Saturday, March 12, 2011

Sharing network infrastructure - way forward for telecommunications?

South East Asian countries like Hong Kong and South Korea are leaders in the provision of ultra-high speed (in the range of giga bit) broadband services, and that too offered at exceptionally cheap rates. In fact, South Korea has a plan to connect every home in the country to the Internet at one gigabit per second by the end of 2012. This is in stark contrast to elsewhere even in developed economies, where broad band services are limited to a few megabits and exorbitantly expensive.

In the US, the fastest service of Verizon, the leading provider of fiber-to-the-home service, is only 50 megabits a second and it costs $144.99 a month. In contrast, Hong Kong Broadband Network offers one gigabit per second service for less than $26 a month, and it operates profitably. Similarly, a pilot gigabit project initiated by the South Korean government with 1,500 households in five South Korean cities costs 30,000 won a month, or less than $27, for a connection.

Broadband service providers in Hong Kong and South Korea undoubtedly enjoy the benefits of high population density of these countries. They also have a critical mass of consumers for these services.

A NYT article argues that in the United States, "costs would come down if several companies shared the financial burden of putting fiber into the ground and then competed on the basis of services built on top of the shared assets. That would bring multiple competitors into the picture, pushing down prices." Most broadband markets in the US have one dominant cable and phone company each.

Another reason for the lack of interest in ultra-broadband services in the US is the absence of services that require such high speeds. Uncompressed, broadcast-quality HD video, for example, uses 23 megabits a second. High speed services include those requiring two-way video-feeds like those used for tele-medicine and other services requiring video-conferencing, require software applications and service providers, apart from customers.

I am not upto speed with the latest regulatory provisions in telecom sector in India. However, the same approach could be adopted in India too where several telecom operators have already laid vast fibre optic backbone networks. In fact, fibre optic networks are today available across the length and breadth of the country, even in rural interiors. In many places, these are adequate to deliver even utlra-broadband services.

With appropriate regulatory changes, similar to the open access arrangements in electricity, telecom service providers can share their networks. The electricity distribution and transmission utilities are obliged to permit anyone to transfer electricity using their networks for payment of a fee.

In the absence of such regulatory enablers, telecom companies would be get locked up in an expensive and inefficient battle to lay competing network lines. This would crowd-out investments in content development and prevent the realization of the full potential of broadband-based service delivery. This is all the more unfortunate since unlike South Korea and other smaller developed countries, distances and problems posed by it are stumbling blocks to India's development. Education, health care, employment skills development and many other areas could be transformed if the infrastructure and softare platform to deliver broadband-based services is available.


mashhood said...

India is way behind from other countries in telecom space. Also the recent scams has slowed its growth rate...

saiprasad said...

The US had a fixed local phone company and we could superimpose any long distance telephony provider on top of the local provider. Obviously, the local provider, provides the backbone to all the long distance companies at the local level.
This is the scheme, in practical terms, that you are suggesting for the ultra broad band service.
The issue is that of the monopoly of the local provider and the difficulty in prodding them to be efficient and reduce costs.