The ISP Scenario in India

The Indian Market

Internet subscribers in India are expected to touch 1.3million by March 2001, as compared to a figure 5,30,000 by March this year, This figure is a growth of 145% over the previous year. Dataquest estimates are slightly more optimistic. DQ expects this to shoot up to 1.86million by 2001 and 3.75million by 2002. DQ’s estimates say that the ISP access market was worth Rs.1.02billion in 1999 and is likely to touch Rs.2.13billion in 2000. The market will expand sharply to touch Rs.8.37billion in 2001 and to Rs.15billion by 2002.

Falling PC prices, coupled with a drop in the access rates (due to the price war in the ISP market) has caused this growth. To some extent, future growth will also be assisted by Internet access through cable TV. Estimates are that three to four years down the line, India, with 30million Internet users will have the most Internet users in Asia, next only to China.

The last 12 months has seen a good growth in the usage of Internet by the corporate segment also. The factors, which have helped this, is the lowering of leased line charges by TRAI(Telecom Regulatory Authority of India)  and the offering of a variety of value-added services by the ISPs. While earlier the corporate were using the Internet more as an information provider – email, surfing etc, many of them are using this to do some kind of e-commerce especially on the vendor end

According to the survey by indiainfoline on 31st July 1999, the small / medium organizations had the largest portion of the subscriber base. Large organizations were next, with a subscriber base of nearly 97,000. The home segment showed a healthy growth in its subscriber base share over its November 1998 share of 8.9%. In the next few years, the home and small/ medium sized segments will experience unprecedented growth in terms of Internet connectivity.

Why The Indian Market Is Attractive

Large market, largely untapped – The sheer numbers in India makes the retail access market very attractive in terms of potential. Right now the PC penetration (and the number of PCs connected to the Internet) is abysmally low. As the access costs and the cost of PCs fall, the market for Internet access , in terms of number of subscribers, should explode.

Growth of the corporate access market is also expected with large domestic computerisation measures in the Government sector. Already initiatives are underway on the part of the Government to start a comprehensive move towards electronic governance. The corporate access market will also grow as the economy gathers momentum and companies realise the benefits of using the Internet.

Lack of a proper telecom infrastructure has kept the Internet penetration down to only the major towns and cities. With the setting up of a National Telecom Backbone, it is expected that Internet will reach more areas of the country. Higher bandwidth availability is also expected to spur the usage of Internet in terms of both number of subscribers as well as the usage time by a particular user.

The development of alternative means of access is also expected to give Internet usage a boost. The most obvious way is using the TV Cable network, given the enormous TV penetration in India. Currently, 30million Indian households have a TV. If this segment of the population can be tapped, Internet usage can explode. Currently, set-top boxes, which connect users to the Internet through the TV, are quite costly. However, with increasing penetration the cost of these boxes should fall and help increase ISP demand.