Smaller players give Airtel, Jio run for their money in home broadband game

The explosion of internet usage during the lockdown and afterwards is a known fact. Not only existing internet users consumed more data, plenty of new users were added by telecom operators and internet service providers (ISPs) in the past eight-nine months. Telcos, especially Reliance Jio and Airtel, rolled out attractive plans for home broadband users. JioFiber, for instance, launched Rs 399 a month plan in late August, and within days, Airtel introduced Airtel Xstream Bundle plans starting at Rs 499.

Even as top telcos are busy luring customers with affordable plans and going aggressive about new customer sign-ups, a recent report by Motilal Oswal Financial Services said that it's actually the smaller players who are getting a larger share of the new subscriber additions in the wired broadband category. For example, in the first half of FY21, smaller players added 75 per cent (or about 1.4 million) of the total subscribers, which is interesting given that both Jio and Airtel have chalked out plans to cover a large number of cities for wired broadband services.

"Recent wired broadband subscriber additions indicate that smaller players are still a competing force in the industry as... these smaller cable operators have better regional and local connectivity than the bigger players," said Motilal Oswal Financial Services report.

The wired broadband segment in India is highly fragmented with penetration levels of mere 7 per cent, in comparison to 55 per cent in China and 70-80 per cent in developed countries. There are over 300 regional and national broadband providers in India, and relatively smaller names like ACT Fibernet, Spectranet, Gigatel, Excitel, You Broadband, and others have been giving tough fight to large telcos.

But large telcos are pulling out all the stops in this space. Airtel, for instance, adopted local cable operator (LCO) model sometime back to accelerate subscriber growth, especially in smaller cities. The idea is to combine LCO's local network with Airtel's fiberised tower backhaul to build last mile connectivity and increase new sign ups.

"In this model, last-mile connectivity would be owned by the LCO. However, the customer would use Bharti's interface, billing and OTT (Airtel Xstream) platform and service, thus allowing it to reach customers and increase its brand presence with lower capex," said Motilal Oswal report.

The LCO model has also enabled Airtel to revisit its earlier mission to target top 100 cities. On the back of LCO model, Airtel can expand to more cities - target market of 150 cities - without having to worry about high capex requirement. JioFiber too has plans to reach 1,600 cities. Although its current subscriber count of just around 1 million on the home broadband side indicates the lack of focus on home broadband segment.

Analysts at JM Financial Institutional Securities though believe that the weak financial position of BSNL-MTNL and the lack of scale for the smaller ISPs present Airtel and Jio with an opportunity to consolidate the market.

"The [wired broadband] penetration could go up significantly driven by remote working and development of a dispersed work force strategy; reduction in price of smart TVs which necessarily require a fixed broadband connectivity... bundling of live TV and OTT by DTH and cable TV providers... and possible reduction in differential with wireless given the impending wireless tariff hikes. The recently-reduced fixed broadband tariff of Jio and Bharti could potentially increase the market size for FTTH [fiber to the home] and also consolidate the market," said JM Financial Institutional Securities in an October report.

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