Broadband set for disruption

The wired broadband market is not far away from the disruption expected to be created by Reliance Industries which earlier shook the telecom market since its entry in late 2016. 

On Wednesday, the company announced an investment of about Rs 5230 crore to buy majority stakes in Hathway Cable and Datacom and DEN Networks. This will bolster the existing plans of the company in this space. Reliance Jio, the telecom arm of Reliance Industries, had announced launch of its broadband service Jio Giga Fiber across 1100 cities, the registrations for which started in August this year. The target is to reach 50 million homes.

Though, the analysts expect the wireline broadband market to be around $2 billion, which is small compared to the mobile market at around $22 billion, the future of the industry lies in fibre broadband which will multiply the data speeds and capacity manifold. This will be critical given the fact that since the onset of 4G services by Reliance Jio, the data consumption has increased significantly. On the network of Reliance Jio alone, the data consumption is around 11 GB per user/month.

“This could be the headstart for company’s ambitious plans in fibre broadband market. Similar to telecom industry, the gameplan will revolve around low tariffs to make inroads in the broadband market which is under penetrated,” a senior executive from a telecom firm said.

The broadband market is dominated by state-run telecom players BSNL and MTNL, followed by private telecom firm Airtel. Out of total 400 million broadband users, just 18 million are on fixed line, though the mobile user base has been steadily going upwards at over 1 billion. 

Airtel has also been quite aggressive in broadband space. It has launched its V Fiber and FTTH based broadband services in few cities already and is expanding aggressively.

Analysts at CLSA says the acquisitions could help Reliance Jio expand into its existing TV subscriber base of over 14 million. “Reliance may have to invest in laying last mile fibre since the bulk of Hathway and Den Network’s broadband is not on fibre. We expect wireline broadband market potential to be limited to $2billion.”

Post the deal, the addressable market for wireline broadband of Reliance Jio will increase to 6.5 million broadband homes passed apart from their existing TV subscriber base of over 14 million.

Analyst firm Nomura in a note said, “RJio’s strategy would be broadly similar to its approach in attacking the Indian wireless space, to disrupt and expand the addressable market (home broadband, cable/DTH and enterprise space). To begin with, while offerings are likely to be in the nature of FTTH-based broadband connectivity (GigaFiber), the converged offerings package will eventually include IPTV-based services as well. “

The fibre broadband market is nascent with just 0.8 million of 18 million wireline broadband base, mostly the connections are through copper wires.

The broadband wireline market in India has been stagnant at 18 million subscribers which is 6% household penetration for last 2-3 years and is expected to be limited to the top-50 cities in coming times which will form 30 million households. 

However, in the US and China, fixed broadband homes as a percentage of pay-TV homes exceeds 98% and in India this number stood at just 14% as of CY17. 

India has been ranked quite low at 134th in the global ranking for fixed broadband and poor fixed-line infrastructure has been a key reason for this. About 80% of data consumption happens indoors through fixed line in homes, in offices and other premises. The FTTH (fibre to the home) service will enable the fibre to reach directly homes/enterprises. Till now, optical fibre reached the premises of the buildings while last mile connectivity is done through copper cable which makes network speeds slower at times.

AGGRESSIVE PLANS

• $2bn – Estimated wireline broadband market
   
• Rs 5,230 cr – Reliance Jio to invest in Hathway Cable and DEN Networks