Will internet penetration growth be dampened by new tax in India?

The Internet user base in India has grown but it is still not big enough as most of us want it to be. It hasn’t grown fast enough. Akamai releases a report every quarter “The State of the Internet“. It may sound cynical but we tend to see how bad India looks in that report. Instead, we should have been looking forward to seeing how is India improving in terms of internet speed, internet penetration.

The infographics from Akamai are self-explanatory. Akamai defines 4 Mbps as broadband. India saw a massive 265% increase in broadband adoption in 2012. This is good news but we can do better.

I have always felt we need to first work on penetration. There are many areas of Bangalore which still don’t have wired broadband – due to high costs of last mile access and government red tape.

average connection speed akamai, Q4 2012


average peak speed akamai, Q4 2012

Death Tax For Wireline Broadband Services in India

I was a little shocked to read yesterday about DoT is planning on introducing 8% license fee on broadband services in India even if they are not using the spectrum. Important points from the article are,

  • The department of telecom (DoT) is evaluating an 8% license fee on broadband services, even on those that do not involve the use of spectrum
  • In the competition between broadband services that use spectrum and those that do not, it is sensible to have a spectrum fee only for users of spectrum
  • The first wave of internet access in India was dominated by wireless alternatives.
  • Wireline broadband services are popular because 3G in India is still not that fast (as it should be).
  • The wireline rollout in India is slow, given the high upfront capital expenditure, and the difficulties of business on the ground in India.
  • An additional 8% tax on them will impede the rise of this important alternative.

Prefer Wireline Broadband Over Slow 3G in India

I strongly prefer using wireline broadband services. I must be one of the first subscribers of Airtel broadband service in Bangalore.

I have been a 2G user on my mobile for a long time. Just 6 months ago I got a 3G pre-paid connection for my battery-power hungry Samsung Tab2. I hate both – 3G and Samsung Tab2. Even while using wifi at work every time I blink the balance on my prepaid connection keeps reducing. I still haven’t found a solution for this prepaid puzzle. And the 3G connection is slow as a donkey.

The following graph from Akamai clearly shows India was not on the list of countries which they felt had to be tracked for mobile internet speeds.

mobile connectivity akamai, Q4 2012
The government of India must work towards internet penetration with decent internet speeds. It will create jobs in pockets all over urban and Tier-2 India. When jobs are created we indirectly pay taxes to the government in various ways – income tax of employees, service tax, you buy goods for your company. So why tax the enabler in India? Leave broadband alone, please.

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