AccessMedia submits multi-client study

AccessMedia International-a global media ventures consulting
and research firm-recently conducted an annual study on Internet Markets and
Usage Trends that highlighted the dynamics and issues, concerning the entire
cross-section of users besides insights into market sizing and projections for
the next five years. The study is a part of a wider multi-client exercise that
AccessMedia undertakes each year in Asia Pacific and Japan.

As predicted by its study last year, the markets hit a ‘slow
patch’ last fiscal due to a multiplicity of reasons. Despite a relatively low
consumer and SOHO subscriber base, the overall market registered a 116.5 percent
growth in the year ended March 2001 over previous year.

Going by realistic estimates the Internet subscriber market
is poised for rapid growth in the fiscal ending March 2003. Growth rate for the
current year is expected to drop to 78.5 percent. The number of subscribers
(connections) is expected to exceed 10 million by early 2004-05, the critical
mass required for most B2C business models. Going by optimistic growth
projections India will have more than 10 million subscribers before the end of
FY 2003-04.

As this year’s study shows, a significant cross-section of
consumers are beginning to relate cost to quality of connections. Delays in
rollout plans and implementations of technologies like DSL, ADSL and cable-based
Internet services, will continue to effect growth as markets are still supply
driven to a large extent. Besides ‘bandwidth traps’ the supply side will
continue to face serious challenges in terms of being able to sustain basic
service quality.

The CAGRs for the five-year period ending FY 2005-06 however
are 60.06 percent and 63.08 percent respectively for realistic and optimistic
scenarios. In terms of people using the Net (as opposed to connections) India
currently has 4.2 million Internet users by realistic estimates. AccessMedia
predicts the number of Internet users to be over 28 million by FY 2005-06.

In terms of the overall market sizing, the country is divided
into four zones. Further to that 14 key cities constitute what is termed as
Priority-1 cities, followed by 12 Priority-2 cities. These cities are
characterized by high growth potential and depending upon the penetration levels
may drop out of the list to be replaced by other cities. Bhubaneshwar and
Cuttack are new entrants to the list. While the Priority-1 cities are expected
to grow at a combined CAGR of 50.64 percent for the next five years, Priority 2
and others will likely grow at 100.88 percent and 154.20 percent respectively in
terms of Internet connections.

Ever strong corporates

The corporate Internet base comprising different access
technologies is still showing strong growth and this trend is expected to
continue through FY ending 2003. Though the pace of graduating to the corporate
segment from the small-office group appears to have slowed down considerably, it
is a temporary phenomenon. The indicators for high Internet adoption are:

• Extent of Internet usage within organizations
• Technology share in corporate data transfers
• Corporate trends in Internet access bandwidth
• Other usage related data relating to Internet hours
• Spending patterns

At this rate the corporate share of Internet connections will
equal that of consumers and SOHO combined by FY 2003-04. The corporate segment
is expected to grow just below 40 percent over the next five-year period. Among
vertical segments, media organizations continue to record maximum usage in terms
of daily dial-up hours, followed by IT companies and Telcos. Travel and tourism
companies take up the third place moving past discreet manufacturing, banks/NBFI/insurance,
and hospitals/medical segments.

Supply side woes

Brand loyalty among the dial-up subscribers (especially PSTN-based)
is extremely low, and users are equivocal when it comes to rating ISPs on
service and connection related parameters, as ‘inconsistent’. Other
technologies like DSL, cable and satellite-based connectivity would certainly
make a difference, but vendor rollout plans seem to be hitting a rough patch.