Will The Licence Fee Cut Trigger A Price War Among Wired Broadband Service Providers In India?

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If you are someone who uses a wired broadband connection at home, then this may excite you much. In recent news, it has been found out that the Indian government is all set to greenlight a plan which will cut license fee on fixed-line broadband services to households.

According to the news reports, this particular proposal has been able to garner the complete approval of the Digital Communications Commission which the ultimate decision-making body in the Department of Telecommunications. Now, it is likely to be heading towards the Cabinet for its final approval this week.

People who are familiar with this ongoing engagement have informed that the Government is going to slash the license fee on the adjusted gross revenue earned from households for providing fixed-line broadband services to a 1 rupee per year per circle. Thus, close to Rs 5000 crores will have to be forgone by the Government when this plan comes into force. 

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Now, one important thing which needs to be taken note of is the fact that this plan won’t be making any changes in services provided to commercial users. This move by the Government probably banks on a 2019 report which stated that a 10% increase in fixed-line broadband internet can lead to an increase of 1.9% in gross domestic per capita

Until now, DoT aka the Department of Telecommunications has been minting about Rs 900 crore annually as licence fees from broadband services. This is something which is paid by operators at 8% of their adjusted gross revenue. Therefore, via this plan, the Government aims to help service providers widen their coverage at much lower costs.

Currently, the fixed broadband penetration in India is only at 6.1%, and this can be easily bumped up to more than double in the next few years. One can compare India’s current penetration level to that of China which has a whopping 86% penetration when it comes to fixed broadband. 

Players Who Stand To Gain The Most From This Plan

When it comes to broadband service providers, both in the wired and wireless category, the biggest players in India are the State-owned BSNL, Bharti Airtel, ACT Fibrenet and Reliance’s Jio.

As per the data from TRAI aka Telecom Regulatory Authority of India, there were 661.94 million broadband subscribers in India by the end of 2019. Nearly 97% of those are wireless broadband subscribers, and just 3% are on wired broadband lines, amounting to 19.14 million.

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Now, the wired broadband segment in the country is dominated by the State-owned BSNL with 8.23 million subscribers followed by Airtel with 2.43 million users. ACT, the third biggest player, had 1.54 million users. Hathway’s subscriber count stood at 0.92 million. Lastly, Reliance Jio’s wired broadband service JioFiber stood at the fifth position with the total number of wired broadband users pegged at 0.84 million as it was recently launched and still in its nascent stage. Besides these top five, there are many regional and small players as well who provide wired broadband services in various cities.

Analysts believe that even though all broadband players undoubtedly stand to benefit from this proposed fee cut, it is Jio which may end up reaping the most out of it. This is simply because it already offers lucrative offers and add-ons such as premium streaming services bundled with free high-definition televisions and set-top boxes for lifetime subscribers. Thus, the only question that now remains to be answered is – whether the wired broadband service providers will be extending this relief in government fees to its users by lowering the prices on their plans!

Only after the proposed license fee cut to broadband service providers becomes a reality we will come to know how exactly the benefits would be passed on to customers. The price war is already on and with the increasing consumption of home internet due to Covid-19 that has forced over 80% of employees to work from home, every broadband service provider wants to acquire as much market as possible in a short span of time. It would also be interesting to see which player reaps the maximum benefit from the proposed cut in license fees. Will this trigger another war price war – something similar to the one after the debut of Reliance Jio in the market. We leave you with some food for thought.

We will keep you updated on all future developments until then stay tuned.

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