Analysis of Broadband Industry:

Airtel Vs Reliance World

ByChandramita SarmaFW 2008-10, HRM

BROADBAND

Broadband Internet access, often shortened to just broadband, is high data rate Internet access—typically contrasted with dial-up access over a 56k modem.

Dial-up modems are limited to a bitrate of less than 56 kbit/s (kilobits per second) and require the full use of a telephone line—whereas broadband technologies supply more than double this rate and generally without disrupting telephone use.

Although various minimum bandwidths have been used in definitions of broadband, ranging up from 64 kbit/s up to 1.0 Mbit/s, the 2006 OECD report is typical by defining broadband as having download data transfer rates equal to or faster than 256 kbit/s, while the United States FCC, as of 2008, defines broadband as anything above 768 kbit/s. The trend is to raise the threshold of the broadband definition as the marketplace rolls out faster services.

Data rates are defined in terms of maximum download because several common consumer broadband technologies such as ADSL are "asymmetric"—supporting much slower maximum upload data rate than download. "Broadband penetration" is now treated as a key economic indicator.

The standard broadband technologies in most areas are DSL and cable modems. Newer technologies in use include VDSL and pushing optical fiber connections closer to the subscriber in both telephone and cable plants. Fiber-optic communication, while only recently being used in fiber to the premises and fiber to the curb schemes, has played a crucial role in enabling Broadband Internet access by making transmission of information over larger distances much more cost-effective than copper wire technology. In a few areas not served by cable or ADSL, community organizations have begun to install Wi-Fi networks, and in some cities and towns local governments are installing municipal Wi-Fi networks. As of 2006, broadband mobile Internet access has become available at the consumer level in some countries, using the HSDPA and EV-DO technologies. The newest technology being deployed for mobile and stationary broadband access is WiMAX.

Indian Market Segments

We consider four main segments in the addressable market for broadband wireless access in India. Many of the numbers are derived from our earlier publication, while some numbers have been updated based on our current projections, using inputs from service providers. In each market segment, the number of BWA customers for each service provider per cell is projected from the population density represented by the number of households and SOHO (small/home offices) per sq km. We thus do not consider multiple customers per household. We only calculate the capacity requirements and the population that needs to be served in a cell, we do not

address the coverage issues and techniques needed to deal with null spaces if any between sectors in the cell.

Dense Urban Scenario:

The Dense Urban market segment comprises of the core areas of first-tier cities and towns like Mumbai, and where typically the cell size is less than 1 km in radius. The population is 16 million, 70% of which lives in an area of 600 sq km. This corresponds to about 3733 households per sq km, assuming a household size of 5 persons. Since alternative options for broadband access are more readily available in the dense urban scenario, we assume that only about 50% of these households would be customers of broadband wireless access. Assuming an average cell radius of 0.75 km, this comes to about 3300 potential BWA customers/cell. This comes to about 660 customers/cell/service provider, assuming 5 competitive service providers in the area.

Urban Scenario:

The Urban market segment comprises of the core areas of second-tier cities and towns like Pune, and where typically the cell size can be about 1 km in radius. For this case, we project based on the example of Pune. The population is about 4.2 million, 70% of which lives in an area of 400 sq km. This corresponds to about 1470 households per sq km, assuming a household size of 5 persons. Since

alternative options for broadband access are still readily available for second-tier cities, but perhaps not as readily as in first-tier cities, we assume that a slightly higher percentage of about 60% of these households would be customers of broadband wireless access.

Suburban Scenario:

In the suburban regions, we assume that there are about 400 households/SOHO per sq km, of which an even higher percentage of 70% could comprise the potential market for broadband wireless access. The cell radius for the suburban regions could vary from 1 km to 3 km. assuming a cell radius of 2 km, this comes to about 3516 potential BWA customers/cell. This comes to about 700 customers/cell/service provider, assuming 5 competitive service providers in the area. In this calculation, it is assumed that the same technology/standard has sufficient coverage (up to 3 km) within regulatory constraints without capacity loss in the same bandwidth. If not, the customers/cell numbers will have to be adjusted to reflect the coverage loss.

Rural Scenario:

There are about 600000 villages in India [3]. Assuming a cell radius of 15 km (could vary from 10 km – 20 km), there are about 150 villages/cell. Assuming that each village has about 5 public access kiosks / schools, and 5 households on the average that can afford and will take

broadband, there are 1500 customers per cell. This indicates a room for growth in number of service providers from 1 in the beginning to about 2 or 3. This comes to about 500-750 customers/service provider/cell. Since the coverage area is much larger, the capacity may reduce due to the use of less efficient modulation in order to maintain the desired link budget. However, this may be acceptable in the rural context. These numbers may be expected to be achieved in a time frame of 3 to 4 years from start of deployment. Beyond that time, there will likely be further growth in these numbers, also aided by improvements in the technologies and lowering of costs. This is the trajectory followed by cellular telephony in India, wherein the initial projection of 100-150 million customers has been increased to 400 million.

Industry structure

Total market structure

Globally, broadband use is picking up speed. From just over 17 million users in 2001, the number of global broadband users has grown rapidly in recent years and is now fast approaching the 250 million mark. Broadband is also gaining in its popularity in view of the fact that service providers, in some countries, are now offering bundled offers, such as services of voice, broadband and television in one combined package. This trend is expected to boost demand for broadband and contribute to the current migration from dial-up to high-speed internet.

Further, with the ease in broadband spectrum regulations, investments by government and decline in service prices are also among the major factors driving the sales of Broadband AccessEquipment.

The report forecasts the market size of Broadband Access Equipment over the period 2007-2010. Further, the total market is segmented into various geographic regions and verticals. The report also presents market size for major countries in various regions. In addition, the report identifies key selling drivers for the Broadband Access Equipment for major verticals.

FUTURE PROSPECTS OF BROADBAND

India has traditionally been known for its cellular service potential. But the cellular services will soon have to share focus with broadband services as well since the country is all set to register the highest growth in broadband subscriber base by 2013.  India is estimated to move from its current position at number 18 in the

world for broadband market and jump to attain the number 6 rank. This will be achieved at a mind-boggling growth rate of 489%. This is the highest growth rate expected from any market and is almost the double from the second highest growth market i.e. Vietnam (276%). Broadband services as a whole will grow by 67 percent over the next five years to reach landmark 680 million connections worldwide. This is a significant surge as compared to yearly growth rate of 28% registered for broadband services from 2004 to 2008.

The growth of the services is likely to be from the developing markets including the merging markets like Russia, India, China, Brazil while countries like South Korea, Japan and Denmark are close to saturation level.

 

“With its burgeoning economy and huge population India will zoom up the rankings of the largest broadband countries in the world. Currently at number 18 in the charts it will hit number 6 by the end of 2013,” said Tim Johnson, Chief Analyst at Point Topic, the firm behind the research. “Central and South America will see the most high-growth countries.  Brazil will shortly enter the top 10 broadband countries in the world, most likely before the end of 2008, and again with a decent economic base and a large population hungry for bandwidth it will outperform most other countries in the next 5 years," he added. The firm says that even though the subscriber base may sound lucrative there is still scope for growth after the five years as only two-third of world’s population will have access to broadband by 2013.

India and South Asia’s operators are very much in the news this week, with broadband launches announced by some of the most dynamic players in the region: Indian operator Bharti Airtel has launched its 16 Mbps broadband service in India (delivered through a fibre backbone carrier ethernet network with last mile delivery on copper using ADSL2+ technology), Indian mobile operator Reliance Communications has launched its CDMA-based mobile broadband service in Kolkata, and Pakistani wireless service provider Wi-Tribe announced a contract for the deployment of its IP backbone, to fulfill its objective of launching WiMAX services in Pakistan this year.

Broadband access is one of the most talked-about topics in the region, as a great tool to launch new services (including high-revenue content), and to boost access to communications in under-served areas. It is therefore fitting that it will be a major topic of discussion at the forthcoming India & South Asia Com, just a month away from now. The congress is the annual meeting place for the region’s operators (GSM, CDMA, fixed-line, wireless), regulators, suppliers and all other stakeholders in the booming telecommunications market.

BHARTI AIRTEL

Telecom giant Bharti Airtel is the flagship company of Bharti Enterprises. The Bharti Group, has a diverse business portfolio and has created global brands in the telecommunication sector. Bharti has recently forayed into retail business as Bharti Retail Pvt. Ltd. under a MoU with Wal-Mart for the cash & carry business. It has successfully launched an international venture with EL Rothschild Group to export fresh agri products exclusively to markets in Europe and USA and has launched Bharti AXA Life Insurance Company Ltd under a joint venture with AXA, world leader in financial protection and wealth management.

Airtel comes to you from Bharti Airtel Limited, India’s largest integrated and the first private telecom services provider with a footprint in all the 23 telecom circles. Bharti Airtel since its inception has been at the forefront of technology and has steered the course of the telecom sector in the country with its world class products and services. The businesses at Bharti Airtel have been structured into three individual strategic business units (SBU’s) - Mobile Services, Airtel Telemedia Services & Enterprise Services. The mobile business provides mobile & fixed wireless services using GSM technology across 23 telecom circles while the Airtel Telemedia Services business offers broadband & telephone services in 95 cities and has recently launched India's best Direct-to-Home (DTH) service, Airtel digital TV. The Enterprise services provide end-to-end telecom solutions to corporate customers and national & international long distance services to carriers. All these services are provided under the Airtel brand.

WHY AIRTEL BROADBAND?

High speed internet accessSurf, play, download, stream & make friends with speeds upto 16 mbps (subject to technical feasibility). Impatience is the new life lives it with Airtel Broadband.  

Surf while you talkNo more missed calls or blocked telephone lines while using the internet. Airtel Broadband connection does not block existing telephone lines and allows one family member to use the phone while another member surfs the net.  

Always on With Airtel Broadband, the internet is always ON, always available! No more waiting for dial-up to connect. You are ready to use the internet as soon as you switch on your computer.  

Exciting Value added servicesWhether it’s On Demand Speed, Antivirus software, Music, Games, opportunities with our value added services are limitless and excitement is never ending.  

Go wifi Did you know that wi-fi helps you connect your computer/laptop to internet without ‘wires’. You do not have to park a place in your home to connect with the world. You can take your laptop around to any place in your home-bedroom, balcony or even kitchen and keep that music playing or chat going on without getting disconnected. Enjoy freedom from wires with Airtel broadband.   

Find your perfect match Airtel broadband offers various plans to choose from, which will suite your needs. Pick the right plan and live a high speed life.

SWOT ANALYSIS OF BHARTI AIRTEL

Strengths Bharti Airtel has more than 65 million customers (July

2008). It is the largest cellular provider in India, and also supplies broadband and telephone services - as well as many other telecommunications services to both domestic and corporate customers.

Other stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel, with whom they hold a strategic alliance. This means that the business has access to knowledge and technology from other parts of the telecommunications world.

The company has covered the entire Indian nation with its network. This has underpinned its large and rising customer base.

Weaknesses An often cited original weakness is that when the

business was started by Sunil Bharti Mittal over 15 years ago, the business has little knowledge and experience of how a cellular telephone system actually worked. So the start-up business had to outsource to industry experts in the field.

Until recently Airtel did not own its own towers, which was a particular strength of some of its competitors such as Hutchison Essar. Towers are important if your company wishes to provide wide coverage nationally.

The fact that the Airtel has not pulled off a deal with South Africa's MTN could signal the lack of any real emerging market investment opportunity for the business once the Indian market has become mature.

Opportunities The company possesses a customized version of the

Google search engine which will enhance broadband services to customers. The tie-up with Google can only enhance the Airtel brand, and also provides advertising opportunities in Indian for Google.

Global telecommunications and new technology brands see Airtel as a key strategic player in the Indian market. The new iPhone will be launched in India via an Airtel distributorship. Another strategic partnership is held with BlackBerry Wireless Solutions.

Despite being forced to outsource much of its technical operations in the early days, this allowed Airtel to work from its own blank sheet of paper, and to question industry approaches and practices - for

example replacing the Revenue-Per-Customer model with a Revenue-Per-Minute model which is better suited to India, as the company moved into small and remote villages and towns.

The company is investing in its operation in 120,000 to 160,000 small villages every year. It sees that less well-off consumers may only be able to afford a few tens of Rupees per call, and also so that the business benefits are scalable - using its 'Matchbox' strategy.

Bharti Airtel is embarking on another joint venture with Vodafone Essar and Idea Cellular to create a new independent tower company called Indus Towers. This new business will control more than 60% of India's network towers. IPTV is another potential new service that could underpin the company's long-term strategy.

Threats Airtel and Vodafone seem to be having an on/off

relationship. Vodafone which owned a 5.6% stake in the Airtel business sold it back to Airtel, and instead invested in its rival Hutchison Essar. Knowledge and technology previously available to Airtel now moves into the hands of one of its competitors.

The quickly changing pace of the global telecommunications industry could tempt Airtel to go along the acquisition trail which may make it vulnerable if the world goes into recession. Perhaps this was an impact upon the decision not to proceed with talks about the potential purchase of South Africa's MTN in May 2008. This opened the door for talks between Reliance Communication's Anil Ambani

and MTN, allowing a competing Inidan industrialist to invest in the new emerging African telecommunications market.

Bharti Airtel could also be the target for the takeover vision of other global telecommunications players that wish to move into the Indian market.

PEST Analysis

Political (incl. Legal) Economic Social TechnologicalEnvironmental regulations and protection

Economic growth

Income distribution

Government research spending

Tax policies Interest rates & monetary policies

Demographics, Population growth rates, Age distribution

Industry focus on technological effort

International trade regulations and restrictions

Government spending

Labor / social mobility

New inventions and development

Contract enforcement lawConsumer protection

Unemployment policy

Lifestyle changes

Rate of technology transfer

Employment laws Taxation Work/career and leisure attitudesEntrepreneuri

Life cycle and speed of technological obsolescence

al spiritGovernment organization / attitude

Exchange rates

Education Energy use and costs

Competition regulation Inflation rates

Fashion, hypes

(Changes in) Information Technology

Political Stability Stage of the business cycle

Health consciousness & welfare, feelings on safety

(Changes in) Internet

Safety regulations Consumer confidence

Living conditions

(Changes in) Mobile Technology

7 p’s Analysis:

Product: Broadband Data card(prepaid & postpaid) Broadband Postpaid Connection USB card

Price: HOME 2222 Plus (Residential) Super Value 499

Super Value 699

Home 999 (Residential)

Home 1499 (Residential)

Combo 555 512 Kbps

Combo 666 1Mbps

Combo 777 2 Mbps

Combo 999 2Mbps

Combo 1299 2Mbps

Combo 2222 2Mbps

Combo 4444 2Mbps

8 Mbps Combo 1299 ( Applicable in Bangalore only )

8 Mbps Combo 19999 ( Applicable in Bangalore only

8 mbps Combo 2222 ( Applicable in Bangalore only )

8 Mbps Combo 4444 ( Applicable in Bangalore only )

8 Mbps Combo 9999 ( Applicable in Bangalore only )

Place: The connection is provided to resident homes close to

the main road. Airtel does not cover inner roads which is ridiculous as the interior roads often contain homes and the main roads contain commercial establishments.

Cover 94 cities in India.

Promotion: HP,Airtel Promotion offer - HP laptop/PC with Airtel

Broadband

Banner, pamphlets, hoardings, newspapers, magazines

People: Sales staff, marketing staff, corporates, students etc.

Physical evidence: Stores, logos

Process: Have own brands, production units for them,

distribution & sell in different stores spread across India.

Michael Porter's 5 Forces

  SUPPLIER POWER Supplier concentration

Importance of volume to supplier

 

Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry

Presence of substitute inputs Threat of forward integration

Cost relative to total purchases in industry

BARRIERSTO ENTRY

Absolute cost advantages Proprietary learning curve

Access to inputs Government policy

Economies of scale Capital requirements

Brand identity Switching costs

Access to distribution Expected retaliation Proprietary products

THREAT OFSUBSTITUTES -Switching costs -Buyer inclination to substitute -Price-performance trade-off of substitutes

 

BUYER POWER Bargaining leverage

Buyer volume Buyer information

Brand identity Price sensitivity

Threat of backward integration Product differentiation

Buyer concentration vs. industry Substitutes available

Buyers' incentives

DEGREE OF RIVALRY -Exit barriers -Industry concentration -Fixed costs/Value added -Industry growth -Intermittent overcapacity -Product differences -Switching costs -Brand identity -Diversity of rivals -Corporate stakes

 

Reliance World

Reliance World (formerly Reliance WebWorld) is a world-class nationwide chain of retail outlets for products and services of the Reliance – Anil Dhirubhai Ambani Group. It is designed to give the customer a delightful experience of

the digital world of information, communication, entertainment and utility services.

All Reliance World outlets are connected to Reliance’s countrywide optic fibre network. The Broadband Centre at Reliance World leverages this broadband network to bring you innovative digital services.

With 234 Reliance World outlets across 105 cities in the country, you are sure to find one in your vicinity.

Reliance Broadband Internet Access provides carrier class Internet bandwidth through a dedicated connection over a

nationwide fiber-optic IP backbone. Its ‘fiber to building’ approach and the huge international bandwidth capacity operated by its group company, Flag Telecom, delivers unmatched service quality and high speeds.

The advantages of our Broadnet Internet solution for SMEs, coupled with bonus bandwidth, help you to deliver high performance to your Internet applications. It can be a critical business enabler for the SME customer.

Reliance Advantages:

The same connection can be used for many PCs.

The SMTP relay option allows you to continue using your existing e-mail IDs.

Bonus bandwidth.

High speeds up to 4 Mbps.

The Optic-fiber-Ethernet advantage:

Optic-fiber to your building cluster.

o Ring-protected optic-fiber ensures high uptime.

o Ethernet-based connectivity delivered over CAT 5 cable.

o Scalable to support futuristic bandwidth services.

Round-the-clock helpdesk.

Why Reliance World?

Broadband Surfing

Broadband is a technology that essentially enables high-speed Internet access. It is a far faster way of connecting

to the Internet than the conventional dial-up method. However, not all broadband connections are the same.

When you log in at Reliance World, you are connected to the Internet through Reliance’s next generation, high-speed, countrywide fibre optic network. That’s why you will notice the difference as soon as you log in.

Surf heavySurprises may come in small packages but broadband sites dole out entertainment in large chunks. Experience these sites at Reliance World, uninterrupted.

Download to your heart’s contentWe all know the pleasures of downloading. And we also know how frustrating it is when the web crawls at a snail’s pace. Download your favourite stuff at Reliance World where the web sets a scorching pace.

Trade onlineDoes the SENSEX give you a high? Do you say your prayers every time the NIFTY hits the choppy waters? Trade online from Reliance World. The markets may be hot but our comfortable environs will help you think with a cool head and broadband will keep you well-connected!

When you’ve got speed on your side, you will discover new ways of leveraging the web. The Internet is an amazing world of information, communication and entertainment. Enjoy this world in its full glory at Reliance World.

SWOT analysis

Strengths: Technological skills

Leading brands Distribution channels Customer loyalty Management

Weaknesses: Absence of important skills Poor access to distribution Low customer retention

Opportunities: Changing customer tastes Technological advances Lower personal taxes

Threats: Tax increases Local brands.

7 p’s analysis

Product: Voice Products: E1 DID, Centrex, PBX trunks, One

Office Duo, toll free, Audio conferencing, and fixed line phones.

Data products: VPN, leased lines, IPLCs, Ethernet, video conferencing, Remote Access VPN, internet data centre (IDC) services (including managed hosting, applications, storage, and disaster recovery), and broadband internet.

Price:

Data Transfer - Pay per Mb Plans (Authenticated)

One connection can be used for multiple PCs

Pay only for the data transferred (upload + download)

Data transfer measured in KB

Enjoy high speeds up to 4 Mbps.

ServiceDownload Speeds *

Monthly Rental (Rs.)

Bundled Usage

Additional Usage /

MBPlan 900 1 Mbps 900 2 GB Rs. 0.8Plan 1199 2 Mbps 1199 8 GB Rs. 0.8 Plan 1999 2 Mbps 1999 12 GB Rs. 0.8Plan 2999 2 Mbps 2999 20 GB Rs. 0.5 Plan 4999 2 Mbps 4999 35 GB Rs. 0.5 Plan 8999 2 Mbps 8999 75 GB Rs. 0.5

Plan 10000

4 Mbps10000 75 GB Rs. 0.5

Flat Fee Plans (Unauthenticated):

One connection can be used for multiple PCs

Unlimited downloads and use at a fixed monthly charge

True always-on connectivity. No login or authentication required for accessing the Internet.

ServiceDownload Speeds *

Monthly Rental (Rs.)

Bundled Usage

Additional Usage / MB

Plan 1100 150 Kbps 1100 Unlimited Not

Applicable

Plan 1500 300 Kbps 1500 UnlimitedNot

Applicable

Plan 2700 600 Kbps 2700 UnlimitedNot

Applicable

Plan 4500 1 Mbps 4500 UnlimitedNot

Applicable

Please note: (applicable for both plans)

Two Ricmail.com Email IDs with storage space of 50 MB each free with every Broadnet SME connection

Installation charges of Rs. 500 extra

Refundable security deposit (Only for pay per MB plans) - Rs. 1000

All taxes including Service Tax extra as applicable

SMTP relay option available.

Static IP

Each Static IP is charged @ Rs. 2000 p.a.

Available in the slabs of 1,5,13 via MACD only for both Usage based and Flat Fee plans.

Maximum static IP permissible 13.

Place:

All over India

Promotion:

Pamphlets, hoardings. Newspapers, magazines

People: Sales staff, marketing staff, corporates, students etc.

Physical evidence: Stores, logos

Process: Have own brands, production units, distribution & sell

across India.

Michael Porter’s 5 Forces Analysis