Many players entered the broadband space with big promises. But Satyam Infoway, aka Sify, surprisingly adopted a wait-and-watch attitude. Today, while most other players are on the ropes, Sify has jumped ahead by signing up thousands of customers for its wireless broadband service. Srikanth R P analyses Sify’s strategy, which has made it a rare success story in the Indian broadband space

Around two years ago, as optic fibre cables were laid across the length and breadth of India as if there was no tomorrow, the broadband dream finally seemed to be coming true in these parts. Most players spoke of creating high-speed broadband networks that would be capable of handling vast amounts of data. Broadband Internet to the home seemed a lucrative market because of the estimated numbers. With over 35 million Indian households already possessing cable TV connections, broadband players calculated that even if a small percent of the cable TV population opted for unlimited and fast broadband access for a monthly fee of Rs 1,000 the windfall would be huge.

Hypnotised by this market ‘potential’, players of all hues—from cable TV guys to utilities to ISPs, began a frantic race to wire up India with optic fibre networks. Another option came in the form of Dishnet, which pushed the virtues of aDSL (asynchronous digital subscriber line) as the best form of broadband Internet access.

Amidst all this action, Sify was watching patiently for the market to mature. While Sify has always been a very
aggressive player and has been blamed many a time by analysts for overestimating market potential (the Rs 499 crore Indiaworld deal being the biggest example), this time it decided to wait and watch before jumping in.

Technology choices
There were basically three technology options that Sify had for providing broadband access to homes. One was
the familiar optic fibre route that most big players had adopted. But after looking at the poor position of market players after the broadband dream turned sour, this option was ruled out. A familiar problem for players who laid down optic fibre cables was the issue of getting the huge number of permissions from hundreds of places—municipal corporations to housing society committees.

In many cases where fibre was used, even if a subscriber wanted a connection, he or she had to wait endlessly since permission from a neighbouring housing society had not been obtained. The gestation period was huge and it meant that return on investment was a dicey prospect.

Another option was the much hyped technology, aDSL. While the technology was great, Dishnet never really spoke the whole truth when it went on its DSL overdrive. Dishnet conveniently ignored the fact that DSL was great for existing basic telephony players, who already had huge copper-based networks. That meant that it was MTNL/BSNL and not Dishnet that was best suited for using DSL. And there was no way MTNL would allow a player like Dishnet to use its existing phone lines. This effectively meant that Dishnet had to lay its own copper wire connecting a home to the nearest node. In addition, there was the huge cost of an aDSL modem, which came close to Rs 30,000. Which meant that an operator had to spend considerable amounts of money on infrastructure alone.

Till some years ago, Sify was closely looking at aDSL as a prospective technology to provide broadband to homes. But looking at the market reaction to Dishnet’s DSL, the company decided against this move. The option left was VSATs—but the company felt that this was a medium fraught with problems related to government regulations. The SKumars.com debacle, based on a similar VSAT route, was also fresh in Sify’s mind.

Wireless is the choice
After evaluating a host of technology options, the company opted for a wireless broadband technology called Point to Multi-Point technology (PMP), which enables customers to be linked through a wireless radio network. The reasoning behind selecting this technology was simple. Sify already had a primary network that gave it 53 points of presence (PoPs) in as many cities. While the network was good enough for servicing corporates, tapping the home segment was an altogether different ballgame.

With its hybrid technology, Sify enabled the last mile for delivery of broadband in such a way that it was acceptable to everyone, quick to deploy and had a low cost of execution, says Shrikant Joshi

Sify had to find a way where it could not only deploy a solution quickly, but also deploy it cost effectively. PMP technology gave Sify the competitive advantage it needed. All this technology needs is a hub to generate signals, which then fires signals in different directions, and a receiver to receive these signals.

Along with the receiver, there is a multiplexer that splits the incoming signals into smaller bandwidth signals, which is then delivered to the end-customer through an Ethernet cable connection to the home computer. So whenever Sify signs on a new building, all it needs to do is put a receiver on the building and allocate bandwidth requirements according to customer needs.

Says Shrikant Joshi, head-access media, Sify, “We realised that broadband had not taken off in a big way given the high cost and the task of laying cables to every building to enable broadband delivery. The key lay in enabling the last mile for delivery of broadband in such a way that it was acceptable to everyone, quick to deploy and had a low cost of execution. This is what exactly Sify enabled with its hybrid technology.”

Apart from the speed at which Sify can execute an order, there is the added benefit of flexibility. Whenever a particular customer needs more bandwidth, the additional bandwidth can be allocated on the fly. For instance, if a scientific institution needs additional bandwidth for a particular week, it can be done in a matter of seconds.

Bandwidth can also be increased when the number of subscribers in a building goes up. This is unlike an ISDN or a cable connection, where if the number of subscribers increase, the bandwidth available to each subscriber automatically comes down.

Also, many other players sought the best commercial routes and went about installing optic fibre networks worth crores after getting ‘market feedback’ that a particular area had a high literacy rate with good PC penetration. But after installing the network, reality turned out to be very different. The inhibitor was the high cost that the players tried to recover from customers. Customers were not ready to pay up and these players could not subsidise costs simply because they had invested huge amounts in building up their networks. In an effort to reduce costs, operators began downscaling their bandwidth requirements. The result was that in some cases customers began complaining that access speeds were even slower than dial-up speeds.

As Sify evaluated the market, it found that there were two distinct classes of users. One group comprised of thousands of new users logging on to the Net from cybercafes, homes or offices. The other group consisted of users who had graduated beyond basic services like search, e-mail or chat and needed higher bandwidth either for shopping or for downloading music files or videos. Most players considered both groups as a homogenous entity and erred in thinking that every home user would be a broadband user.

But Sify worked differently. At the entry level, Sify had its dial-up option while at the mature user level it offered the broadband facility. Here, the strategy was to tap huge residential complexes and identify potential broadband users. The technology would only be offered to a building if it assured a minimum base of 20 subscribers. Before launching this technology, Sify did a pilot test in Chennai. After thoroughly testing it, the company decided to tap the Mumbai market.

Initially, residential complexes were reluctant, given the failure of other players in living up to the promise of providing broadband. But after demonstrating the virtues of the technology and the cost/value proposition, some residential complexes gave Sify the nod. After the first month of aggressive convincing, the next two months gave Sify the momentum it was waiting for. The success of the solution can be gauged from the fact that in just a period of three months Sify has managed to sign up over 200 buildings in Mumbai alone. Each building has a minimum of 20 customers, which translates to 4,000 customers. In Chennai too the solution has received a good response with over 20 buildings signing up in the first month.

Another advantage for Sify is that the infrastructure can be quickly dismantled and moved to another location. This effectively means that in case a particular building is not turning out to be as profitable as earlier envisaged the operation can be wound up quickly. This is in contrast to other players who cannot rip apart the infrastructure created. The right of way advantage that players like BSES had now ceases to be an advantage with the advent of Sify’s wireless technology. Once a hub is in place, it can seek to address more and more customers—both corporate and residential users.

In the end
The success of Sify shows that even though there are myriad technology options available, for technology to be successful one has to customise it according to the environment it will be used in. And sometimes, an early-mover advantage is perhaps not an advantage at all. From the days when Sify’s amateurish dot com deal triggered off atrocious valuations of dot coms to the present times when Sify has learnt from the mistakes of others and has succeeded, life has truly come full circle for India’s first privately owned Internet giant.