ready to pay extra charges to increase broadband speed but very few (34%) are relying on mobile only for home internet. Most of these consumers also believe that this trend will continue in the future as well amplifying the demand for home broadband more than ever. The recently allowed regulations that allow employees to work from home are likely to further fuel this growth.

With a penetration rate of just 7.6 per cent, India currently has the lowest fixed broadband penetration amongst emerging Asian countries. In comparison, countries such as Indonesia (15%), Philippines (18%), Malaysia (41%), Thailand and Vietnam have nearly 50 per cent penetration. This is despite the fact that at $11, the broadband ARPU in India is lower than these countries with Indonesia (US$16), Philippines (US$25), Malaysia (US$32), Thailand (US$17) and Vietnam (US$16) all being higher. At US$5.3 per month, India also has the lowest truly unlimited home broadband plans amongst these countries.

All this points to a significant potential for India. However, there are two areas that emerge as high priority for growing home broadband in India:

(a)Making home broadband more desirable (pricing is now settled, need to drive customer pull for home broadband solutions) and;

(b)Exploiting alternative technology options for deploying home broadband solutions faster.

Driving the appeal for home broadband beyond just fast internet:

As per TRAI’s consultation paper on promoting broadband connectivity and enhancing broadband speeds, at 38.19 Mbps download speed, India ranks 75th amongst 175 nations on fixed broadband download speeds. Amongst the BRICS countries, Brazil (59.4 Mbps), Russia (68.4 Mbps), China (133.6 Mbps) all provide higher speeds, with only South Africa (36.3 Mbps) being marginally slower than India.

While India does have to catch up on delivering faster speeds, a look at other markets gives a sense of how the market will evolve. Globally, from a service offering perspective, markets can be categorized into 3 broad categories: (a) home broadband used primarily for high speed, always on internet, (b) used also for entertainment, productivity (studies, medicine, etc.) and security hub and (c) differentiated experience.

Out of the over ~ 270 million households, India has ~ approximately 200 million TV households and ~ 70 million DTH customers. Media and entertainment is a big driver in India. We also have over 650 mobile broadband users. Smart TVs are amongst the fastest growing consumer durables, and therefore increasingly, the combination of households that have both smartphones and smart TV will keep growing. As a result, expect the service offerings in India to start mirroring some of the more developed markets:

Markets where smart TV and smartphones penetration is already high, have now started to move towards delivering service promise that cannot be matched by mobile offerings. Telcos in countries such as UK and Australia have started to offer varieties of “speed promise”, “money back if no service” guarantees to customers. These guarantees provide clearly differentiated experience (against mobile broadband) and gives a very compelling reason for customers to adopt home broadband solutions.

Using alternative technologies to accelerate faster rollout to home broadband offerings:

While fixed broadband has remained the de-facto solution for providing always on, high speed home broadband connection, wireless and satellite-based technologies have also made rapid progress in the last few years. From offerings speeds ~ 10 Mbps till about 2015, wireless technologies today can deliver > 200 Mbps. Markets such as US, Australia and closer home in Philippines have seen telcos use Fixed Wireless Access technologies to rapidly expand home broadband services. A leading telco in the Philippines for example has added ~ 1.4 million customers in the period from January to September 2020, in a country with just 25 million households.

Rural broadband penetration in India is still only 30 per cent (TRAI Performance Indicators report, FY 2019–20 Q3). Satellite based technologies provide an excellent alternative to providing effective solutions for these and suburban markets where the 4G coverage isn’t good enough and fixed broadband is not feasible to rollout.

Spend on communication services is typically 3 per cent of household income. Given the current ARPU levels, and considering the household breakup by income, there should be at least 50 million households in India who should be targetable for home broadband solutions (more than double of the current 20 million households that have fixed broadband connections).

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