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BSNL Broadband: Government grant to speed up Wi-Max rollout

December 15, 2010
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With about 6 million broadband subscribers as of June 2010 and a 61.45 per cent market share, Bharat Sanchar Nigam Limited (BSNL) is the country’s largest internet and broadband operator. With Bharti Airtel and Mahanagar Telephone Nigam Limited  occupying the second and third positions with 12.35 per cent and 9.08 per cent market share respectively, BSNL is clearly leading the market by a fair margin.

However, the operator’s broadband base is significantly low when compared to its mobile and wireline subscriber bases, which stood at 78.32 million and 26.21 million respectively as of September 2010. In fact, the situation is the same for all operators. The country’s mobile subscriber base has crossed 700 million, but the broadband customer base stands at only 10 million. Moreover, broadband subscribers have been using the service sparingly.

The biggest impediment to the country’s broadband growth so far has been the lack of adequate infrastructure, as most of the operators have not been able to build adequate optic fibre networks. In this regard, BSNL is at an advantage with the largest fixed line network in the country as the majority of broadband connections are on wireline. However, wireless is likely to drive future growth as it is a more convenient medium and a feasible option for rural areas. Unlike wireline, wireless technologies do not involve issues like right of way, heavy investments or a long gestation period.

Clearly aware of the advantages that wireless technology offers, BSNL is fast moving ahead in this space. Being the first operator to be allocated broadband wireless access spectrum, BSNL has already launched Wi-Max services in several circles, well ahead of its private peers.

Besides individual consumers, BSNL is also targeting small and medium enterprises, large companies, government institutions, schools and colleges, and is planning to connect all upcoming common service centres through Wi-Max broadband. It has also planned an extensive marketing campaign to increase service awareness among the masses.

However, expressing concerns about the commercial viability of its rural Wi-Max project, the service provider recently informed the government that it would not be able to continue with the project unless it is provided a Rs 23.95 billion grant to support the venture. BSNL’s move is unusual for a state-owned company and shows its reluctance to run businesses that involve huge capex and opex, leading to significant losses. The company recorded a loss of Rs 18.22 billion for the year ended March 2010, a first in its history.

Its rural Wi-Max project is divided into three parts. About 1,000 towers would be set up under Phase I, followed by 6,863 units in Phase II. Initially, the Department of Information Technology (DIT) had agreed to provide subsidies of Rs 7.1 billion for the two phases – Rs 1.6 billion for setting up the first 1,000 towers and Rs 5.5 billion for the rest. The DIT has already approved the Rs 23.95 billion grant for the project.

The company will gain from the Department of Telecommunications’ (DoT) plans to invite bids for rolling out wireless broadband services in 600,000 villages with support from the Universal Service Obligation (USO) Fund. These villages are not being covered by BSNL under its rural Wi-Max project. According to reports, DoT will allow operators to deploy any technology according to benchmarks specified for broadband speed and quality of service. BSNL will be given the lowest-quoted subsidy from the USO Fund as the second operator in each circle.


BSNL is the fourth largest telecom operator in India with the largest fixed line network in the country and an extensive wireless network. Over the past few years, the company has been leveraging its fixed line network to expand its broadband portfolio, in line with the government’s thrust on increasing broadband penetration. Today, the broadband and internet segment is a key focus area for the company.

Despite being a late entrant into the segment, BSNL overtook incumbent Tata Communications (then VSNL) in September 2003 to become the country’s largest internet service provider. In February 2005, the company launched ADSL+-based broadband services under the DataOne brand in Bangalore, Chennai, Hyderabad, Kolkata and Karnataka.

Currently, BSNL offers internet services in 26 circles (including GSM and CDMA) and broadband services in over 4,600 cities. It has deployed over 625,000 route km of optic fibre, covering almost 500 towns and more than 6,000 cities, under the National Internet Backbone Phase I (NIB I) project, which was launched in May 2003. Based on a multiprotocol label switching  system, the network offers over 436 nodes and 432 points of presence, covering most district headquarters. BSNL launched the Rs 1.2 billion NIB II project three years ago.

Market position 

The share of the broadband customer base in the country’s total internet subscriber base increased from 47 per cent in June 2009 to over 56 per cent in June 2010. The company’s share of broadband subscribers in its total internet subscriber base stood at over 60 per cent in June 2010.

BSNL has made significant investments in broadband infrastructure in the past one year. Its broadband network currently covers around 98 per cent of the district headquarters, 80-85 per cent of the block headquarters, 85 per cent of the cities and over 170,000 villages.

The state-owned operator’s revenues from the internet and broadband segment increased by over 200 per cent (albeit on a small subscriber base) from Rs 9.9 billion in 2007-08 to Rs 25.1 billion in 2009-10.

BSNL offers broadband services on both the post-paid and prepaid platforms. In addition to its rural Wi-Max project, the company has launched urban Wi-Max services in the Punjab and Kerala circles.

Wi-Max services in the country were launched in Kerala in April 2010, followed by Punjab. BSNL has earmarked around Rs 700 million for Wi-Max rollout in Punjab and Chandigarh. In Punjab, Wi-Max broadband services are available in select cities and the operator plans to cover the entire state in the next six-seven months. BSNL’s Wi-Max broadband subscriber base in Punjab currently stands at 2,500  and the company is planning to increase it to 18,000 by March 2011.

Wi-Max services are also being provided through a franchise agreement with SOMA Networks in Gujarat, Andhra Pradesh and Maharashtra.

Future plans 

The shift in demand from voice to data has necessitated a change in the nature of the network. BSNL is poised to cash in on this opportunity and has planned extensive expansion of broadband services. It is aiming at a broadband subscriber base of 16 million by March 2014.

By June 2011, it intends to increase the number of Wi-Max base transceiver stations (BTSs) in Punjab from 350 to 1,100 and add another 60-70 BTSs in Chandigarh. It currently has 60 BTS sites in Chandigarh.

In Kerala, 25 towers were initially set up in four municipalities to provide Wi-Max services. The operator plans to expand its Wi-Max network in the state to 900 BTSs under a two-phase expansion programme. The first phase will cover 450 towers covering all major cities and towns, and district headquarters.

Since BSNL is the only company in India to have committed to the Wi-Max technology standard for its wireless broadband services, it has prepared a back-up plan in case all other operators in the country opt for the long term evolution (LTE) technology platform.

BSNL, which recently awarded contracts to four companies – Teracom, Take Solutions, Adishwar India and Ampoules – to roll out Wi-Max-based broadband services on a franchise basis, introduced a clause in the contracts mandating them to shift to the LTE technology standard, if the latter emerges as the successful technology platform in India. While Teracom has partnered with Cisco for the project, Take Solution has a tie-up with Chinese vendor ZTE. Adishwar and Ampoules have partnered with Israel-based equipment vendor Alvarion. The private firms would provide 10-32 per cent of their revenues to BSNL.


In the mobile service segment, the company has been facing a massive capacity crunch on account of procedural delays and political interference. In the broadband space, the operator has been surrounded by controversies. The authenticity of one of the selected franchise companies for BSNL’s Wi-Max rollout, Ampoules and Auto Private Limited, is being questioned. While the company was reported to be based in Kolkata, the state government found that no such company ever existed at the address provided for seeking the franchise agreement.

Net, net, with its mobile business facing severe losses, broadband is the only saving factor for the company. Well aware of the potential of this segment, BSNL needs to consolidate its leadership position in this space and capitalise on its first- mover advantage before its peers start rolling out their broadband services.

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