Deployment Models and Required Investments For Broadband Report 2010 12 A CII Study

Deployment Models and Required
Investments for Developing Rural

Broadband Infrastructure in India
December 2010
A study conducted for Confederation of Indian Industry by
FOREWORD
regulation for providing broadband access to ~ 700
million Indians (direct or shared) via 214 million
connections by 2014 by establishing a pan-India
broadband backhaul and access infrastructure.
National broadband initiatives are being taken across

the globe that are transforming the telecom industry
of various countries and thereby the local economy
and social landscape. In fact, it has been found that a
number of emerging economies are leading the way due
to the realization that broadband helps their economy.
According to a study conducted by World Bank, with
every 10% increase in broadband penetration, there
is an increase in GDP growth of 1.4%. In addition,
broadband leadership is positively linked to creating
an innovation led economy.
Confederation of Indian Industry (CII) has embraced
Business for Livelihood as its theme for the year
2010 and is committed to the cause of infrastructure
building for competitiveness and inclusive growth.
It has been witnessed that continual investment
in national broadband infrastructure in various
countries has been invaluable in increasing broadband
penetration, which helps in maximizing countrys
competitiveness.
Th is Study suggests that the Industry and Government
should together build a Pan-India Broadband
Infrastructure for the countrys overall growth.
The aim of the Study is to help develop policy and
India needs to build a successful national broadband

strategy for which it requires a mature ecosystem
for future development and needs strong and active
participation from government to facilitate growth.
The targeted beneficiaries will include the Indian IT
and Telecom industries, MSMEs (Micro, Small and
Medium Enterprises), rural population (agricultural
community), education and healthcare industry, as
well as the manufacturing and service sectors. It would
also help the Government implement its e-Governance
initiatives and facilitate inclusive growth.
The new age India needs to have digital connectivity,
besides physical connectivity, to uplift , engage and
enhance all sections of society and by including them
in the mainstream growth process enabling us to build
an inclusive India.
Chandrajit Banerjee
Director General
Confederation of Indian Industry
Introduction
The Indian Telecom Industry has witnessed

unprecedented growth since its inception. It has
come a long way from the time when hardly anyone
had heard of a mobile phone, to becoming the second
largest telecom market in the world today. New
benchmarks have been set as we moved from wireline
to wireless and from few select customers to masses
in a short span of fi fteen years. While the first phase
of telecom growth was largely driven by the explosion
in the wireless space, data is expected to lead the next
wave, which is crucial for the inclusive growth and
development of the economy.
(core, middle and access) and to identify and address

the infrastructure gaps. Th is study Deployment
Models and Required Investments for Developing
Rural Broadband Infrastructure in India
commissioned by the Confederation of Indian
Industry (CII) and conducted by Analysys Mason,
aims to help policy makers in formulating guidelines
for providing broadband access (direct or shared) to
about 60% of the total population by 2014. It delves
deep into the most appropriate deployment and
investment models for the Indian context.
One of the key fi ndings is the role of the Government.
Like in other countries, here too, governments
intervention and support is necessary for the
broadband ecosystem to reach a critical mass. The
telecom industry undoubtedly will play an active role
to help boost the penetration levels which will pave
the way for the broadband revolution in our country.
Broadband will ride this data wave to help create the

much needed information highway for accessibility of
various essential services such as education, healthcare,
governance and commerce by the masses. It will also
provide a fi llip to the success of large government
programs such as MGNREGA (Mahatma Gandhi
National Rural Employment Guarantee Act) and to
the Bharat Nirman objective of connecting 250,000
gram panchayats in the country via broadband.
Deployment of a National Broadband infrastructure
is a prerequisite, and to enable that it is essential to
understand the reach of the existing infrastructure
Sanjay Kapoor
Chairman
CII National Committee on Telecom & Broadband
iv Deployment Models and Required Investments for Developing Rural Broadband Infrastructure in India
Acknowledgement
We would like to thank all members of the CII National Committee on Telecom and Broadband, especially the
Steering Committee for Broadband Study who were instrumental in guiding this study:
Mr. Harish Krishnan, CISCO India (Chair, CII Steering Group on Broadband Study)
Mr. Chetan Krishnaswamy, Dell Incorporation
Mr. Jaijit Bhattacharya, Hewlett-Packard India Sales Pvt Ltd.
Mr. Natesh Mani, Sify Technologies Ltd
Mr. P Balaji / Mr. Dinesh Chand Sharma, Ericsson India Pvt Ltd
Mr. Parag Kar, Qualcomm India Pvt Ltd
Mr. R Sivakumar / Mr. Vivek Vasishtha, Intel Technology India Pvt Ltd
Mr. Saurabh Goel, Bharti Airtel Ltd
Mr. T V Ramachandran, Vodafone Essar Ltd
Mr. Marut Sen Gupta, Senior Director, CII
Mr. Anjan Das, Senior Director, CII
Ms. Arunima Sharma, Deputy Director, CII
We are grateful to the government and industry stakeholders for providing invaluable insights. We would like to
especially acknowledge the TRAI for their thought leadership in this area, and hope that our further elaboration of
these ideas would benefit the development of the industry and the Governments policies in facilitating its growth.
Deployment Models and Required Investments for Developing Rural Broadband Infrastructure in India v
List of Sponsors
vi Deployment Models and Required Investments for Developing Rural Broadband Infrastructure in India
Executive Summary
The broadband market in India is at a nascent stage of
development with household penetration of broadband
limited to approximately 4% at the end of 20091.
Moreover, the broadband subscriber base remains
concentrated in urban areas with the top 10 cities
(metros and six tier 1 cities), accounting for about 60%
of total subscribers2 . In addition to the multiple demand
and supply side challenges, one of the key reasons for
this low penetration and geographic concentration
is the unavailability of core / middle mile and access
infrastructure for broadband outside the top cities and
towns. Across all international markets, a national
broadband backbone is almost always the starting point
for deployment of a national broadband plan, followed
by demand stimulation initiatives by the market and
government, and resolution of supply side issues in
parallel.
The demand and supply side issues have earlier been
addressed in detail as part of the CII study in September
2009, India 2009 2014: Broadband Roadmap for
Inclusive Growth. The focus of this report is on a
detailed analysis of one of the main recommendations
of the earlier study establishing broadband backhaul
(core and middle mile3) and access infrastructure in rural
India. Th is becomes especially important in the context
of the governments plan of providing broadband service
to all the 250,000 gram panchayats4 in the country,
followed by connectivity to panchayats and Common
Service Centers (CSCs) for shared access. It is expected
that the adoption of high bandwidth applications such
as video on demand, tele-medicine, multimedia based
distance learning and video conferencing will increase
not only in urban centres, but even more so in rural
areas.
key gaps and required investments: To assess the

coverage level of existing fibre deployed across urban
and rural areas by operators and infrastructure
providers, identify additional backhaul and access
infrastructure required for covering 250,000 gram
panchayats, along with the required investments
1.
Global Experience and Investment Models
To identify appropriate investment models for building

broadband infrastructure in India, we studied and
analyzed the broadband market evolution in twelve
countries5 over multiple years. These countries were
selected based upon their stage of market maturity
(developed vs. emerging), status of launch of national
broadband plan, as well as the availability of sufficient
data points for analysis.
International experience suggests that growth in
broadband market undergoes the following three
phases of sequential development (network deployment,
ecosystem development, and demand stimulation &
welfare), in parallel with an increase in household
broadband penetration:
Phase 1 / Network Deployment: In the fi rst stage

of broadband development, the primary focus is on
deploying backbone network infrastructure (core
network, in addition to access network in some
markets), and initiating policy enablers to kick
start broadband growth to reach levels of 10 to 20%
household penetration. Th is stage is characterized
by a relatively higher level of government role and
intervention
Phase 2 / Ecosystem Development: In this stage

market forces take over as the primary driver
for growth, with the government stepping back
and playing a facilitating role. This stage involves
deployment of high speed infrastructure in residential
and commercial areas, introduction of new services,
Th is study focuses on the following three areas which

are critical for deployment of a pan-India broadband
infrastructure in the country:
Global experience and investment models: To

analyze the broadband evolution roadmap as well
as investment models adopted in developed and
developing markets, along with the role of key
stakeholders such as government and operators
Status of the existing broadband infrastructure,
Potential investment models for broadband

infrastructure in India: To analyze various
investment models for deployment of backhaul
and access infrastructure for broadband in India,
including funding, execution and management,
and recommend the most suitable models
TRAI: The Indian Telecom Services Performance Indicators Report (October - December 2009); 2 Based on Industry Inputs; 3 Core and middle mile refers to network beyond
the first level of traffic aggregation; 4 According to Ministry of Panchayati Raj, there were approximately 239,582 gram panchayats as of March 2008. However, for this study, we
have taken 250,000 gram panchayats across India as widely quoted by various government agencies; 5. The twelve countries include Australia, Brazil, China, Ghana, Japan, Kenya,
Korea, Malaysia, Russia, Singapore, Thailand and United States
viii Deployment Models and Required Investments for Developing Rural Broadband Infrastructure in India
applications and devices to increase household

broadband penetration to about 50% to 60%
Phase 3 / Universal Access and Welfare: Th is is the

last stage of broadband market evolution where the
government contribution / role becomes important
in addressing market inefficiencies and driving
further adoption. Th is is made possible by ensuring
availability of broadband services in un-served areas
and focusing on developmental applications such as
public safety, e-governance, education and other
enablers for ensuring equal access to information,
opportunities and infrastructure
Moreover, depending upon the role of the government

in each of the above market evolution stages, there exist
three investment models, namely, Ownership, Public
Private Partnership (PPP) and Financial Incentives,
which are detailed as follows:
The ownership model has the highest level of

government involvement with the government
deploying and owning the broadband core and / or
access infrastructure
The PPP model has relatively lower level of

government role, with government partnering with
one or more private operators in developing the
broadband infrastructure
The financial incentives model defi nes governments

role as a facilitator for providing incentives and
grants to public and private sector companies for
deploying broadband infrastructure, but without
having any ownership
The above analysis of broadband evolution and

investment models adopted across countries suggests that
government plays the most critical role in the network
deployment stage to ensure availability of infrastructure
to offer broadband services. In the ecosystem development
stage, the role of the government declines significantly as
service providers start focussing on offering broadband
services in viable areas. However, in the last phase, the
role of government increases to ensure availability of
services even in the non-viable business areas.
Based on the above analysis, it appears that the Indian
broadband market will require a significant contribution
from government agencies in the initial rollout of core /
middle mile and access network infrastructure. Moreover,
since the broadband initiatives in India are delayed by
about 5 to 6 years, the three phases need to be compressed
into two phases for faster deployment and adoption
of broadband. The first and third phase need to begin
6
simultaneously in India to achieve the CII objective of 214

million broadband connections by 2014.
2. Status of the Existing Backhaul Infrastructure,

Key Gaps and Required Investments
Analysis of the existing backhaul infrastructure
deployed by various service providers, including the
incumbent operator, suggests that although all cities
and towns have at least a single service provider with
fibre infrastructure, the majority of villages lack core
and middle mile infrastructure. Industry inputs suggest
that BSNL is estimated to provide connectivity to
28,000 villages through its existing exchanges, while the
fibre coverage of other service providers such as Airtel,
Reliance Communications and Tata Communications
remains limited to metros and urban areas.
Infrastructure providers such as RailTel, POWERGRID
and GAILTEL have also deployed their own fibre
infrastructure, but this infrastructure is primarily
present along with the railway and main utility lines and
is not optimized to reach a large number of remote rural
areas.
A high level analysis of existing infrastructure indicates
that almost the entire stretch of national and state highways
already has fibre deployment. For covering 250,000 gram
panchayats, it has been assumed that additional fibre
backbone will be deployed along the existing rural roads.
Based on this methodology, there is a requirement for
an additional 301,000 Route Kilometers (RKms) of
infrastructure to cover all the 250,000 gram panchayats
and will require an investment of approximately INR
17,500 crores and INR 8,500 crores for underground and
aerial fibre deployments, respectively. The above investment
includes cost for right of way, trenching, ducting, cabling
and active equipment.
Apart from fibre, microwave links (50 Mbps capacity)
can also be considered for deployment of backhaul
infrastructure especially in more difficult to reach rural
areas. Assuming one hop per gram panchayat, microwave
based backhaul deployment (equipment, installation
and annual tower rental6) will require an investment of
INR 25,400 crores.
We expect that the actual backhaul deployment will be
a mix of underground fibre, aerial fibre and microwave
link based connectivity based on the deployment
situation, but have estimated an overall requirement of
INR 17,500 crores.
Includes tower rental of INR 15,000 per month for 5 years
Executive Summary ix
3. Status of the Existing Broadband Access

Infrastructure and Required Investments
the SPV (a new company with majority stake of

a private / public service provider and minority
holding by the central government)
Apart from the core and middle mile network,

additional investment would be required to deploy the
access infrastructure to offer broadband services to end
users in rural areas. Th is would be rolled out based on
existing as well as upcoming wireless technologies such
as EV-DO, WiMAX, HSPA and LTE. Inclusive of site
equipment, access device (PC, laptop, netbook or mobile
handset) and site running cost, the total investment
required for 5 years will vary from INR 20,700 crores to
INR 22,900 crores based on technology deployed, with
average tower coverage radius of 5 Kms. Based on this,
the average investment cap for deployment of pan-India
access infrastructure will be INR 22,200 crores.
Government Led SPV: Owned, deployed and

funded by the SPV (a new company with majority
stake of central government and minority holding
by a private / public service provider)
In addition to the infrastructure, development of

localized content / applications needs to be encouraged
through various policy initiatives around content,
hosting and creating awareness among end users.
4. Potential Investment Models for Broadband

Infrastructure in India
The above mentioned investment models (Ownership,
PPP and Financial Incentives), can have multiple variants
based on the source of required investment and the level
of involvement of key stakeholders, as following:
Based on the direct / indirect involvement of central

/ state governments and agencies, there are three
possible variants of the Ownership model:
Central Government Owned: Infrastructure
owned and funded by the central government and
deployed by either the government or by BSNL
State Government & Municipality Owned:
Infrastructure owned by the state government
/ municipality, deployed by private or public
service providers, and funded jointly by central
government and state government / municipality
Incumbent Owned, Government Supported
7
SPV : SPV created through the divesting of the
backhaul assets of BSNL, RailTel, POWERGRID
and GAILTEL. The network is owned and
deployed by the SPV but funded by the central
government
Based on the role of private service providers, public

private partnership model can have two variants:
Telco Led SPV: Owned, deployed and funded by
Special Purpose Vehicle
x Executive Summary
Based on the type of funding support from the

government, fi nancial incentives model can have
two variants:
Government Loans & Subsidies Private Owned:
Owned, funded and deployed by private / public
service provider with favourable loan and subsidy
support by the government
Reverse Auctions: Owned and deployed by private
/ public service provider with the winning party
and funding support amount from the central
government determined through auction
These seven models were compared and evaluated based

on key parameters such as time to rollout, ability to drive
approvals, level of government participation, utilization
of existing infrastructure and speed of pre-execution,
which are critical for successful and timely deployment
of the additional network infrastructure and thereafter
efficient utilization of this new infrastructure.
While all the seven investment models are applicable
for core and middle mile infrastructure deployment,
only six investment models are applicable (all except
Incumbent Owned Government Supported SPV) for
access infrastructure. However, the business models
and ownership of core / middle mile should be decided
independently of the business models and ownership of
access infrastructure.
Given that the government will have an important
role in development of the national broadband
infrastructure, and based on comparative analysis of
various models across parameters mentioned above, we
believe that the following models appear to be the most
suitable for backhaul and access:
Backhaul infrastructure:
Central Government Owned
Incumbent Owned Government Supported
Special Purpose Vehicle (SPV)
Jointly Funded & Owned SPV - Telco Led Model
Access infrastructure:
Government Subsidies (directly to end users)
Reverse Auction
5. Operational Plan for Identified Investment

Models for Core Infrastructure
6. Operational Plan for Identified Investment

Models for Access Infrastructure
Each of the investment models for core

infrastructure have a different operational plan, which
includes establishing the company, infrastructure
rollout and operations and management. The details are
as below:
Each of the investment models for access

infrastructure have a different operational plan, which
includes establishing the company, infrastructure
rollout and operations and management. The details are
as below:
Central Government Owned Model: The central

government will mandate BSNL to extend its fibre
network to cover the 250,000 gram panchayats
with funding support from central government
/ USOF / MGNREGA. The operation of the
additional infrastructure will be managed by the
existing BSNL team while the additional fibre
infrastructure will be deployed by existing BSNL
norms, by using vendors identified on regional basis
through tender
Government Subsidies (Directly to End Users):

Government (USOF) will provide subsidy to rural
end users on a pre-determined rate. The subsidy will
be on a per household basis and can be transferred
directly to the end users account through mobile
banking, with each subsidy payment authorization
subjected to an authentication model based on
the UID8. In this model, telcos will roll-out and
manage the access infrastructure using their own
funds, while end user affordability is enhanced
through the subsidies
Incumbent Owned, Government Supported

SPV Model: Government will divest BSNLs
backhaul assets to create a separate entity and
will mandate other PSUs such as GAILTEL,
RailTel and POWERGRID to combine their
assets with this SPV. The funding for additional
network deployment will be provided from central
government / USOF and vendors identified by the
SPV based on standard tender process will deploy
the infrastructure. The SPV operation and routine
management will be governed by a management
committee, with representatives from the PSUs, as
well as the government
Reverse Auction: Government (USOF) will carry

out the reverse auction on a per circle basis with only
existing telcos allowed to bid in the auctions. The
maximum level of subsidy will be predetermined
on a per circle basis and the lowest subsidy bidder
will get the required USOF support. USOF
will provide the minimum support required for
roll-out to the telco on an annual basis based on the
pre-determined infrastructure roll-out obligation.
Moreover, telcos winning the bid will be required
to submit a bank guarantee (as a percentage of the
total bid value) which would be revoked in steps
if the winning party misses rollout milestones, up
until the total guarantee amount is exhausted
Jointly Funded and Owned SPV Telco Led

Model: Government will create a Parent SPV
(100% owned by Government of India), which will
own all of the deployed network assets. Subsidiary
SPVs will be created (based on number of regions
carved out for deployment) for execution of the
network deployment and on-going operations and
maintenance, with joint equity ownership with
the Parent SPV split between them (e.g. telco vs.
Parent SPV as 74%:26%). The paid-in equity for
the subsidiary SPVs will be supplemented with
grant from the USO fund to aggregate the total
funding requirement of INR 17,500 crores for the
pan-India backbone. The subsidiary SPV operations
and routine management will be governed by a
management committee, with representatives from
the telco, as well as the government
7.
Conclusion
Based on the above analysis and recommended approach,

we are confident that the country can meet CIIs goal
of providing broadband access (direct or shared) to ~
700 mn population (via 214 mn connections) by 2014,
as established in its earlier report, India 2009 2014:
Broadband Roadmap for Inclusive Growth.
While the government is preparing its recommendations
for a National Broadband Plan for India, this report
can be used as an input in creating those guidelines for
establishing the broad policy and regulatory framework
and in deciding the most optimal investment model for
deployment of core / middle mile and access broadband
infrastructure in the country.
Unique Identification Number / Aadhar
Executive Summary xi
Table of Contents
1.
Objective and Methodology
2.
Overview of Broadband Services in India
3.
Global Experience with Deployment Models for

National Broadband Networks
4.
Investment Required for Deployment of Backhaul

5.
10
16
Investment Required for Deployment of Access

22
6.
Potential Deployment Models for India
30
7.
Evaluation of Deployment Models and Operational Plan
40
Annex A: Case Studies of Global Broadband Deployments
48
1

The objective of the study is identify the different investment model options
and recommend most suitable options for deployment of pan-India broadband
backhaul and access infrastructure in India. To achieve this objective, we analyzed
the broadband ecosystem evolution of various developed and developing countries
along with adopted investment models, evaluated the existing networks in India to
identify the existing gaps, estimated the total investment required for additional
infrastructure deployment, identified potential investment models and fi nally
recommended the most suitable models for India
1.1. The objective of this study is to identify the
stimulation initiatives, this report analyzes one of the
different investment model options for deployment
main recommendations of setting up of core / middle
of a pan-India broadband infrastructure
mile and access infrastructure in detail.
Multiple
global
macro-economic
studies
have
To facilitate the growth of broadband in India, the
established the role of broadband in socio-economic
government is preparing its recommendations for a
development, with a recent report concluding that for
National Broadband Plan for India. Th is report can
every 10% increase in broadband services penetration,
be used as an input in creating those guidelines for
there is an increase in GDP growth of 1.4%9. To bridge
establishing the broad policy and regulatory framework
the digital divide among urban and rural India and for
and in deciding the most optimal investment model
providing growth impetus to the Indian economy, the
for deployment of core / middle mile and access
government of India has already planned to provide
broadband infrastructure in the country.
broadband connections to all the 250,000 gram

panchayats in the country. Th is will facilitate shared
1.2. Our methodology included developing an
as well as direct access to basic e-governance services
understanding of global experience in broadband
along with other commercial services to a large
deployment, and evaluation of investment model
proportion of the rural population in the country.
options for India, including an assessment of

required investments
Th is study is in continuation to India 2009 2014:

Broadband Roadmap for Inclusive Growth report
The study was structured into three phases with an end
published by the Confederation of Indian Industry
objective of identifying the most optimal investment
(CII) in September 2009. While the focus of the
model option for the Indian market (Please refer to
earlier study was on broadband demand and market
Exhibit 1.1).
Economic Impacts of Broadband In Information and Communications for Development 2009: Extending Reach and Increasing Impact A World Bank Study by Qiang,
Christine Zhen-Wei, and Carlo M. Rossotto
Deployment Models and Required Investments for Developing Rural Broadband Infrastructure in India 2
Exhibit 1.1: High Level Project Approach
High Level Project Approach
Analysis
Analysisof
ofthe
thenational
national
broadband
broadbandplans
plansof
ofkey
key
countries
countries
Selected countries based on

parameters such as economic
status, launch of the national
broadband plan and investment
models
Analyzed national broadband plans

of the selected countries to identify
investment model options
Identify
Identifypotential
potentialinvestment
investment
models
modelsfor
fordeployment
deploymentof
of
pan-India
broadband
pan-India broadbandnetwork
network
Understand
Understandexisting
existing
infrastructure
infrastructurein
inIndia
Indiaand
and
estimate
estimateadditional
additional
investment
investmentrequired
requiredfor
forcore
core
and
andaccess
accessinfrastructure
infrastructure
Analyzed the level of existing urban

and rural backhaul infrastructure of
various services providers
Identified the gaps and estimated

the required backhaul and access
deployment to fulfill these gaps
Identified key investment model

options based on international
broadband plans
Evaluated the investment model

options based on the parameters
such level of government
participation and time to rollout and
identified the suitable investment
models for India
Estimated potential investment

required for covering the gaps
based on underground / aerial fibre
and microwave link deployment
Estimated the investment required

for deploying access infrastructure
Source: Analysys Mason
The fi rst phase of the study was focused on

understanding and analyzing global deployment
and investment model options, and involved a
study of the national broadband plans for twelve
developed and developing countries.
1.3. We had discussions with industry experts along

with inputs and feedback from the CII broadband
committee members as part of this study
Th is study was completed through interactions with
The second phase of the study includes a high level

understanding of the existing urban and rural
access and backhaul infrastructure of major public
and private operators and infrastructure service
providers, identification of current gaps in the
network and estimation of the investment required
for deploying a pan-India broadband network
multiple stakeholders (regulatory authorities, policy

making bodies and service providers), including the
Department of Telecommunications (DoT) including
USOF, Department of Information Technology
(DIT), Telecom Regulatory Authority of India
(TRAI), National Information Centre (NIC), Unique
The fi nal phase of the study was focused on

identification of potential investment model options
for the Indian broadband market, evaluation of
these models based on multiple parameters, and
development of recommendations
3 Objective and Methodology
Identification Authority of India (UIDAI) and Public

Information Infrastructure and Innovations (PIII).
These interactions provided invaluable insights, and
we are grateful to these organizations for sparing
their time. We would like to especially acknowledge

the TRAI for their thought leadership in this area,
and hope that our further elaboration of these ideas
would benefit the development of the industry and the
Governments policies in facilitating its growth.
Apart from primary research, Analysys Mason
conducted extensive secondary research to evaluate
and analyze the national broadband plans of various
countries and evaluate the investment models adopted
by these countries. Previous projects conducted by
Analysys Mason teams on national broadband plans
in other countries globally were also utilized to build
the analysis and recommendations.
Objective and Methodology 4
2
Overview of Broadband Services
in India
Overview of Broadband Services in India

The current broadband penetration in India is limited but with the introduction
of 3G and BWA in the next couple of years, the growth rate is expected to increase
manifold
of households with DSL as the predominant access

technology contributing to 85.5% of the total subscribers
as of December 2009. Other technologies such as cable,
Ethernet / LAN, Wireless, Fibre and leased lines contribute
to the remaining 14.5%. The current subscriber base is
lagging the broadband target of 20 mn by 2010 set by the
government in the National Broadband Policy 2004.
2.1. The current broadband penetration in India

remains limited to only 4% of households, but has
started to show momentum in the last year with
introduction of wireless modems, declining tariff s
and increasing end user utility
Broadband penetration in India is limited to only 4%
Exhibit 2.1: Internet (Broadband & Dial-up) Subscribers in India (2004 2009)
15.2
16
Subscribers (mn)
12.8
12
10.3
8.6
6.7
7.8
5.5
3.1
2.1
5.5
0.1
0.9
5.8
6.5
7.2
7.3
7.4
5.4
2004
2005
2006
2007
2008
2009
Dialup Internet Users
Broadband Internet Users
Source: Telecom Regulatory Authority of India
Technologies such as DSL and cable are primarily targeted

towards residential users and small & medium businesses,
while fibre, wireless and other technologies are being used
to target the enterprise customers. Moreover, in the last few
years, the telecom industry has seen significant growth in
high speed wireless data service access through CDMA 1X
/ EVDO data dongles offered by various wireless operators.
As per industry inputs, there are approximately 2.2 mn
dongle subscribers as of 2009.
In the last few years, broadband service in India has seen
a significant increase in subscriber base primarily due to
increasing affordability, utility and migration from dial-up
to broadband.
2.1.2. Service Utility / Relevance: Adoption of broadband

/ internet services has been limited due to the utility
and relevance of content and applications being off ered.
However, in the past 3 to 4 years, household adoption
is being driven by educational and other utility
applications such as banking, online ticket booking (such
as railway and airlines) and utility payments (such as
electricity, telecom and water).
2.1.3. Dial-up to Broadband Substitution: The reduction in
tariff as well as expansion of broadband infrastructure
beyond metros and tier I/II cities has led to migration
of internet subscribers from dial-up to broadband
connection.
2.1.1. Increasing Service Aff ordability: Reduction in

broadband tariff has led to a signifi cant increase
in adoption (CAGR of 55% from 2006 to 2009) of
broadband services due to increasing aff ordability. This
tariff reduction has been led by BSNL which launched
DataOne Broadband Service in 2005 with a monthly
rental of INR 199 for 250 MB download limit. The
current lowest tariff data plan off ered by major operators
is shown in Exhibit 2.2.
2.2. Th is growth rate is expected to increase manifold

with the introduction of 3G and BWA in the next
couple of years
DSL based broadband service is expected to be capped at
around 14 mn subscriber base due to limited penetration
of copper lines (BSNL & MTNL together have 31.6 mn
wireline subscribers as of 2009) in the country. Moreover,
industry inputs suggest that an estimated 40% of these
Exhibit 2.2: Lowest Broadband Tariff Plan Offered by Various Service Providers (June, 2010)
Service Provider
Lowest Tariff Plan
Free Data Usage Limit
Additional Data Charge
BSNL
INR 125
150 MB
INR 0.6 / MB
MTNL
INR 49
200 MB
INR 1.0 / MB
Airtel
INR 599
3 GB
INR 0.2 / MB
Reliance Communications
INR 299
1 GB
INR 0.9 / MB
Tata Communications
INR 1000
70 GB
Source: Operator Websites
7 Overview of Broadband Services in India
lines are not upgradable to DSL due to quality issues of

copper and loop length (distance from local exchange).
However, with the completion of 3G and BWA spectrum
auctions, wireless technologies are expected to drive the
future growth of broadband in India. Operators who
have won spectrum have already started rolling out their
networks and are expected to drive the growth in the market
through various innovative offerings such as device-service
bundling.
Overview of Broadband Services in India 8
3
Global Experience with
Deployment Models for National
Broadband Networks
Global Experience with Deployment

Models for National Broadband Networks
Analysis of adoption of broadband and the National Broadband Plans of various
developed and developing countries indicates that governments play a significant
role in the initial stages of broadband infrastructure deployment
analysis, which were selected based on the following

parameters / mix:
3.1. The countries covered under this study were

selected on the basis of their economic status, launch
of National Broadband Plan (NBP) and investment
model(s) adopted
The objective of studying international experiences was to
understand the broadband growth patterns across multiple
countries, including the evolution roadmap, investment
models, role of various stakeholders and funding
mechanisms. We identified twelve countries (Australia,
Brazil, China, Ghana, Japan, Kenya, Korea, Malaysia,
Russia, Singapore, Thailand and United States) for this
Economic status (developed or developing)
Launch of national broadband plan, and
Investment models adopted for implementation
3.2. Global experience across multiple developed

and developing markets indicates that the broadband
market has typically evolved through three
different phases, with varying levels of government
intervention
Exhibit 3.1: Selected Countries for Analysis of Broadband Adoption

Introduction of National Broadband Plan by Developed and Developing Countries
Germany
China
Korea
95
96
97
98
Singapore
Australia
Japan
99
00
01
02
Russia
Malaysia
03
04
New
Zealand
Ghana
05
06
France
07
08
Kenya
09
Thailand
10
11
US
Brazil
government stepping back and playing a facilitating

role. The business growth is led by private and public
sector participants, and this stage involves deployment
of high speed access infrastructure in high / medium
income areas, introduction of new services, applications
and devices. This phase is estimated to last until the
broadband penetration increases to about 50% - 60% of
households
Analysis of broadband evolution and national broadband

plans (wherever applicable) for these countries suggests that
broadband evolution in these countries have typically gone
through three phases of network deployment, ecosystem
development, and universal access and welfare (please refer
to exhibit 3.2).
These phases have been defi ned based on household
penetration and the extent of government involvement
across the broadband growth cycle. The details for each
phase are as given below:
3.2.1. Network Deployment: In the first stage of broadband
development, the primary focus is on deploying backbone
network infrastructure (core network, in addition to
access network in some markets), and initiating policy
enablers to kick start broadband growth. This stage is
characterized by an increase in broadband penetration
to about 10 to 20% of household penetration, in about 3
to 5 years (depending on the country). Most importantly,
in this phase the government plays an active role, directly
or indirectly, for deployment of fibre optic infrastructure
which is critical for providing backhaul support for
broadband growth in the country
3.2.2. Ecosystem Development: In this stage market forces
take over as the primary driver of growth, with the
3.2.3. Universal Access and Welfare: This is the last stage

of broadband market evolution where the government
contribution / role becomes important in addressing
market inefficiencies and ensuring true mass market
adoption for equitable benefit and growth. This requires
ensuring availability of broadband services in un-served
/ under-served areas and focusing on developmental
applications such as public safety, e-governance, education
and other mass market applications. Preceding this
phase, growth in the broadband subscriber base declines
as a result of saturation in expansion of network to all the
viable areas / geographies by service providers
3.3. Depending upon the role of government, there

exist three investment models, namely Ownership,
Public Private Partnership and Financial Incentives,
the selection of which vary with the stage of market
development
Exhibit 3.2: Broadband Evolution and Growth Framework

Phase 1
Phase 2
Ecosystem Development
Network Deployment
Deploy backbone network

infrastructure
Phase 3
Universal Access and Welfare
Deploy high speed infrastructure in high
Stimulate further adoption through
economic areas
development of public services

targeted towards mass market and
utility services
in the low demand areas (financial incentive)
In addition, develop services and applications Ensure coverage of un-served /
underserved areas
to drive usage / demand
Initiate policy enablers such Deploy access network to increase coverage

as infrastructure sharing to
increase competition
Household Broadband Penetration
68%
51%
34%
17%
High
Significant role of
government in rollout of core
and access infrastructure,
either through own and / or
mandating incumbent and
regulatory / policy changes to
increase penetration
Investment model:
Ownership / PPP
Growth in broadband adoption is

primarily driven by market forces.
Major investments are from private
sector with the role of government
typically limited to providing
financial incentives
~ 50% - 60%
Med-High Level of
Investment model: PPP /

Financial Incentives
Med
~ 10% - 20%
Level of government intervention

increases to enable service
development to stimulate demand
and ensure BB availability to all
services at affordable prices
Investment model: PPP /
Financial incentives
0%
Year 1
Year 3
Year 5
11 Global Experience with Deployment Models for National Broadband Networks
Year 7
Year 9
regulatory /
policy
Intervention
3.3.3. Financial Incentive Model: In this model, the

governments role is primarily as a facilitator for
providing incentives and grants to public and private
sector companies for infrastructure deployment, but
without having any ownership. The operator deploys and
owns the infrastructure and the government primarily
provides support through provision of interest free or
easier loan terms. Japan is one of the countries where this
investment model has been deployed
The analysis of broadband evolution across various

countries as mentioned in section 3.1 suggests that there
exist three primary investment models based on the role of
government and stage of broadband market in the country.
The details of these investment models are as follows:
3.3.1. Ownership Model: This model has the highest level
of government involvement with the government
responsible for rolling out and owning the core / access
broadband assets. In this model, the government owns
and deploys the fibre optic infrastructure directly or
indirectly by either mandating the public sector operators
to rollout fibre or through bidding by private companies
for deployment. Brazil, China, Malaysia, and Russia
are examples of some countries that have used this
investment model
3.4. India is currently in the initial stage of the

broadband evolution and growth framework and
will require significant influence / participation by
the government from a funding as well as facilitation
perspective
With household broadband penetration of around 4%,
India is currently in the initial phase (Phase 1) of the
global broadband evolution and growth framework. As
established above, the government will have to play a
prominent role through investment into infrastructure
and also develop regulation and policy for facilitating the
growth of broadband in the country.
3.3.2. Public Private Partnership Model: This model has a

relatively lower level of government involvement, with
the government partnering with one or more private
operators in developing the broadband infrastructure.
In this model, the government part finances the
infrastructure roll-out, while the remaining investment
is made by the private operators. The infrastructure is
jointly owned by government as well as the operators.
Australia, Kenya, Korea, Singapore and Thailand are
some of the countries that have used PPP model for
infrastructure deployment
Moreover, since the broadband initiative in India is

delayed by at least 5 to 6 years, these three phases need to
Exhibit 3.3: Indias Positioning in the Global Broadband Framework

Phase 1
Phase 2
Network Deployment and Ecosystem Development
Given that national broadband plan is already delayed in India, government &
90%
private sector need to collaborate for the fast development of additional fibre
infrastructure from blocks to villages
Government needs to initiate policy enablers to increase competition & deploy high
speed infrastructure in high economic areas & access network in low demand areas
In addition, stimulate adoption through development of public services targeted
towards mass market and utility services
India
underserved areas such as

small villages
High
~ 50% - 60%
60%
30%
Ensure coverage of un-served /
CII Vision:
214 mn connections
at speed 2Mbps
Med-High Level of
regulatory /
policy
Intervention
Given the low broadband

penetration, India is today in
the initial phase. It is evident
that government intervention
will be required
Med
India is Here
India can leverage the ISPs current

initiatives and emergence of 3G & BWA
services to achieve this target in time
span of 5 years
~ 4%
0%
Year 1
Year 2
Year 3
Year 4
Year 5
Global Experience with Deployment Models for National Broadband Networks 12
(~3%) in the country. Also, a large proportion of the

existing copper lines (40%) cannot be upgraded to DSL
due to poor copper quality and loop length issues (distance
from the exchange).
be compressed into two phases for faster deployment and

adoption of broadband in the country. The fi rst and third
phases (development of public services for mass market
adoption) need to start simultaneously in India to achieve
the CII objective of 214 mn connections by 2014.
Even for private operators, industry inputs suggest that

the top 25 cities contribute to more than 90% of the
broadband service revenues across access technologies. Th is
concentrated revenue contribution of private operators can
be attributed to their fibre network and Points of Presence
(PoPs) being limited to the top 100 cities.
The government also needs to support broadband growth

by addressing some of the key operator challenges such as
Right of Way (RoW) and business viability, especially in
deep rural areas. While the RoW issue can be addressed by
establishing a nodal agency for single window clearance,
business viability issues in rural areas can be addressed
through deployment of shared network infrastructure
among operators and support from USOF.
3.6. To ensure inclusive growth through coverage

of rural areas with high speed access, availability
of a robust core and middle mile infrastructure is
imperative
3.5. However, the current penetration and growth in

broadband remains limited to the urban centers of
India
For long term data requirements, the most suitable technology

with high data carrying capacity needs to be deployed.
Currently, the bulk of internet / broadband applications
and services used in India, such as email, internet browsing,
instant messaging and basic tele-education, remain basic
in nature. However, going forward it is expected that the
adoption of high bandwidth applications such as video on
demand, tele-medicine, multimedia based distance learning
The broadband subscriber base is concentrated in the top 20

cities which account for about 70% of the DSL broadband
base, while the remaining 30% is contributed by other cities
and rural areas (Please refer to Exhibit 3.4).
Th is can be attributed to the limited wireline penetration
Exhibit 3.4: Broadband (DSL) Subscribers by Cities for PSU Operators (October 2009)
100%
Top 10 Cities account for 60% of overall broadband

subscriber base for BSNL and MTNL
11%
80%
Next top 10 Cities account for 10% of overall broadband

subscriber base for BSNL and MTNL
11%
8%
60%
8%
13 Global Experience with Deployment Models for National Broadband Networks
Others
Allahabad
Kanpur
Gurgaon
Vishakhapatnam
Dakshin Kannada
Trichur
Pondicherry
Mysore
Kannur
Noida
Kalyan
Panjim
Madurai
Vadodara
Trivandrum
Surat
Indore
Lucknow
Ernakulam
Pune
Calcutta
Hyderabad
Delhi
Mumbai
Bangalore
Total
0%
Chennai
20%
3% 2%
1% 1%
1% 1% 1%
24%
1% 1% 1% 1%
1% 1% 1% 1%
1% 1% 1% 1% 1%
1% 1% 1%
Nagpur
3%
Coimbatore
5%
40%
Ahmedabad
7%
Chandigarh
100%
and video conferencing will increase in urban as well as rural

areas. Some of these applications will require broadband
speeds of more than 4 Mbps per user as shown in exhibit 3.5.
To ensure quality of service delivery for such high bandwidth
applications and keeping in mind the data usage growth
experienced in developed countries, robust core and middle
mile infrastructure that is scalable at low Capex per MB in
addition to lower operational cost is imperative. Also, with
the expected launch of 3G and BWA (WiMAX and LTE)
networks by several operators, required backhaul capacity
will increase multi-fold in the coming years.
Based on the above analysis, it is imperative that India
create the required infrastructure to meet long term
data requirements. Th is will include deploying a mix of
underground and aerial fibre, due to its ability to scale to
high data volumes, and microwave links, due to their cost
effectiveness in connecting difficult to reach areas. Analysis
of broadband infrastructure deployments in various
countries (such as Australia, Japan, Korea, Malaysia,
Singapore and US) also indicate that globally most
countries have also deployed, or are in process of deploying
similar architectures for backhaul infrastructure.
Exhibit 3.5: Application Evolution and Bandwidth Requirement
Voice, data, video convergence

High definition video per channel
Multimedia based distance learning
Video on demand
Tele-medicine
4 Mbps
Video conferencing
Dedicated internet access
Standard Definition Video streaming
1 Mbps
Basic Tele-education
VoIP
Internet audio / music streaming
Instant messaging
Internet access
E mail
Global Experience with Deployment Models for National Broadband Networks 14
4
Investment Required for Deployment
of Backhaul Infrastructure in India
Investment Required for Deployment of

Backhaul Infrastructure in India
The existing fibre optic infrastructure covers the urban markets but has only
limited presence in villages / rural areas. To cover the 250,000 gram panchayats an
additional fibre deployment of 301,000 Rkms will be required at an investment of
approximately INR 17,500 crores
4.1. Although proprietary studies have been conducted

by private service providers and few government
agencies on the state of existing fibre infrastructure,
none of it is accessible to external parties, thus there is
no audited infrastructure data available in the public
domain
(PoPs) of the country as shown in exhibit 4.1, and is laid

primarily along the highways (national and state) and other
ancillary roads.
Inputs from various service providers suggest that while
almost all the national and state highways have fibre
running along the road, district roads have only marginal
The existing fibre optic infrastructure deployed (~10.4 lakh
fibre coverage. Fibre along rural roads is almost non-existent
Rkms as of 2009) by various service providers (operators
(except for deployments connecting BSNLs 28,000 rural
and infrastructure providers) covers the entire urban area
exchanges). Also, industry inputs suggest that for the large
but has only limited presence in villages and rural areas.
part fibre is currently available up to the block level and
The incumbent public sector operator, BSNL, reportedly
additional fibre needs to be deployed from block to villages
accounts for most of the existing fibre infrastructure
to connect the 250,000 Gram Panchayats.
(~60% of the total) and has Points of Presence (PoP) in

all the districts / cities and 28,000 villages. These PoPs are
Moreover, the reported fibre deployment includes a
mainly installed at the existing 38,302 telecom exchanges
significant proportion of fibre for providing last mile access
of BSNL which are connected through fibre. Apart from
in metros and tier I cities. Also, while the service providers
BSNL, other public sector companies such as RailTel,
report the route kilometres of fibre deployed by them, due
POWERGRID and GAILTEL have also deployed fibre
to lack of audited data, it is not possible to fi nd out how
infrastructure for their internal use and for leasing out
much of the reported fibre is lit vs. dark or just even ducts
excess capacity to other companies, but this infrastructure
in some cases.
is primarily deployed along the railway and main utility

lines, and is thus not optimized to reach a large number
of remote rural areas. The existing infrastructure of private
operators such as Airtel, Reliance Communications and
Tata Communications are restricted to the top 150 cities
4.2. Our methodology was based on calculating the

required fibre route kilometers through an analysis of
national highways, state highways, district roads and
rural roads
Exhibit 4.1: Existing Fibre Infrastructure and Coverage of Various Service Providers10
Service Provider
Total Fibre
Laid
Total Cities
Covered
BSNL
614,755
RKmb
All cities & 28 K

gram panchayats
Reliance
190,000
RKmb
44
Airtel
126,357
RKmb
130
Tata
40,000
RKmb
60
RailTel
37,720 RKm
600
PowerGrid
21,652 RKm
110
GAILTEL
13,000 RKm
200
Level of Backbone Infrastructure Coverage : Very High
Metros /
Tier I Citiesa
Very High
Medium
Other
Cities
Gram
Panchayats
Low
No Coverage
Mid Sized
Villages
Small
Villages
Source: Industry Inputs, Analysys Mason
Exhibit 4.2: Approach to Estimate Investment for Backhaul Infrastructure in Each State
Approach to Estimate Investment for Network Infrastructure in Each State
Number
Numberof
of
administrative
administrative
units
units(districts,
(districts,
towns
towns&&villages)
villages)
Total
Totallength
length
(RKm)
(RKm)of
ofroads
roadsin
in
the
thestate
state
Total
Totallength
lengthof
ofroad
road
infrastructure
infrastructureininthe
thestate
state
classified
classifiedinto:
into:
National
Nationalhighways
highways
State
Statehighways
highways
Major
Majordistrict
districtroads
roads
Other
district
Other districtand
and
village
villageroads
roads
Backhaul
Backhaulrequired
required
to
tocover
covertarget
target
area
areawith
withcore
core
and
andmiddle
middlemile
mile
infrastructure
infrastructure
%
%roads
roadsto
tobe
becovered
coveredby
by
core
coreand
andmiddle
middlemile
mile
infrastructure
infrastructureto
toprovide
provide
BB
BBcoverage
coverageto
toall
allthe
the
administrative
units
administrative units
%%coverage
coveragefor
fornational
national
highways
highways
%%coverage
coveragefor
forstate
state
highways
highways
%%coverage
coveragefor
formajor
major
district
districtroads
roads
%%coverage
coveragefor
forother
other
districts
districts&&village
villageroads
roads
Additional
Additional
backhaul
backhaul
deployment
deployment
required
requiredacross
across
state
state
Estimate
Estimateexisting
existingfibre
fibre
deployed
deployedacross
acrossthe
thestate
state
by
byservice
serviceproviders:
providers:
BSNL
BSNL
RailTel
RailTel
PowerGrid
PowerGrid
Private
PrivateOperators
Operatorssuch
such
as
asBharti
BhartiAirtel
Airteland
and
Reliance
Comm
Reliance Comm
Total
Totalinvestment
investment
required
required
Cost
Costof
offibre
fibrelayout
layoutper
perKm
Km
for
forboth
bothunderground
undergroundas
as
well
as
aerial
deployment
well as aerial deployment
including:
including:
Ducting
Ducting
Trenching
Trenching
Right
Rightof
ofWay
Way
Cable
cost
Cable cost
Active
ActiveEquipment
Equipment
Microwave
MicrowaveEquipment
Equipment

10
a. Includes top 8 cities with population > 4 mn and total income > INR 100 bn; b. Includes fibre deployed for access in addition to core and middle mile infrastructure
17 Investment Required for Deployment of Backhaul Infrastructure in India
Industry inputs suggest that almost all the fibre is laid
4.3. State-wise build up suggests that approximately

301,000 route kilometers of additional fibre will be
required to be laid from blocks to villages to cover the
250,000 Gram Panchayats
alongside existing roads. We assume that for connecting

250,000 Gram Panchayats, the required fibre will also
be deployed along rural roads. We adopted a bottoms-up
approach for calculating the additional fibre requirement,
at a state-wise level. A high level approach for estimating
Calculations based on the above approach and assumptions
the additional fibre deployments and investment required
suggest that 301,000 route kilometres of additional fibre
is shown in exhibit 4.2.
will be required from blocks to villages to cover the 250,000

gram panchayats. A high level state-wise fibre gap (in RKms)
All the national highways, state highways, district roads
for connecting gram panchayats across states and required
and rural roads were analyzed at a state level. With the
investments has been illustrated in exhibit 4.4.
assumption that all the national / state highways and a
4.4. We expect the actual deployment to be a mix of

underground and aerial fibre along with microwave
links with investment cap at INR 17,500 crores
proportion of district roads in the state already have fibre,

the additional fibre deployment was calculated based on
the gap between existing and the required road coverage in
each state. The level of investment varies across states and
We analyzed the cost structure for backhaul deployment,
is based on the extent of rural roads on which fibre needs
including cost elements such as ducting, trenching,
to be deployed. An illustrative approach for a state has been
cable, active equipments and right of way to calculate the
shown in exhibit 4.3.
Exhibit 4.3: Illustrative Approach for Calculation of Required Infrastructure in a State

Rajasthan Road Network
Investment Required for Broadband Coverage

Unit
National
State
District
Highways Highways Roads
Other
Roads
Total
114,139
Total Length
RKm
5,585
11,228
7,266
90,060
% Coverage
Required
100%
100%
60%
40%
RKm
5,585
11,228
4,360
36,024
100%
100%
100%
10%
Total Fibre Deployed
RKm
5,585
11,228
4,360
3,602
24,775
Fibre to be Laid
RKm
32,422
32,422
Cost per Fibre Km

(underground)
INR
581,806
581,806
581,806
1,886
1,886
281,789
281,789
281,789
914
914
Total Fibre Required

% Length Covered
Investment Required
(Underground)
Cost per Fibre Km
(Aerial)
Investment Required
(Aerial)
INR Cr
INR
INR Cr
57,196
Source: State Government Websites, Industry Inputs, Analysys Mason
Investment Required for Deployment of Backhaul Infrastructure in India 18
Exhibit 4.4: State-wise Calculation of Required Additional Fibre Deployment

Investment
(INR Cr)
Length (RKm)
State
State
Under
Ground
Aerial
7,627
444
215
Maharashtra
13,267
7,874
458
222
19,107
9,667
9,440
549
Bihar
24,616
13,734
10,882
Chhattisgarh
18,610
9,318
Goa
2,194
Gujarat
Haryana
Total
Covered
Andhra Pradesh
42,576
34,949
Arunachal Pradesh
21,141
Assam
Gap
Investment
(INR Cr)
Length (RKm)
Under
Ground
Total
Covered
Gap
117,503
70,495
47,008
2,735
1,325
Manipur
4,625
2,447
2,178
127
61
266
Meghalaya
8,597
5,395
3,202
186
90
633
307
Mizoram
9,838
6,174
3,664
213
103
9,292
541
262
Nagaland
3,053
1,907
1,146
67
32
1,109
1,085
63
31
Orissa
24,540
12,103
12,437
724
350
46,830
35,450
11,380
662
321
Punjab
18,801
6,202
12,599
733
355
12,469
5,693
6,777
394
191
Rajasthan
57,196
24,775
32,422
1,886
914
Himachal Pradesh
7,847
4,463
3,384
197
95
Sikkim
998
574
425
25
12
J&K
7,884
6,670
1,214
71
34
Tamil Nadu
34,363
21,219
13,144
765
370
Jharkhand
9,529
7,261
2,268
132
64
Tripura
1,630
1,192
438
26
12
53,789
52,996
3,083
1,493
Uttar Pradesh
107,731
81,476
26,255
1,528
740
Karnataka
Aerial
Kerala
16,598
16,404
194
11
Uttarakhand
10,989
4,662
6,326
368
178
Madhya Pradesh
43,975
34,843
9,133
531
257
West Bengal
17,818
11,498
6,319
368
178
Exhibit 4.5: Investment Required to Rollout Backhaul Network to Connect 250,000 Gram Panchayats11
Backhaul Deployment Options and Required Investments for Covering 250K GPs
Cost Elements
Underground
Underground Fibre
Fibre
(301,000
(301,000 RKm)
RKm)
Ducting and Trenching

Cable Cost and Active
Equipment
Deployment of additional
fibre along the rural roads
Backbone
Backbone
Deployment
Deployment
in
in 250K
250K Gram
Gram
Panchayats
Panchayats
Aerial
Fibreb
Aerial Fibre
(301,000
(301,000 RKm)
RKm)
Deployment of additional
fibre through aerial route
Microwave
Microwave Link
Link
(222K
(222K Hops)
Hops)
Deployment of 50 Mbps
microwave link for BH d
Right of Way a
Cable Cost and Active
Equipment
Investment Required
(INR / RKm)
150,000
130,000
INR 17,500
crores
300,000
130,000
Right of Way
150,000
Equipment and Installation
243,800
Tower Rental per Month
Total Investment
(INR Crores)
INR 8,500
crores
INR 25,392
croresc
15,000

11
a. Right of Way includes cost paid to local government / agencies granting RoW permission; b. Assuming same length of fibre deployment through underground and aerial
deployment; c. Indicates Capex of INR 5,412 cr and 5 year tower rental charges of INR 19,980 cr for antenna assuming one microwave hop per gram panchayat; d. BH - Backhaul
19 Investment Required for Deployment of Backhaul Infrastructure in India
investment required for rolling out 301,000 RKms of fibre
Apart from fibre, microwave links (50 Mbps capacity)
through underground or aerial method. Alternatively,
can also be considered for deployment of backhaul
microwave links with 50 Mbps capacity can also be
infrastructure, especially in tough to reach areas. Assuming
considered for deployment of backhaul infrastructure
one hop per gram panchayat, microwave based backhaul
in certain areas. The associated cost across all the three
deployment (equipment, installation and annual tower
deployment options is illustrated in exhibit 4.5.
rental) will require an investment of ~INR 25,400 crores.
Our calculations suggest that INR 17,500 crores will be
However, we expect the actual backhaul deployment will
required in case of underground deployments with right of
be a mix of underground fibre, aerial fibre and microwave
way charges contributing approximately 50% of the total
link based connectivity and will require an investment of
cost. However, if the fibre is deployed aerially in parallel
~INR 17,500 crores, assuming a fair mix of all the three
to existing power lines (all the gram panchayats already
backhaul deployment options.
have provision for electricity, such as poles and cables),

the investment required will be INR 8,500 crores. Th is
investment is significantly lower that the underground
laying of fibre due to saving of ducting and trenching
charges as well as lower right of way payouts.
Investment Required for Deployment of Backhaul Infrastructure in India 20
5
of Access Infrastructure in India

of Access Infrastructure in India
Apart from core and middle mile network, additional investment would be required
to deploy the access infrastructure to offer broadband services to end users in rural
areas. This would be rolled out based on existing as well as upcoming technologies
such as EV-DO, WiMAX, HSPA and LTE. Inclusive of site equipment, access
device and site running cost, the total investment required for 5 years will vary from
INR 20,700 crores to INR 22,900 crores based on technology deployed with average
base station coverage radius of 5 Kms. Based on this, the average investment cap for
deployment of pan-India access infrastructure will be at INR 22,200 crores
5.1 Globally, deployment and user base of various
broadband services. Some of these access technologies have
access technologies are linked to the overall ecosystem
been deployed extensively across the globe, while others
maturity of the technology
have witnessed limited deployment as illustrated in exhibit

5.1. Th is variance in global deployment can be attributed to
There exist several wireless access technologies such as
overall ecosystem maturity (such as availability of network
EV-DO, WiMAX, HSPA and LTE for deployment of
equipment and end user access devices) of the technology.
High
Exhibit 5.1: Global Deployment Status of Wireless Access Technologies (June 2010)12
HSPA
Use Base
User base: 148 mn

Available devices: 837
User base: 380 mn
Available devices: 2,579
EV-DO
User base: 9 mn
Low
User base: Negligible

WiMAX
LTE
EV-DO
WiMAX
HSPA
LTE
Access Technologies
Source: GSA, CDG, WiMAX Forum, Analysys Mason

12
Size of bubble represents number of devices available for the access technology
Average cost of deployment across the different access
on throughput and level of service bundling as illustrated
technologies differs primarily based on the cost of network
in exhibit 5.2.
equipment such as BTS, antenna and other associated

equipment. In case of EV-DO, WiMAX, HSPA and LTE,
Moreover, end user revenue will differ based on various
the average deployment cost per tower, over a period of 5
use cases as well as the ability of the technology to support
years, is estimated to be INR 84.8 lakhs, INR 92.9 lakhs,
the bandwidth requirement for the use cases as illustrated
INR 91.9 lakhs and INR 93.2 lakhs, respectively. The
in exhibit 5.3. For example, ARPU for triple play offering
above mentioned average tower deployment cost includes
will be significantly higher as compared to pure play data
capex per site, tower rental and access device (PC, laptop,
offerings. Also, adoption and ARPU of broadband services
netbook or mobile handset) cost for expected subscriber
will depend on various factors such as availability of relevant
base (average 788 subscribers per tower based on population
content / applications, entry cost (access device, installation
covered) over the next 5 years. Comparison of various
and bundled service) and awareness among end users,
access technologies indicated that some technologies are
especially in the rural areas.
favourable on deployment costs, while others score better
Exhibit 5.2: Technology Comparison Across Various Parameters

Parameters
Current Capex
per Site
Monthly Opex
per Site
Current CPE
Cost
Realizable
Throughput
Device
Ecosystem
Service Bundling
Possibility
Time to
Market
EV-DO
WiMAX
HSPA
LTE
~INR 207K
~INR 1,113K
~INR 920K
~INR 1,150K
~INR 50K
~INR 50K
~INR 50K
~INR 50K
INR 2,300
INR 2,990
INR 2,000
INR 3,000
9.9 Mbps per Site
30 Mbps per Site
10.8 Mbps per Site
40 Mbps per Site
652 Devices
300 Devices
2,579 Devices
30 Devices
Broadband Only
Broadband Only
Broadband & Voice
Triple Play
Current CDMA network

can be easily upgraded
Pan-India deployment
could be a challenge
Initial focus on top

100 cities
Currently limited due

to device ecosystem
Favorability of Parameter: Very High
Very High
Medium
23 Investment Required for Deployment of Access Infrastructure in India
Low
Very Low
5.2 We estimated total cost of deployment for various
5.3 Based on a coverage radius assumption of 5 Kms,
access technologies using average site coverage radius
the number of towers required for offering broadband
of 5 Kms and the associated site capex and opex
services will be approximately 37,250
We analyzed rural areas at a state level to estimate the

total cost of access infrastructure required to cover all
the gram panchayats in a state. Using an assumption of 5
Kms coverage radius, we calculated the number of towers
required to cover all the 250,000 gram panchayats in India.
Th is required number of towers was further used to estimate
the total equipment cost (network equipment and access
device) and operational expenditure (tower rentals) over a
period of 5 years. A high level approach of the methodology
adopted to estimate the access infrastructure deployment
Using an average coverage radius of 5 Kms, the number

of towers required to offer broadband services in the
rural areas of each state was estimated. Our estimates
indicate that ~37,250 towers will be required to
cover all the 250,000 gram panchayats in India, as
illustrated in exhibit 5.5. Moreover, for calculation
of cost of deployment, we have only considered the
tower rental charges, assuming that all the required
towers already exists and are being used by operators
to offer 2G services.
cost is illustrated in exhibit 5.4.
Exhibit 5.3: Possible Services by Access Technologies

Parameters
EV-DO
WiMAX
HSPA
LTE
Native Voice
Internet Access
Email
Instant Messaging
VoIP
Multimedia Based Tele Medicine
Video Streaming
Video Conferencing
HD Video / IPTV
Multimedia Based Learning
Very High
Medium
Low
Very Low
Investment Required for Deployment of Access Infrastructure in India 24
Exhibit 5.4: Approach to Estimate Investment for Access Infrastructure in Each State
Approach to Estimate I nvestment R equired for Access I nfrastructure
NNumber
umberof
ofGGram
ram
Panchayats
Panchayats&& VVillages
illagesin
in
Each
EachState
State
State-wise
State-wiseTTower
ower
RRequirement
equirementfor
forcovering
covering
RRural
uralIIndia
ndia
CCost
ostof
ofDDeployment
eployment(N
(NPV
PV))
of
ofAccess
AccessIInfrastructure
nfrastructure
I Inputs:
nputs:
I Inputs:
nputs:
Rural
Ruralpopulation
populationand
andarea
areaby
by
state
state
Rural
Ruralpopulation
populationper
pergram
gram
panchayat
panchayatby
bystate
state
Base
Basestation
stationcost
cost
Tower
Toweropex
opexcost
cost(rentals,
(rentals,
power,
power,etc.)
etc.)
CPE
CPEcost
cost
Access
Accessinfrastructure
infrastructure
deployment
deploymentplan
planover
overthe
thenext
next
55years
years
Average
Averagearea
areaper
pergram
gram
panchayat
panchayat
Tower
Towercoverage
coverageradius
radiusof
of55
Kms
Kms
Discount
Discountrate
ratefor
forNPV
NPV
calculation
calculation
Exhibit 5.5: Total Number of Towers Required for Providing Broadband Access to all the 250K Gram Panchayats
(for a site coverage radius of 5 Kms)
State
Andhra Pradesh
Number of Towers
3,121
Maharashtra
3,255
Arunachal Pradesh
978
Manipur
254
Assam
948
Meghalaya
263
Bihar
1,175
Mizoram
215
Chhattisgarh
1,584
Nagaland
197
Goa
38
Orissa
1,865
Gujarat
2,124
Punjab
555
Haryana
498
Rajasthan
Himachal Pradesh
681
Sikkim
Jammu & Kashmir
2,550
Tamil Nadu
86
1,365
Jharkhand
925
Karnataka
2,111
Uttar Pradesh
Kerala
444
Uttarakhand
611
Madhya Pradesh
3,511
West Bengal
1,004
Total Towers
37,250
Tripura
3,952
124
2,813
5.4 The average investment cap for deployment of
INR 22,889 crores, respectively, over a period of 5 years as
pan-India access infrastructure will be ~INR 22,200
illustrated in exhibit 5.6.
crores
The network deployment cost has been calculated based
To estimate the total cost of access network deployment,
on the assumption that in year 1 only 5% of the required
we have considered various capex and opex elements
towers will be installed, which will gradually increase
associated with the access infrastructure. In the capex, we
to 100% deployment by the end of year 5. Similarly, to
have considered BTS and associated equipments (such as
calculate the cost of access devices, we have assumed the
antenna and feeder cable), other network elements (such as
total addressable market will be only 33% of the rural
HLR, media gateway, SGSN/GGSN, authentication and
households above poverty line (39% of total households in
RNC) and end user access devices (PC, laptops, netbook
rural areas are below poverty line), which brings a total of
and mobile handset). In the opex, we have considered site
29.3 mn rural subscribers at the end of year 5. Moreover,
running expenses such as tower rental, power / diesel,
broadband adoption among the addressable households
shelter, security and other operational cost.
has been assumed at 2% in year 1 increasing to 100% at the

end of year 5.
High level calculation suggest that the Net Present Value

(NPV @ 12%) of the deployment cost of EV-DO, WiMAX,
Based on the above analysis, the average investment cap
HSPA and LTE network will be approximately INR
for deployment of pan-India access infrastructure will be
20,673 crores, INR 22,803 crores, INR 22,349 crores and
~INR 22,200 crores.
Exhibit 5.6: Total Cost of Deployment (NPV) over 5 years by Access Technologies (Tower Radius of 5 Kms); INR Crores13
I nvestment R equired to R ollout Access I nfrastructure to 250K G ram Panchayats
C ost Elements
Site Equipmenta
EV
EV-D
-DO
O
Access
D
Deployment
eployment
CCost
ost of
of Access
Access
IInfrastructure
nfrastructure
Site Equipmenta
3,704
Access
Site
Opexc
Access
Deviceb
3,825
Access Deviceb
19,730
Site
I N R 22,349
crores
11,176
Site Equipmenta
Opexc
I N R 22,803 crores
3,060
19,730
Site Opexc
LLTT EE
19,730
I N R 20,673 crores
11,176
Site Equipmenta
HHSPA
SPA
19,730
11,176
Deviceb
T otal I nvestment
(N PV ) d
689
Opexc
Site
W
WiM
iMAX
AX
Deviceb
I nvestment
R equired (I N R C r)
I N R 22,889 crores
11,176

13
a. Includes cost of BTS, antenna and other equipment costs (reducing at 5% per year); b. Includes access device (INR 11,500 per device) for expected subscriber base (reducing at
10% per year); c. Includes site opex such as tower rental, power and security for 5 years; d. Discounted at 12% based on tower deployment of 5% in year 1 to 100% in year 5
Exhibit 5.7: Number of Indian Language Websites (2008 - 2009)

713
153
Hindi
Tamil
117
97
Telegu
Bengali
57
40
38
34
Gujrati
Kannada
Punjabi
Marathi
Source: IAMAI, Analysys Mason
Exhibit 5.8: Key Initiatives Required for Development of Localized Content / Applications in India
Content
Development
Initiative for
Development of
Localized Content
Local IT and VAS companies need to be provided financial incentive (such as tax break) for
development of rural content based on pre-determined business model
Development of user interface and content / applications that are device agnostic (mobile, PC
and netbooks)
All applications and network infrastructure being funded by the government to be IPv6 ready
Government should facilitate deployment of internet data centers that are required
to host content / applications through subsidized power / land and by making the required
clearance process easier. The State Data Centers (SDCs) and National Data Centers (NDCs)
should be encouraged to connect with one another and to NIXI nodes and offer Business
Continuity Planning / Data Recovery
Local hosting of websites needs to be encouraged by the government as this reduces the overall
cost of offering broadband services to end users by avoiding international data (IPLC)
Empower all the schools and colleges with broadband connection with minimum 2 Mbps speed
and ensure at least 1 PC per 40 students
Limited basic IT education and awareness about benefits of broadband in rural areas is also one
of the reasons behind low adoption of broadband services in India
A pan-India internet awareness campaign needs to be undertaken by the key stakeholders

(government, operators/ISPs, VAS providers and NGOs) to develop the basic ICT skills
among rural population
Content
Hosting
Creating
Awareness
Source: IAMAI, Analysys Mason
5.5 In addition to access infrastructure, development
Content development: The government should
of localized and relevant content / applications needs
promote development of localized content and
to encouraged to facilitate adoption of broadband in
applications by providing various fi nancial incentives
rural areas
(such as tax breaks) to the local developer community.

Moreover, government should ensure that the content
At present, the majority of available content and applications
/ applications developed are device agnostics (mobile,
are in English and are mostly targeted towards the urban
PC and netbooks) and are IPv6 ready
population. The number of local language websites is quite
Content hosting: For hosting content / websites,
limited (see exhibit 5.7), reflecting the poor availability of
government needs to promote development of
localized online content that can be accessed by semi-urban
internet data centers by providing subsidized power
and rural users. Moreover, most of the currently available
as well as the land required to set up the data center.
content / applications are not relevant for the rural
The government should also ensure that most of the
population, which makes broadband an unattractive value
content / applications are hosted locally in India to
proposition for end users.
reduce the overall cost of offering broadband services

to end users by avoiding international data (IPLC)
charges
Apart from content, low literacy level and limited ICT

awareness are also some of the key reasons for low adoption
of internet services in India.
5.6 Various policy initiatives around content, hosting

and consumer awareness will be required to promote
the development of localized content and applications
To promote the development of localized and relevant
content / applications for mass market adoption, multiple
policy initiatives around content development, local hosting
End user awareness: The government needs to ensure

that all the schools and colleges are connected to the
internet and there is at least one PC per 40 students.
Limited ICT education and lack of awareness about
the benefits of internet services are also some of the key
reasons for low internet usage in India. To increase end
user awareness, especially in rural areas, government
needs to undertake a pan-India awareness campaign
in partnership with key industry stakeholders (such as
operators, ISPs, VAS providers and NGOs)
and end user awareness will be required, as illustrated in

exhibit 5.8.
6

Based on the ownership structure, deployment of additional infrastructure and
type of funding support, there are seven variants of three primary investment
structures that can be considered as potential deployment models for India
6.1. Analysis of per site economics indicates that the
6.2. Given the size of investment, it will take more
maximum annual revenue potential per tower is INR
than 10 years for service provider to achieve EBITDA
21.9 lakhs
breakeven
The average investment required for deployment of a
High level analysis of the rural broadband business model
rural tower for providing broadband service will be INR
suggests that cumulative EBITDA per site for 10 years
1.1 crores (including capex, opex and access device). This
will be INR 87.5 lakhs (as illustrated in exhibit 6.2).
results in a requirement of INR 17,500 crores to cover an
The net present value (at a discount rate of 12%) of this
14
additional 222,000 gram panchayats with backhaul and
cumulative EBITDA is expected to be INR 39.3 lakhs.
INR 22,200 crores for deploying last mile infrastructure
This leads to a cost revenue gap for an average site of INR
including access devices.
67.3 lakhs per tower.
Broadband adoption in villages is expected to be driven by
Given the significant cost revenue gap, government
shared access hubs, with household penetration not likely
subsidy / support will be required for deployment of
to exceed 33% of the total households above poverty line
end-to-end infrastructure (core, middle mile, last mile
(39% of population is below poverty line in rural areas).
and access device) to offer broadband services in all the
Also, not more than two service providers including the
250,000 gram panchayats in India. However, investment
service provider (SPV / telco), are likely to offer service
models for providing subsidy / support for core and access
per gram panchayat resulting in limited potential for
infrastructures will vary due to the nature of ownership
revenue through leasing of backhaul capacity. This leads
and deployment of these networks.
to a total expected revenue per tower of INR 21.9 lakhs

(as illustrated in exhibit 7.1) at the end of ten years.
14
BSNL already has covered 28,000 gram panchayats
Exhibit 6.1: Per Tower Economics for Broadband Deployment in Rural Areas15
Capexa per tower (INR Lakhs)
23.6
Access Device Cost (INR Lakhs)
53.0
Annual Opexb (INR Lakhs)
30.0
Total Cost / Tower (INR Lakhs)
106.6
Year 1
Year 3
Year 5
Year 10
Total Addressable HHc / Tower
788
788
788
788
Household Penetrationd (%)
2%
18%
100%
100%
Subscriber (Households)
16
138
788
788
Expected ARPU / HH (INR)
200
200
200
200
Service Revenue (INR Lakhs)
0.2
2.5
12.5
18.9
Backhaul Revenuee (INR Lakhs)
0.1
0.6
1.6
2.8
Shared Access Rev (INR Lakhs)
0.1
0.2
0.2
0.2
Total Revenue (INR Lakhs)
0.4
3.3
14.3
21.9
EBITDA f (INR Lakhs)
0.3
2.2
9.2
14.3
Very High
Medium
Low
Very Low
Exhibit 6.2: Cumulative EBITDA Per Tower for a Service Provider16 (INR Lakhs)
87.5
Investment required to deploy backhaul and

access infrastructure per tower:
~ I N R 106.6 L akhs
73.2
58.8
44.5
30.4
16.7
0.3
1.4
3.6
2011
2012
2013
7.5
2014
2015
2016
2017
2018
2019
2020

15
16
a. Includes BTS and core network costs, b. Includes tower rental cost only; c. Includes only 33% of the households above poverty line (61%); d. HH penetration is assumed to
increase from 2% in Yr 1 to 100% in Yr 5; e. Includes revenue from one telco using the backhaul network; f. At an average opex of 30% (excluding tower rentals & backhaul cost)
Telco / SPV who deploys the backbone and access infrastructure to cover 250,000 gram panchayats in India
31 Potential Deployment Models for India
6.3. Based on global deployment experience and
However, in the case of access infrastructure, the network
industry inputs, we have identified seven different
will be deployed and used only by the company which
deployment models, which vary based on the asset
owns the assets and will be non-sharable.
ownership, funding, deployment and management

6.4. Model 1.1: Central Government Owned Model:
Based on an analysis of global deployments and industry
High level of central government participation
inputs, there are primarily seven investment models as
and use of BSNLs existing fibre assets will reduce
illustrated in the exhibit 6.3 below.
coordination and setup time
While all the seven investment models are applicable
In this model, the central government (through BSNL) will
for core and middle mile infrastructure deployment,
own and deploy the additional fibre infrastructure from
only six investment models are applicable (all except
blocks to villages with clear roll-out obligation to ensure
Incumbent Owned Government Supported SPV) for
timely deployment. The funding support to BSNL will
access infrastructure. However, the business models
be provided by the central government using USOF. The
and ownership of core / middle mile should be decided
various aspects of this model are illustrated in exhibit 6.4.
independently of the business models and ownership of

access infrastructure.
6.4.1. Pros of this model
Completely planned, funded and controlled by the

central government, eliminating business viability
issues
Does not require coordination and partnership among

multiple players to setup the new venture
Because of the involvement of central government,

getting right of way clearances and approvals should
not be an issue
In the case of core infrastructure, the additional backhaul

infrastructure deployed will be owned by one company
but shared among all the telcos that require backhaul
bandwidth to offer services. Also, the new backhaul
infrastructure will be integrated with the existing backhaul
assets across all service and infrastructure providers.
Exhibit 6.3: Potential Investment Models for Additional Fibre Deployment in India
Ownership
11
Investment
Investment
Models
Models
Ownership
Ownership
Public
Public Private
Private
22 Partnership
Partnership
(PPP)
(PPP)
33
Funding
1.1
1.1
Central Government
Owned Model
1.2
1.2
State Government or
Municipality Owned
State Govt
or Municipality
(Core)
Telcos (Core and

access)
Central / State
Govt / USOF /
Municipality
1.3
1.3
Incumbent Owned
Govt Supported SPV
Central Govt
& BSNL (Core)
SPV (Core)
Central
Government /
USOF & BSNL
2.1
2.1
Jointly Funded & Owned

SPV Telco Led
BSNL (Core and

access)
Central
Government
Telcos and Central

SPV (Core and
Govt (Core and
access)
access)
Central Govt &

Public / Private
Operators
Central Govt &

Telcos (Core and
access)
SPV (Core and

access)
Central Govt &

Public / Private
Telcos
3.1
3.1 Subsidies, Private Owned
Public / Private
Telcos (Core and
access)
Public / Private
Telcos (Core and
access)
Central Govt &

Public / Private
Telcos
3.2
3.2
Public / Private
Telcos (Core and
access)
Public / Private
Telcos (Core and
access)
Central
Government
Jointly Funded & Owned
2.2
2.2 SPV Government Led
Government Loans &
Financial
Financial
Incentives
Incentives
Deployment
Central Govt
(Core); BSNL
(Access)
Reverse Auctions
Potential Deployment Models for India 32
BSNL can leverage its fibre infrastructure deployed up

to the block level, enabling faster network rollout
Planned, funded and controlled by the central and

state government eliminating business viability issues
Since the state government and municipalities will be

involved, right of way clearances and approvals should
not be an issue
6.4.2. Cons of this model
Speed of deployment by BSNL may be slower because

of government policies and procedures associated with
planning, tendering and execution
Assigning the infrastructure deployment responsibilities to BSNL with funding support from USOF will
provide significant advantage to the incumbent and
might infringe the level playing field right of other
operators
6.5. Model 1.2: State Government or Municipality
Speed of rollout by state governments / municipalities

could be a concern as they have limited knowledge
of the telecom infrastructure and might take time to
execute, given the complexities
Utilization / integration of existing fibre infrastructure

will be dependent on the level of operator interest
Selection and fi nalization of implementation partners

(sub-contractors) may take time due to tendering
process on a state by state basis
Owned Model Involvement of state governments

and municipalities will ensure faster approval of RoW
and other clearances
In this model, the state governments or municipalities
6.6. Model 1.3: Incumbent Owned, Government
will own the new fibre infrastructure. A majority of the
Supported SPV Consolidating assets of all PSUs
funding will be provided by the central government /
will ensure higher utilization of existing fibre
USOF (60%), while the state governments / municipalities
infrastructure
will contribute the remaining amount. However, the state

government / municipalities will sub-contract the actual
In this model, a Special Purpose Vehicle (SPV) led by
laying and deployment of fibre infrastructure to vendors
the incumbent operator, BSNL, will be created which
through tendering process. The various aspects of this
will own the combined existing backhaul assets of PSUs
model are illustrated in exhibit 6.5.
such as BSNL, RailTel, POWERGRID and GAILTEL.
Exhibit 6.4: Model 1.1 Central Government Owned Model17

1.1
1.1 Central Government Owned Model
Ownership
Block
Village
BSNL
Infrastructure
Deployment
BSNL owns the infrastructure

Government will put a rollout
obligation
Tender Based
Block
Village
Infrastructure
Private
Vendors
BSNL will select the equipment

vendors and service providers (circle /
region wise) through tender process
(Circle / Region Wise)
Funding
INR 17.5K croresa
USO Fund
BSNL
INR 13.5K croresb
Central government will provide the

funding to BSNL for deployment of
core infrastructure and towers

17
a. Indicates investment required for core / middle mile deployment; b. Indicates 5 year investment required for access network deployment with tower coverage radius of 5 Kms
Additional fibre deployments will be done by this SPV
providers for providing broadband services. The various
through sub-contracting the work to vendors. The
aspects of this model are illustrated in exhibit 6.6.
funding requirement for rolling out additional fibre
will be provided by USOF with a mandate from the
government to lease this infrastructure to all the service
Completely planned and funded by the government,

eliminating business viability issues
Exhibit 6.5: Model 1.2 State Government or Municipality Owned Model18

1.2
1.2 State Government or Municipality Owned
Ownership
Block
State Govt.
/ Municipalities
Village
Infrastructure
Deployment
Individual state government /

municipalities will own the
infrastructure
Tender Based
Block
Private
Operator
Village
Infrastructure
Individual state governments will

select private operators who will
deploy infrastructure
State Govt / Municipality
Funding
60%c
GoI /
USOFa
40%
SG/Mb
State Govt.
/ Municipalities
Jointly funded by central government /

USOF and state governments /
municipalities
Exhibit 6.6: Model 1.3 Incumbent Owned, Government Supported SPV19

1.3
1.3 Incumbent Owned, Govt. Supported SPV
Ownership
Block
Village
SPVa
BSNL and other PSUb will divest their

assets to create a new SPV with
proportionate equity
BSNL will merge its access
infrastructure to the SPV
Village
SPV
SPV will deploy the required core and

SPV
USOF will provide the additional

funds to the SPV for infrastructure
deployment
Infrastructure
Deployment
Block
Infrastructure
Funding
100%
USOF

18
19
a. Universal Service Obligation Fund; b. State Government / Municipality; c. Assuming central government will contribute 60% of the required funds
a. Special Purpose Vehicle; b. Include RailTel, GAILTEL, and POWERGRID
Because of government participation, getting right of

way clearances and approvals should not be an issue
High level of existing infrastructure utilization with

consolidation of backhaul assets of all PSUs such as
BSNL, RailTel, POWERGRID and GAILTEL
the remaining funds will be provided from the USOF. The

operator with the maximum existing infrastructure in a
particular region / circles is expected to bid the most as they
would need the least funding and would want to utilize their
existing assets. The operator deploying the infrastructure
The pre-execution process of merging separate assets

from PSUs may take time
Speed of deployment by the new entity may be slow

because of legacy operations and tender based selections
of vendors and execution partners
will get access to a defined share of network capacity for their

own internal usage. The various aspects of this model are
illustrated in exhibit 6.7 (Detailed description of this model
has been provided in the Section 7.3.3 of Chapter 7).
6.7.1.
6.7. Model 2.1: Jointly Funded and Owned by SPV
Relatively faster deployment due to the involvement of

private operators
Government will offer rights to use a proportion of

network capacity free of cost to incentivize private
participation
Government will facilitate right of way and regulate

the use of infrastructure through policy guidelines
Provides equal opportunity for all licensed telecom

operators to participate, including government-owned
and private
(Telco Led) Involvement of telcos as a majority

stakeholder in the SPV may lead to faster network
deployment
In this model, an SPV led by an operator will be created
which will own and deploy the additional infrastructure on a
regional or circle wise basis. The operator will be the majority
shareholders of the SPV, while the government will hold the
remaining stake. The operator for each region / circle will be
selected by the government based on the highest bid (equity
Pros of this model
contribution) for deploying the additional backhaul, while
Establishing the ownership structure could take an

extended period of time
Exhibit 6.7: Model 2.1 Jointly Funded and Owned by SPV Telco Led 20
2.1
2.1 Jointly Funded & Owned SPV Telco Led
Ownership
Block
Village
Infrastructure
SPV
Different telcos will be involved and

own the infrastructure along with
government
Deployment
Tender Based
Block
Village
Infrastructure
SPV
Central government will select the

telco (circle / region wise) through
bidding process
Funding
Telco
SPV
USOF
/ GoIa
Majority funding by central

government and partial funding by
telco for infrastructure deployment
Equity generated through bidding

20
a. Includes governments contribution in the SPV equity and the USOFs contribution to fill the gap between total funds required and the funds generated through creation of PV
Interest level of private operator for a stake in the SPV

may be limited because even after subsidy, return on
investment in the near term will be challenging
Potential network duplication as only one operator

per region deploys the network without collaboration
with others
Process of creating of a separate company may take time
Interest level of private operators for a small stake in the

SPV may be low because of unviable business case in
rural areas and lack of control
Speed of rollout may be slower because of of government

policies and procedures associated with planning,
tendering and execution
Potential network duplication as only one operator per

region deploys the network without collaboration with
others
6.8. Model 2.2: Jointly Funded and Owned by SPV

(Government Led) Telcos as stakeholders in the SPV
may facilitate deployment, but government majority
ownership likely to present hurdles
In this model, an SPV will be created with government
as the majority and private operators as the minority
stakeholders. This SPV will then own and deploy the
additional fibre infrastructure. The various aspects of
this model are illustrated in exhibit 6.8.
Both government and private sector will jointly plan,

fund and control the new company
Because of the involvement of government as a majority

stakeholder in the SPV, getting right of way clearances
and approvals should not be an issue
6.9. Model 3.1: Government Loan / Subsidies, Private

Owned Limited government support is not expected
to generate interest among private operators for fibre
deployment in rural areas
In this model, the additional fibre infrastructure will be owned,
deployed and funded by the operators while the government
will support such rollout through easy / interest free loans
and subsidies. Any operator / service provider can deploy
the infrastructure as per their focus / preference areas across
the country and claim the benefits from the government. The
various aspects of this model are illustrated in exhibit 6.9.
Exhibit 6.8: Model 2.2 Jointly Funded and Owned by SPV Government Led 21
2.2
2.2 Jointly Funded & Owned SPV Govt Led
Ownership
Block
Village
Infrastructure
Deployment
SPV
Central government and private

operators will own the infrastructure
Tender Based
Block
Village
Infrastructure
SPV
New company will deploy the

infrastructure
SPV
Central government and private

sector companies
will invest in the new company for
Funding
GoI /
USOFa
Telco
Equity generated through bidding
21
a. Assuming central government will invest majority in the new company
Exhibit 6.9: Model 3.1 Government Loan / Subsidies, Private Owned
3.1
3.1 Govt. Loans / Subsidies, Private Owned
Ownership
Block
Village
Infrastructure
Public
or Private
Operators
Respective public and private sector

operators will own the fibre
infrastructure
Deployment
Block
Village
Infrastructure
Public
or Private
Operators
Respective public and private

operators will deploy the infrastructure
Funding
Zero Interest Loans

Public Operators
GoI
Private Operators
GoI will provide the zero or low

interest loans / subsidies to the public
and private operators
Low Interest Loans
Exhibit 6.10: Model 3.2 Reverse Auctions

3.2
3.2 Reverse Auctions
Ownership
Block
Village
Infrastructure
Public
or Private
Operators
Central government will conduct circle

wise reverse auctions to select an
operator; Infrastructure will be owned
by the circle wise service providers
Deployment
Block
Village
Infrastructure
Public
or Private
Operators
Public or private operators will deploy

the fibre infrastructure
Funding
GoI
Public
or Private
Operators
Central government will provide

subsidies to the operators who will
win the reverse auctions
6.9.1.
Pros of this model
Fast and efficient deployment of the infrastructure due

to the involvement of private sector companies
Lack of interest among private companies due to poor

business case
Partial government support will not cover the business

viability issues for the private sector companies to
deploy the infrastructure and the dispersal of incentives
may take time
Obtaining right of way clearances or individual state

level government approvals will be an issue, especially
in this case where the implementation is done by
private operators
Low level of existing backhaul infrastructure utilization

/ integration
Existing model and structure, so can quickly start

auction process
Fast and effective deployment of the infrastructure can

be dictated based on rollout milestones and associated
penalties for missing them
Without government control, private operators may

not stick to the timelines, as evident from some past
USO funded projects
Obtaining RoW clearances or individual state level

government approvals will be an issue mainly in cases
where the implementation is done by private operators
Low level of existing backhaul infrastructure

utilization / integration
6.10. Model 3.2: Reverse Auctions Th is model does

not leave the government with much direct control
but is quick to implement and execute
This model is similar to the reverse auction model
currently adopted by the USOF for rcecent deployments
in rural areas. In this model, the central government
will conduct circle-wise reverse auctions for rollout of
additional infrastructure and will select the operator that
bids for the lowest support. The winning operator will
then invest the remaining amount to own and deploy
the infrastructure. The various aspects of this model are
illustrated in exhibit 6.10
7
Evaluation of Deployment
Models and Operational Plan
Evaluation of Deployment Models and

Operational Plan
Based on evaluation of various investment models, Central Government Owned,
Incumbent Owned Government Supported SPV, and Jointly Funded & Owned
SPV Telco Led models appear most suitable for Core Infrastructure deployment.
For Access Infrastructure deployment, Government Subsidies (directly to end
users), and Reverse Auction models appear to be the most suitable
7.1. Evaluation of potential investment models based

on the parameters of level of government involvement,
time of deployment and infrastructure requirement
The investment models discussed in the Chapter 6 need
to be evaluated based on key parameters such as level
of government participation, time to rollout, structural
establishment, ability to drive right of way clearances /

approvals and level of utilization of existing networks,
which are critical for successful and timely deployment of
the additional fibre infrastructure and thereafter efficient
utilization of this new infrastructure. Exhibit 7.1 illustrates
these parameters in detail along with their definitions and
the level of criticality.
Exhibit 7.1: Parameters for Evaluating Various Investment Models22

Evaluation Parameters
Parameter Definition
Level of Government
Participation
Extent of government participation in the investment models in terms

of committed funds, policy support and ownership
Time to Rollout /
Deployment
Time required for physically rolling out the core / middle mile and access network
Structural
Establishment
Time for getting the investment model operationalized e.g. setting up

of an SPV
Ability to drive required approvals from the state government and mua
nicipalities for deployment, especially the RoW approvals for core network
Existing (backhaul & tower) infrastructure of service providers till

the village level to be utilized for maximum coverage and to avoid
duplication
Ability to Drive
Approvals
Utilization of Existing
Infrastructure
Legend: Level of Criticality : Very High
High
Level of Criticality
Medium

22
a. Right of Way applicable only for core / middle mile deployments
7.2. Based on evaluation of various investment

models across these parameters, three models have
been shortlisted for core and two models for access
All the seven investment model options, as discussed in
chapter 6, were evaluated on the basis of key parameters
(level of government participation, time to rollout, structural
establishment, ability to drive right of way clearances /
approvals and level of utilization of existing networks) along
with criticality of these parameters necessary for efficient
additional backhaul and access infrastructure deployment
and effective operations of the new entity. A high level
comparative analysis is illustrated in exhibit 7.2.
Based on the above comparative analysis, Central
7.3. Operational Plan for Suitable models for Core /

Middle Mile Infrastructure Deployment
7.3.1.
Operational Plan for Central Government Owned Model
The operation plan for the Central Government Owned

Model for core / middle mile infrastructure deployment is
as illustrated in the exhibit 7.3.
Setup of the Company: Central government will

mandate BSNL to extend its backbone network to
250,000 Gram Panchayats. The deployed pan-India
backbone will be an asset of BSNL, with a mandate
to share the infrastructure with other industry
participants at fair terms governed by TRAI
Infrastructure Rollout: Government will use

the USOF to provide BSNL with funds of ~ INR
Government owned, Incumbent Owned Government
17,500 crores for deployment of 301,000 RKms
Supported SPV, and Jointly Funded & Owned SPV Telco
of required backhaul network. BSNL will follow
Led models appear to be the most suitable for deployment
a standard tender process to procure active and
of additional backhaul infrastructure in India. For access
passive network components at central level and hire
infrastructure deployment, Government Subsidies (directly
service providers to deploy network at regional level.
to end users) and Reverse Auctions models appear to be
Government will determine the network rollout
most suitable.
obligation and link release of funds with completion
Exhibit 7.2: Identification of Most Suitable Investment Models for India
Financial
Incentives
PPP
Ownership
Investment Model
Level of
Government
Participation
Time to
Rollout /
Deployment
Central Govt. Owned

Model
State Govt. or
Municipality Owned
Incumbent Owned
Govt. Supported SPV
Jointly Funded &
Owned SPV Telco Led
Jointly Funded &
Owned SPV Govt. Led
Govt. Loans / Subsidies,
Private Owned
Reverse Auctions
Legend: Level of Criticality : Very High
High
41 Evaluation of Deployment Models and Operational Plan
Medium
Structural
Establishment
Ability
to Drive
Approvals
Utilization
of Exiting
Infrastructure
Potential
Models for
Core
Potential
Models for
Access
3
2
3
3
2
2
2
2
2
NA
2
2
3
3
of the rollout milestones and will also facilitate right

of way to enable faster network rollout
Operations and Management: BSNL will operate the

infrastructure, through its existing in-house network
operations team. TRAI will regulate the operations
by setting guidelines around non-discriminatory
usage of network and interconnection, and setting
carriage bandwidth charges. Revenue sources for this
additional fibre network will include network leasing
to other service providers for backhaul capacity, and
services provided directly to the end customers and to
shared access centers
The operation plan for the Incumbent Owned, Government

Supported SPV Model for core / middle mile infrastructure
deployment is illustrated in exhibit 7.4.
7.3.2. Operational Plan for Incumbent Owned, Government

Supported SPV Model
Setup of the Company: Government will divest

BSNLs backhaul assets to create a separate entity and
will mandate other PSUs such as GAILTEL, RailTel
and POWERGRID to combine their assets with this
SPV. This entity will focus on the wholesale market for
telecom carriage services. BSNL will own the majority
stake in the SPV with other PSUs owning an equity
stake determined based on their contribution to the
total assets. The deployed pan-India backbone will be an
asset of the new SPV and will be available for access to
other service providers on a non-discriminatory basis
Exhibit 7.3: Operational Plan for Central Government Owned Model (Core Infrastructure)23
1
Setup of the Company
Infrastructure Rollout
Company Ownership Structure
Execution Model
Operations & Management

Revenue and Operating Model
100%
Passive Component
Providers
GoI
Mandate for
rollout of panIndia Backbone
Telcos (2G, 3G, 4G)

Backhaul
BB connection provided
to Gram Panchayat
BH
Active Component
Providers
Private
vendors
by region
SH
Turnkey Service
Providers
Exhibit 7.4: Operational Plan for Incumbent Owned, Government Supported SPV Model (Core Infrastructure)24
11
22
33
Execution Model

O
SPV
Retail
Separate entities
under BSNL
SPV
Passive Component
Providers
Turnkey Service
Providers
Telcos (2G, 3G, 4G)

Backhaul
to Gram Panchayat
BH
Active Component
Providers
Private
vendors
by region
SPV
SH

23
24
a. BH: Backhaul; b. SH: Shared Access

a. BH: Backhaul; b. SH: Shared Access
Evaluation of Deployment Models and Operational Plan 42
Infrastructure Rollout: The new SPV will be provided

with a grant of INR 17,500 crores from USO fund for
the deployment of backhaul network. Network will be
deployed by private vendors identified by the SPV. The
SPV will follow a standard tender process to procure
active and passive network components at central level
and hire service providers to deploy network at regional
level. Government will regulate the timely deployment
of network by issuing rollout obligations for the SPV
by region and link release of funds with completion
of the rollout milestones. Government will facilitate
RoW to enable faster network rollout
Operations and Management: The SPV operations

and routine management will be governed by a
management committee, with representatives from
the PSUs, as well as the government. TRAI will
regulate the operations by setting guidelines around
non-discriminatory usage of network and interconnection, and setting carriage bandwidth charges.
Revenue sources for this additional fibre network will
include network lease to other service providers for
backhaul capacity, services provided directly to the
end customers and to shared access centers
Parent SPV (100% owned by Government of India)

and will determine the number of Subsidiary SPVs
to be created (based on number of regions carved out
for deployment) and the exact equity split for them
(e.g. telco vs. government as 74%:26%). The parent
SPV will own assets, while the subsidiary SPV will
receive Irrefutable Rights of Usage (IRU) for the
deployed infrastructure. The total viability gap will
be predetermined on a regional basis. An auction will
be conducted at a regional level to determine the telco
partner and equity contribution for subsidiary SPV.
The remaining equity contribution to the subsidiary
SPV will be made by the Government, in the ratio
determined above
subsidiary SPVs will be supplemented with grant

from the USO fund to aggregate the total funding
requirement of INR 17,500 crores for the backhaul
backbone. Being a majority stakeholder in the SPV, the
telco will lead the infrastructure rollout. Government
will regulate the timely deployment of network by
issuing rollout obligations for the SPV, penalty for
not meeting those would range from fees to loss of
equity share in the SPV over time. The government
7.3.3. Operational details for Jointly Funded and Owned SPV

Telco Led Model
will offer rights to the telco to use a pre-determined

share (~ 30%) of network for free usage internally. The
The operation plan of the Jointly Funded and Owned SPV

Telco Led Model for core / middle mile infrastructure
deployment is illustrated in the exhibit 7.5.
Infrastructure Rollout: The paid-in equity for the
remaining bandwidth will be leased on commercial

terms to external customers with revenues accruing to
the Subsidiary SPV. Government will facilitate RoW
to enable faster network rollout
Setup of the Company: Government will create a
Exhibit 7.5: Operational Plan for Jointly Funded and Owned SPV Telco Led Model (Core Infrastructure)25
11
22
33
Execution Model

Government Owned
(Owns the assets) Parent
SPV
Subs
SPV1
Subs
SPV2
Subs
SPV3
Equity generated
through creation
of SPV
Owns Irrefutable Rights of Usage

and deploys infrastructure
Funds for
Network Rollout
Government
subsidy for the
network rollout

25
Telcos (2G, 3G, 4G) and

ISPs
to Gram Panchayat
USO Fund
SPV
Jointly owned by
Telcoc and GoI in a
pre-determined ratio
(e.g. 74%:26%)
BH
a. BH: Backhaul; b. SH: Shared Access; c: Telco can either be a private operator such as Airtel or PSU operator such as BSNL
SPV
SH
administration based on the average affordability

levels per household. Initial subsidy will include access
device and installation costs, with service charges to
be subsidized for up to 5 years
Operations and Management: The subsidiary SPV

operations and routine management will be governed
by a management committee, with representatives
from the telco, as well as the government. TRAI will
regulate the operations by setting guidelines around
non-discriminatory usage of network and interconnection, and setting carriage bandwidth charges.
Revenue sources for this additional fibre network will
include network leasing to other service providers
for backhaul capacity, and services provided directly
to the end customers and to shared access centers.
Owners may be allowed to withdraw dividends if and
when the subsidiary SPV is profitable
Infrastructure Rollout: Telcos with existing license

to roll-out the rural infrastructure using their own
funds. It is expected that more than one telco in a circle
will ensure better QoS from competitive pressures as
end users will have the right to select the telco of their
choice
Operations and Management: The operations and

routine management will be governed by the telco
management only. TRAI will regulate the operations
by setting guidelines for rural broadband tariffs.
Revenue sources for the telcos will include services
provided to retail subscribers directly through
residential connections, shared access centers such as
CSCs and to business (enterprise / SME) users
7.4. Operational Plan for Suitable models for Access

Infrastructure Deployment
7.4.1.
Operational Plan for Government Subsidies (Directly to

End Users) Model
The operation plan for the Government Subsidies (Directly

to End Users) Model for access infrastructure deployment is
as illustrated in the exhibit 7.6.
Subsidy Distribution: Government (USOF) will

provide subsidy to rural end users at a pre-determined
rate on a per household basis. Th is subsidy can
be transferred directly to the end users account
through mobile banking with authorization to be
subjected to UID authentication. End users will
then use the money to get the required broadband
connection through service providers of their choice.
The level of subsidy will be determined by the USOF
7.4.2. Operational Plan for Reverse Auction Model
The operation plan for the Reverse Auction Model for

access infrastructure deployment is as illustrated in the
exhibit 7.7.
Subsidy Distribution: Government (USOF) will

carry out the reverse auction on a per circle basis with
the maximum level of subsidy to be predetermined
on a per circle basis. Only telcos with existing ISP /
UASL license will be allowed to bid in the auctions
and the lowest subsidy bidder will get the required
Exhibit 7.6: Operational Plan for Financial Incentive (Direct Subsidy to End Users) Model (Access Infrastructure)26
Subsidy Distribution
Distribution Structure
Execution Model
USOF
Rural
Households

Circle
Telco
User
1
User
2
User
3
Existing
Telcos
Telco
1
RESa
BB connections provided
to residential subscribers
GIb
to Govt Institutions
BUSc
to enterprises / SMEs
Telco
2
Owns the right to select the

service providers of its choice

26
a. RES: Residential customers; b. GI: Government institutions such as schools and hospitals; c: BUS: Business users
USOF support. The telco will own the assets and

will thus have the right of usage for the deployed
access infrastructure. Moreover, the government will
mandate sharing of the access infrastructure with
other industry participants, through open access
agreements, at terms governed by TRAI
which would be revoked in steps if the winning party

misses rollout milestones, up until the total guarantee
amount is exhausted. After this the government
revokes the deployment rights and hands over the
same to another telco through a fresh auction
Infrastructure Rollout: USOF will provide the

minimum support required for roll-out to the telco
on an annual basis based on the pre-determined
infrastructure roll-out obligation. The subsidy provided
by USOF will be used for access infrastructure as
well as end user devices. Telcos emerging winners
in the auction process will be required to submit a
bank guarantee (as a percentage of the total bid value)
Operations and Management: The operations and

routine management will be governed by the telco
management only. TRAI will regulate the operations
by setting guidelines for rural broadband tariffs and
QoS. Revenue sources will include services provided
to retail subscribers directly through residential
connections, shared access centers such as CSCs and
to business (enterprise / SME) users
Exhibit 7.7: Operational Plan for Reverse Auction Model (Access Infrastructure)27
1
Execution Model

USOF
Telco
Telco
1
Telco
2
Telco
3
Funds committed by
Telco
Owns the access infrastructure
Funds for
Network Rollout
Government
subsidy for the
network rollout

27
a. RES: Residential customers; b. GI: Government institutions such as schools and hospitals; c. BUS: Business users
BB connections provided
to residential subscribers
GIb
to Govt Institutions
BUSc
to enterprises / SMEs
USO Fund
Telcos
Telcos with
Existing License
RESa
A
Annex A: Case Studies of
Global Broadband Deployments
Annex A: Case Studies of Global

Broadband Deployments
Generate adequate supply in terms of broadband

infrastructure, via various available technologies
A-1. Malaysia Case Study: In 2002, the government

kick-started broadband growth by deploying backbone
infrastructure, after which the market forces led the
growth
Stimulate demand to ensure efficient take-up of

broadband services via suitable content & applications
services and explore various funding mechanisms to
fi nance the project
Objectives and Targets for NBP:
Identify gaps in existing regulations, and where

necessary, introduce new policies to facilitate
broadband rollout
Key objective of developing nationwide broadband

network is to transform Malaysia into a communication
and multimedia global hub. Other objectives include:
Exhibit A-1: Malaysia Broadband Evolution Case Study

Phase 1
Network Deployment
Phase 2
Phase 3
Universal Access
and Welfare
National BB initiative (2002): Launch of National Broadband Initiative National BB initiative

National BB initiative
to deploy both core and access network
(2006): Launch of Bridging (2008): High Speed
Digital Divide (BDD) plan
Broadband network rollout
by government
11
35%
22
22
Malaysia
11
Leveraged USP funds to increase
usage through initiatives such as
development of broadband centers
and subsidizing netbooks
High
28%
National BB
initiative (2010):
Stimulate demand
of broadband
Government initiated deployment of

backbone (fibre) infrastructure through
public investments
~ 25%
Med - High
Med
21%
Increased coverage into

rural and low demand
areas in partnership with
private company ARL
HomeComm Sdn Bhd
14%
Level of
regulatory /
policy
Intervention
Built high speed

broadband network
rollout in economically
well-off areas through
Telkom Malaysia
~ 10%
7%
0%
2002
2003
2004
2005
2006
2007
2008
2009
National Broadband Speed Definition: 128 Kbps
Legend: Investment Model:
11 Ownership
22
Public Private Partnership
33 Financial Incentives
Source: Government Website, Analyst Reports, Analysys Mason
USD 6.1 bn with support from state development

bank, BNDES, and national fund for telecom
investments, Funntel
High level targets (as defi ned in 2002) include:

Total number of subscribers to reach 1.3 mn by 2006
and 2.8 mn by 2008; by end of 2010, Malaysia will
achieve 50% household broadband penetration
Optical fibre access to contribute 10% penetration for

broadband by 2010
A-2. Brazil Case Study: In Brazil, NBP (2010) is

focused on expanding broadband coverage & offering
affordable services in low demand areas
High level target include deployment of internet at

high speed in almost all Brazilian municipalities
(4,600) by 2014 and provide broadband services to
75% households
A-3. Japan Case Study: In Japan, government used

fi nancial incentives in the growth phase of industry to
develop core & access infrastructure
Objectives and Targets of Various Broadband Programs:
Key objective of developing national broadband plan is

to boost access to broadband Internet services among
low-income households. Other objectives include:
Revive the state owned telecom company, Telebras,

which will manage the additional fibre optic backbone
network of 23,000 RKms
u-Japan Policy (Dec 2004): Established to enable

ubiquitous connectivity, user friendliness and access
to unique content with a focus on development of
ubiquitous networks, advanced ICT usage, upgrading
enabling environment and technology strategies
Target: Provide ultra high-speed broadband to 90%
households by 2010
Telebras will also support public policies to provide

internet broadband for universities, research centers,
schools, hospitals, care centers, community telecentres
and other points of interest
Between 2010 to 2014, the government plans to invest
IT New Reform Strategy (Jan 2006): The government

established the IT New Reform Strategy as none of
the previous policies were focused on the same. The
Exhibit A-2: Brazil Broadband Evolution Case Study

Phase 1
Phase 2
Network Deployment
Backbone Infrastructure Development: Service providers led

National Broadband Plan (2010): Government launched the NBP to develop
network deployment with government enabling state owned service additional backbone infrastructure through Telebras and provide affordable
providers in infrastructure deployment
access and expand broadband coverage through leveraging existing
infrastructure in almost all municipalities. Government will provide an investment
of USD 6.1 bn primarily supported by state development bank BNDES and
national fund for telecom investments, Funntel
11
30%
Brazil
22
Reestablishing state owned
Telebras to operate the backbone
network with private companies
providing services to end users
25%
High
20%
15%
10%
5%
Medium
Some of the state governments
relaxed tax rates levied on the
operators to enable them offer
affordable broadband services
~ 10%
Development of backbone
infrastructure was driven by
initiatives from service providers
Low
0%
2004
2005
2006
11 Ownership
2007
22
2008
Source: ITU Database, Industry Reports, Government Websites, Analysys Mason
49 Annex A: Case Studies of Global Broadband Deployments
2009
Level of
regulatory /
policy
Intervention
Exhibit A-3: Japan Broadband Evolution Case Study

Phase 1
Phase 2
e-Japan Strategy II (2003): U-Japan Policy (2004):

Development of applications Launch of next generation
and effective usage of IT
ICT strategy for ubiquitous
connectivity
33
68%
Network Deployment
e-Japan Strategy (2001):
Development of core and
Phase 3
33
Japan
IT New Reform strategy

i-Japan Strategy 2015:
(2006): IT initiative to bridge Stimulate demand through
the urban and rural divide
development of digital
infrastructure and services in
governance, healthcare,
education and HR
33
33
11
22
High
51%
34%
Mandated NTT to
share its fibre optic as
well as access
infrastructure at low
prices to enable
competition
Provided financial
incentives to private
broadband service
providers
Provided financial
incentives to private and
public sector companies
to upgrade the existing
infrastructure for
ubiquitous connectivity
~ 50%
Med - High
Med
Provided financial
incentives to all
broadband service
providers
17%
~ 10%
Provided grants to local

governing bodies to
establish NGN
companies to bridge
the rural and urban
divide
Enabled development
of digital infrastructure
through public and
private sector
companies
2006
2008
Level of
regulatory /
policy
Intervention
0%
2000
2001
2002
2003
2004
11 Ownership
2005
22
2007
2009
Source: OECD, Analyst Reports, Government Websites, Analysys Mason
key focus areas was to solve social problems through

utilizing ICT & included 15 areas such as environment
and e-government services
A-4. Russia Case Study: In Russia, the focus has been

on enabling government services through development
of ICT infrastructure
Target: Provide broadband services to every household

by 2010
Objectives and Targets of e-Russia Initiative:
Th ree Year Emergency Plan (April 2009): Th rough this

initiative, government planned to implement economic
stimulus measures that utilize ICT
Target: Promotion of key projects by digital special
zones and vitalization of industries/communities
and development of new industries & digital
infrastructure
i-Japan Strategy (July 2009): Established the strategy to

cover whole economic system enabling a high standard
of living & connecting people. The three priority areas
includes e-government (national/local), medicine/
healthcare & education/human resources
Target: Establish broadband infrastructure - Over
100 Mbps for mobile, 1 Gbps for fi xed by 2015 along
with information security measures
The initiative was launched in 2002 (investment ~

USD 2.1 bn) with primary objectives to ICT enable
the administration and state management operations.
Th is included improvement in ICT regulation and
development of various G2G, G2B, G2C services and
High level target of e-Russia initiative includes:

Improve efficiency of Russian economy, government
and regional management by increasing ICT usage
Facilitate civil society development via free access to
information
Increase number of IT specialists and IT competent
users
Annex A: Case Studies of Global Broadband Deployments 50
Exhibit A-4: Russia Broadband Evolution Case Study

Phase 1
Phase 2
Network Deployment
Backbone Infrastructure Development: Government enabled infrastructure deployment through
state owned service provider Rostelecom
E-Russia Initiative (2002): Launched in 2002 (investment ~ USD 2.1 bn) with primary objectives to
ICT enable the administration and state management operations. This included improvement in ICT
regulation and development of various G2G, G2B, G2C services and access infrastructure
11
30%
22
22
BB penetration remains
limited to larger cities only
with no initiatives taken
by government yet to
offer universal access
25%
High
20%
Russia
E-Russia initiative continued with

governments increased focus on G2G
services
Launched e-Russia
initiative with 50% of the
investment sourced from
private investors
Government deployed backbone infrastructure

through state owned Rostelecom and railways
owned Transtelecom
Level of
regulatory /
Government continued its policy
Intervention
e-Russia initiative to
15%
stimulate further demand
~ 10%
10%
5%
0%
2002
2003
2004
2005
2006
11 Ownership
22
2007
2008
2009
Source: ITU Database, Industry Reports, Government Websites, Analysys Mason
Exhibit A-5: Australia Broadband Evolution Case Study

Phase 1
No Government
intervention
Phase 3
Universal Access
and Welfare
Network Deployment
National Broadband
Strategy (2004): Launched
policy framework for
broadband development
Connect Australia (2005):

Australia Connected (2007):
Expand broadband to rural
Deliver fast affordable
areas & roll out new networks broadband access.
Government allocated.
Cancelled in 2008
33
75%
Phase 2
22
22
National Broadband Network

2009: Design, build and operate
the wholesale-only open access
NBN
22
Australia
Established a new company (partly

owned by government and private
sector) to build and operate the
National Broadband Network
Med-High
50%
50%
Med
25%
Level of
regulatory /
policy
Intervention
Med
Provided funding, grants

and incentives, through
multiple programs, to
private sector for various
initiatives including
broadband infrastructure
development
Provided funds to private

sector & other existing
carriers to deploy improved
infrastructure in remote
areas & enhance wholesale
competition
Provided funds to a private

company (in addition to its
own investment) for rollout
of the new fibre network
~ 15%
~ 1%
0%
2002
2003
2004
2005
2006
2007
2008
2009
11 Ownership
22
Source: OECD, Industry Reports, Government Websites, Analysys Mason

Access to Retailers: Provide equal, wholesale access

to retailers enabling them to deliver advanced digital
services and applications
A-5. Australia Case Study: Broadband market in

Australia has been developed under the PPP model
supported by fi nancial incentives from government
A-6. United States Case Study: Government role in

the US is limited to providing access to un-served
households and new service development to drive
adoption
The National Broadband Plan (2009) was created with

the primary aim of improving Australias productivity,
economic prosperity and service delivery in the areas
of education & healthcare and combating the impact
of climate change
Government focus was on reforming the current telecommunication regulatory regime which has been in
place since 1997, and the competition regime, which
was due for review in 2009
With the new network and competition reforms,

government is expecting an increase in competition
leading to lower prices and better quality of service
In US, the National Broadband Plan (2010) was

developed to bridge the existing gaps and to address
unrealized opportunities in broadband by ways
through which government can encourage private
investment, innovation, lower prices and better options
for consumers
High level targets include:

Broadband Access: Affordable access to 50:20 Mbps
actual download and upload speeds for at least 100
mn US homes by 2015
High level targets include:

Broadband Access: Wholesale-open access broadband
coverage to 90% of households with speed of 100 Mbps
using FTTP and 12 Mbps to 10%, using next generation
wireless & satellite technologies by 2018
Wireless Broadband Innovation: Lead global mobile

broadband innovation with fast and extensive
networks
Transform Economy: Directly support ~ 25K local jobs

every year, on average, over the eight years (2010-2018)
Affordable Access to Individuals: Access for all to
Exhibit A-6: United States Broadband Evolution Case Study

Phase 1
Phase 2
Phase 3
Network Deployment
Demand Stimulation and Welfare
Private owned internet backbone infrastructure: Private sector companies such as Comcast, AT&T and
Verizon manage the internet backbone (fibre) infrastructure in the US
Initially it was developed by the government agency National Science Foundation (NSF) for government
use, but was handed over to private ISP association in 1995 for commercial use
National Broadband Plan (2010): Plan

to bridge existing gaps in broadband
coverage to address unrealized
opportunities through development of
new services and applications
United
States
Provide affordable 100 Mbps access to

least 100 mn US households by 2015
22
80%
60%
~ 50%
40%
Med
Level of
regulatory /
policy
Intervention
Provide grants and funds to

accelerate broadband
deployment and adoption
20%
~ 10%
Low
No intervention
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
11 Ownership
22
Source: OECD, FCC, NBP Website, Analysys Mason

Exhibit A-7: Korea Broadband Evolution Case Study

Phase 1
Phase 2
KII project phase 1

(1995 1997): Built
nationwide optical
backbone network
KII project phase 2 & 3 (1998 - 2005): Up-gradation and

expansion of existing national transmission networks
Broadband Convergence Network (BcN) : Widen

network bandwidth, upgrade converged transport network
of telecom, broadcasting and internet, integrate network
Broadband IT Korea 2007: Stimulate utilization of e-government
management and service / control network roll out, along
services
with provisioning of converged services
22
100%
Phase 3
Network Deployment
33
Korea
22
Med-High
80%
~ 80%
60%
40%
20%
Induced public sector

funding to enable KT and
Dacom to build the
infrastructure under PPP Size of government
investment decreased
model
and more investment was
Built test-bed network to made from KT and
support development of Dacom
new technologies and
Imposed obligations on
applications
KT to build 1 Mbps BB
network in low demand
areas
Level of
regulatory /
policy
Intervention
Med
Combined investments from

central government, local
government and private
sector under the PPP model
Extended financial benefits

and tax exemptions for the
private sector to expand
coverage and stimulate
demand
~ 10%
0%
1998
1999
2000
2001
2002
2003
11 Ownership
2004
22
2005
2006
2007
2008
2009
Source: Industry Reports, Government Websites, Analysys Mason

providers (NSP) investments in network deployment
around the nation
affordable, robust broadband, and the means and

skills to subscribe
Affordable Access to Anchor Institutions: 1 Gbps
services to anchor institutions (schools, hospitals and
government buildings)
Public Safety Network: Every fi rst responder to have
access to a nationwide Interoperable broadband public
safety network
Clean Energy Economy: Lead in clean energy economy
and track and manage real-time energy consumption
by all individuals
The first phase comprised of building nationwide

optical backbone network infrastructure
Second phase involved deployment of access

infrastructure and expanding coverage of backbone
infrastructure
The objective of the phase three was to upgrade and

expand the national transmission networks and ATM
switches
In Korea, Korea Telecom and Dacom were selected to

deploy the infrastructure with the government under
PPP model
A-7. Korea Case Study: The Korean government built

a national optic backbone in the initial stage, followed
by a facilitation role in the growth stage
The Korea Information Infrastructure (KII) project

had the following objectives:
Construction of high capacity backbone network
Facilitating research environments
Reducing the burden of facility-based service
A-8. Singapore Case Study: In Singapore, ownership

and PPP models have been adopted for deployment of
core and access infrastructure respectively
Objectives and Targets of Various Broadband Programs:
Next Gen NBN: Established in 2006, under the

iN2015 masterplan, as a strategic enabler of economic
& social growth, transforming the way people work and
Target: Provide 60% access for homes and businesses

to Next Gen NBN by 2010 and 95% by 2012
interact. The focus was to offer competitively priced,

ultra-high broadband speeds of up to 1Gbps (minimum
of 50 Mbps uplink and 100 Mbps downlink per end
user) and open access to attract service providers to
offer innovative services
Wireless@SG: Established in 2006 as a part of Next

Generation National Infocomm Infrastructure
initiative with a focus on to provide seamless wireless
Exhibit A-8: Singapore Broadband Evolution Case Study

Phase 1
Phase 2
Phase 3
Network Deployment
Singapore One Phase 1 (1997):

Singapore One Phase 3 (2002): Demand
Development of BB network using fibre
stimulation through development of services
backbone and combination of DSL, fibre and such as e-commerce and e-governance
cable for last mile
Singapore One Phase 2 (1998): Enabling
development of advanced applications &
services
11
150%
Singapore
Next Gen NBN (2006): Project under iN2015 master

plan to grow infocomm sector and to build a well
connected society. Includes deployment of
nationwide ultra high speed broadband access of
1Gbps+
22
22
High
120%
90%
Developed core
backbone and access
network in collaboration
with private players
Development of services and

applications through joint efforts of
multiple agencies such as IDA and
National Science & Technology Board
60%
Med
Developed infrastructure through
PPP model with two private
companies; one each for deploying
active & passive infrastructure
~ 50%
Level of
regulatory /
policy
Intervention
30%
~ 20%
0%
1998
2000
2001
2002
2003
2004
11 Ownership
22
2005
2006
2007
2008
2009
Source: Infocomm Development Authority of Singapore, Analysys Mason

Exhibit A-9: China Broadband Evolution Case Study
Household Broadband Penetration (%)

China
30%
Development of broadband
backbone infrastructure
20%
Launch of National
Information Infrastructure
Project (1997)
10%
11
11
Ownership
22
33
0%
2001
2003
2005
2007
2009

broadband access and Enhancing user experience and

driving the adoption of consumer / enterprise services
Target: Free wireless access in high human-traffic
areas, including Central Business District, shopping
belts & residential town centers until 2013
Intelligent Nation 2015 (iN2015): Th is is an initiative

by Infocomm Development Authority of Singapore
(IDA), to establish Singapore as an intelligent
nation and a global city. The focus of this initiative
is to transform lives and businesses, fuel competitive
enterprise, provide infrastructure and develop human
capital
Target: 90% home broadband usage, 100% computer
ownership in homes with school-going children and
create 80,000 additional jobs
A-9. China Case

Ownership Model
Study:
Adopted
Government
Development of backbone network infrastructure in

China was led by government owned service providers.
Government enabled broadband coverage up to large villages
by mandating the service providers. Its other initiatives
included launch of National Information Infrastructure, to
develop information networks for ministries, government
departments and state enterprises and stimulate demand of
broadband services.
A-10. Thailand Case Study: Expected to Implement

NBP through PPP Model
In 2006, government removed the obligation of Build
Transfer & Operate (BTO) model to enable private and
public operators to build and manage their own fibre
backbone infrastructure. There has been an increased
focus of regulatory body (NTC) to influence public &
private sector to deploy national fibre optic backbone in
low demand areas. NTC is in the process of identifying a
business model & developing an operational plan to deploy
the required infrastructure (estimated investment: USD
300 mn).
A-11. Ghana Case Study: In Ghana, NBP was

completely implemented by government
In 2007, government launched Wiring Ghana project
with the objectives of expansion of the fibre backbone
to facilitate broadband availability across country &
support e-governance program. The network is being
deployed by equipment vendors in two phases with
complete funding from government. Total cost of the
project is ~USD 250 mn, which partially supported by
loans from Government of China.
Exhibit A-10. Thailand Case Study: Expected to Implement NBP through PPP Model

Thailand
15%
12%
9%
Launch of National
Broadband Plan
6%
3%
22
0%
2004
2005
2006
2007
2008

2009
11
Ownership
22
33
A-12. Kenya Case Study: In Kenya, NBP was through

public private partnership
In 2006, government formed the National ICT policy to
enable affordable access to telecom & broadband services
across the country. Government initiated deployment
of fibre cable systems to improve bandwidth availability

& connectivity, in partnership with Telkom Kenya &
equipment vendors. In 2008, government invested ~USD
60 mn to form a separate company to develop the national
fibre backbone network in partnership with equipment
vendors.
Exhibit A-11: Ghana Broadband Evolution Case Study

Ghana
0.5%
0.4%
0.3%
Launch of Wiring
Ghana initiative
0.2%
0.1%
11
11
Ownership
22
33
0.0%
2004
2005
2006
2007
2008
2009
Exhibit A-12. Kenya Broadband Evolution Case Study

Kenya
0.5%
0.4%
Deployment of national fibre

backbone infrastructure
0.3%
0.2%
0.1%
22
11
Ownership
22
33
0.0%
2004
2005
2006
2007
2008
2009

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Deployment Models and Required

Investments for Developing Rural

A study conducted for Confederation of Indian Industry by

National broadband initiatives are being taken across

India needs to build a successful national broadband

The Indian Telecom Industry has witnessed

(core, middle and access) and to identify and address

Broadband will ride this data wave to help create the

Mr. Chetan Krishnaswamy, Dell Incorporation

Mr. Jaijit Bhattacharya, Hewlett-Packard India Sales Pvt Ltd.

Mr. Natesh Mani, Sify Technologies Ltd

Mr. Parag Kar, Qualcomm India Pvt Ltd

Mr. Saurabh Goel, Bharti Airtel Ltd

Mr. T V Ramachandran, Vodafone Essar Ltd

Mr. Marut Sen Gupta, Senior Director, CII

Mr. Anjan Das, Senior Director, CII

Ms. Arunima Sharma, Deputy Director, CII

key gaps and required investments: To assess the

Global Experience and Investment Models

To identify appropriate investment models for building

Phase 1 / Network Deployment: In the fi rst stage

Phase 2 / Ecosystem Development: In this stage

Th is study focuses on the following three areas which

Global experience and investment models: To

Status of the existing broadband infrastructure,

Potential investment models for broadband

applications and devices to increase household

Phase 3 / Universal Access and Welfare: Th is is the

Moreover, depending upon the role of the government

The ownership model has the highest level of

The PPP model has relatively lower level of

The financial incentives model defi nes governments

The above analysis of broadband evolution and

simultaneously in India to achieve the CII objective of 214

2. Status of the Existing Backhaul Infrastructure,

Includes tower rental of INR 15,000 per month for 5 years

3. Status of the Existing Broadband Access

the SPV (a new company with majority stake of

Apart from the core and middle mile network,

Government Led SPV: Owned, deployed and

In addition to the infrastructure, development of

4. Potential Investment Models for Broadband

Based on the direct / indirect involvement of central

Based on the role of private service providers, public

Special Purpose Vehicle

Based on the type of funding support from the

These seven models were compared and evaluated based

5. Operational Plan for Identified Investment

6. Operational Plan for Identified Investment

Each of the investment models for core

Each of the investment models for access

Central Government Owned Model: The central

Government Subsidies (Directly to End Users):

Incumbent Owned, Government Supported

Reverse Auction: Government (USOF) will carry

Jointly Funded and Owned SPV Telco Led

Based on the above analysis and recommended approach,

Unique Identification Number / Aadhar

Objective and Methodology

Overview of Broadband Services in India

Global Experience with Deployment Models for

Investment Required for Deployment of Backhaul

Investment Required for Deployment of Access