The Indian media is full of news about how investors such as Reliance Industries have paid Rs. 38,000 Cr. ($ 8 B) to buy 4G/wireless broadband access licenses. And this is on top of the ~ Rs 70,000 Cr ($ 16 B) telcos have spent on 3G licenses. Clearly people with money are betting that internet usage in India is at an inflection point; Mukesh Ambani recently predicted that there would be over 100M broadband users in India within 5 years. Considering that after 10 years, there are only 5 M broadband connections in India and in 2009, the number of users only grew at 17% YoY, that’s ambitious. But is it crazy ? China has 200 M + internet connections and 50 % + of US households have broadband. Furthermore, Indian telcos hope to replicate their mobile voice success – in 10 years, India has added over 600 mobile connections, and continues to add 20 M new users every month.
I am a believer. I believe that in 5 years, broadband access will be ubiquitous in India, with 200 M + connections with speeds exceeding 1 Mps (on average). I also believe that while mobile phones will be the most common way to access the internet in India, iPAd like tablet devices will become mainstream. And thin/zero client devices that leverage TVs and mobile phones to provide access to computing for less than Rs 500/month will become widespread.
The obvious question is why? Why am I so bullish (or as some might say, naïve)? At current growth rates, there will only be 10 -15 M broadband users in 5 years. And even those who have internet access don’t seem to use it much; Indian internet users only spent 11 hours/month online, the lowest in Asia, and 50% of the global average.
Here is what’s changed, IMO.
Telcos are incented to drive adoption. Wireless broadband has a high upfront fixed costs(for licenses and equipment) and the incremental cost of adding a subscriber is low. As a result, having bought licenses, telcos will price broadband access very aggressively and put their considerable marketing muscle behind it, i.e. they will replicate the mobile formula, and they are starting from a position of strength, in terms of expertise, access to capital, subscriber base, etc.
Tablets will be available for less than Rs 15,000 in less than 18 months. And smart phones with 4″+displays will soon sell for Rs 5000. Tablets in particular,I believe, will drive internet usage in India, because they combine the best of a phone (personal, portable, apps) with the screen size of netbook. I suspect that in a couple of years, riders on the Delhi metro will all pull their tablet as soon as they board and watch a movie, pay bills or even trade on the stock market on their way to work/home.
Social media and video conferencing will drive adoption. In the US, the bubble in the late 90s primed the pump by funding an ecosystem of on-line content and commerce providers like Yahoo, Amazon and Ebay. Such start-ups coupled with the widespread deployment of broadband triggered a virtuous cycle accelerating both penetration and time spent online. In India, historically, there have been very few (in relative terms) things to do on-line, beyond e-mail and porn. Social media has changed that. Even my mother has a FB page. India is one of the largest markets globally for Orkut and YouTube traffic in India is exploding. And, RockeTalk, an Indian social application is growing like a weed. To sum up, social media is driving content creation, providing entertainment and fueling video communication. And doing so without depending on large amounts of VC funding.
Electronic payments finally taking off. E-Commerce depends on widespread adoption of electronic payments. After all, people who have not used an ATM are unlikely to buy goods online. Well, finally, there are almost 100M debit+ credit cards in India and a host of recent regulatory changes are likely to accelerate adoption of electronic payments
To sum up, the 3G/4G auctions are the flashpoint for a virtuous cycle which will be a game changer for the Indian economy. In less than 5 years, the internet will impact the daily lives of 100s of millions Indians providing cheap entertainment, reducing consumer prices, creating millions of new jobs and improving productivity of every Indian business.