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ACT's Bala Malladi on TRAI tariff order, Jio GigaFiber & pricing war in wired broadband

The ACT CEO does not see a big pricing war in wired broadband sector

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MUMBAI: Earlier this week, Atria Convergence Technologies (ACT) Fibernet, the wired broadband internet service provider (ISP), inked a deal with over-the-top (OTT) platform ZEE5 in order to up the entertainment quotient for its subscribers across segments. Likewise, ACT had earlier also stitched together partnerships with streaming services like Netflix and Hooq. That was followed by the launch of its first consumer product ‘ACT Stream TV 4K' device in India.

The transformation of the Bengaluru-headquartered fibre-to-the-home (FTTH) company into a video and broadband player is symbolic of the digitally disruptive landscape on offer at the moment. Apart from offering high-speed internet, ACT is moving towards offering innovative customer-centric solutions and providing a 360 spin to all entertainment needs of a consumer. 

The makeover is as much about evolution as it is about survival. Disruption is due in the FTTH sector with Reliance on the verge of rolling out its Jio GigaFiber service. If the bloodbath in telecom is anything to go by, the likes of ACT could be in for a pricing war in the wired broadband battlefield.

According to the company's latest financial results, the number of subscribers went up from 1.15 million in FY17 to the current 1.39 million. A worrying sign for ACT could be the decline in average revenue per user (ARPU) from Rs 891 per month to Rs 760 per month. That could further drop after Jio gets a foot into the door.

ACT CEO Bala Malladi, however, seems unfazed by the prospect.

“The biggest problem in this particular segment is availability. You’ve got to build availability to fight on the prices. To that extent, there is enough and more space (after GigaFiber's full-flagged launch). Because of availability being an issue, we don’t believe that it’s going to be a huge price war-led competition, but yes anything can happen,” he told Indiantelevision.com in an exclusive interview.

India’s wireline broadband market is headed towards bundled plans with a possibility of generating Rs 80,000 crore in revenue in five years, ratings agencies say. With wireline broadband penetration at seven per cent at the moment, Malladi sees merit in this forecast.

“Usage, habits and aspirations of consumers are changing. You can see Netflix coming and really making huge strides here. Similarly, whenever an IPL match streams on Hotstar, our data consumption shoots up. I think mobile explosion itself has changed the salience of the convenience factor. So, therefore we believe that as the usage and habits grow, the need for having a very high speed broadband itself will increase,” he highlighted.

With fierce competition and bundling of services, the pricing in the segment could reduce by as much as 40-50 per cent, some experts say.

“There is a fundamental difference between wireless and a wired. One is that there is a huge amount of penetration opportunity in fixed line broadband. I am a firm believer in expanding this market,” he stated.

Market expansion in wireline broadband is bound to occur through FTTH networks.

“We firmly believe in delivering the advantage to the customer, we have been doing it. If you see when the whole market was at 512 kbps, we used to deliver 10 mbps at Rs 999. I am talking about 8-9 years ago. So that has been our ethos, that’s exactly how we intend to work,” the veteran executive added.

FY2024 could see the wireline broadband subscriber base touch 100 million if penetration increases to 30 per cent.

“It’s very much possible. I don’t know if it will take 5 years or 10 years, the opportunity is huge in this market. I think building up infrastructure is the biggest challenge. Once the infrastructure is built, you should be able to deliver that kind of service,” Malladi opined.

Last year, it was reported that Airtel had set aside Rs 24,000-crore capex guidance for FY19 to grow its wired broadband network across India. State-run BSNL, which leads in the subscriber race, too has upped its investment with the imminent threat of Jio.

“There is enough space to grow. We will grow and have enough investment to support that growth. That’s why if you see we are in 18 markets. We are only in 18 cities. We are not all over the country. So we take those focused spots and we are sufficiently funded to take care of our growth,” he pointed out when asked about investments ACT sees itself making to ring-fence itself from potential disruption.

Another avenue of disruption in an area ACT operates in was affected by the Telecom Regulatory Authority of India's new tariff order for the broadcast and cable services sector. Malladi believes it’s too early to deduce trends from the new regulatory framework's implementation.

"It’s too early to talk. There are billing challenges, other challenges across the market and it’s a massive change. It will take time to settle," he stated.

However, Malladi did offer an insight based on his early impressions with respect to ARPU growth. "I think the SEC-A customer ARPU will go up. For SEC-B and C there is a possibility of ARPU going down," he concluded.

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