Internet Poll Verdict: Indian Broadband connections are expensive…but why ?

I had set up a poll a fortnight back on this to understand why Indian Internet penetration is lagging behind so much so that a country of size of Hong Kong beats India, even when we out number them in population by over a billion people. Obviously, one of the basic reason is that more than 70% of Indian still live in villages and are dependent on farming with no need of internet as yet what so ever.

But what about urban Indians? India has more than 250 million people living in cities, then why is it that we have only 3.5 million broadband connections to show?

Here is the Poll Verdict:

Out of total of 156 poll participants around 44% felt that Internet connections are expensive. I feel so too.

Lets compare Indian Internet broadband prices to that of U.S.

A 3 MBPS speed unlimited download broadband connection in US is available from ISPs like Comcast or Verizon at $29.99 or roughly Rupees.1200 per month. A 512 KBPS speed, unlimited download Internet connection from VSNL or Airtel or Reliance is available from Rs. 1499 or $37.5 to Rs.1799 or $45 per month. This is 6 times slower and 25 to 50 percent costlier than in US. In India, the monthly charge for a broadband connection accounts to 47 to 56 percent of the per capita income*, while it is less than 1 percent in the USA. Obviously, paying 1500 rupees in India is much much higher than paying 30 dollars in USA !

I fail to understand this overpricing in India. Especially, when the wages are a much lower than in the US – the minimum wage in US is approximately Rs.232 per hour, where as in India, it is only around Rs.25. Most Internet service providers in the USA built their infrastructure when the telecom equipment prices were at their peak several years back. Right now, Indian ISPs are able to purchase equipment at far lesser prices. I also do not feel that bandwidth costs to Indian Internet Service providers will be much different from their counterparts in U.S.

Than why do these Indian ISPs charge such exorbitant rates?

Essentially Indian ISPs have not passed the benefits of lower operating costs in India to the customers. Until such profiteering is indulged by ISPs, Internet prices will be beyond the reach of most Indian and Internet usage will not become common. You have to remember that mobile usage became viable for the common man only after both the mobile equipment prices and the mobile usage charges became one of the cheapest in the world. That led to the rapid growth of mobile users.

The most worrying aspect of lower penetration of Broadband connections is that Indian e-commerce is lagging. Indian online startups are finding it difficult to sustain due to lack of consumer interest.

I do not have any doubt that Internet connections prices will fall and we will see a surge in subscribers.

The question is WHEN?