When it comes to telecom market potential, India, the second-most populated country in the world, is often overlooked in the shadow of its larger, more populated neighbor to the northeast.

As we enter 2006, India still may struggle to rectify that view. One of the key telecom statistics for the region—the total number of broadband subscribers—is woefully lower than the Indian government hoped it would be, at this point. Two years ago, the government set a goal of having 3 million broadband subscribers in India by the end of 2005. As of December 2005, the actual number of subscribers stood at 835,000 nationwide, according to Sridhar Pai, founder of Tonse Telecom, a consultancy providing information about the telecom market in India (Pai’s reports and sign-up for the Tonse newsletter can be found at www.tonsetelecom.)

The Indian government has deregulated the telecom industry, but the industry and the market are still clearly going through some evolutionary pains. At least two of the reasons for the “severe shortfall” in broadband subscribers are economic, Pai told Global Telephony recently. “The government had always charged high customs fees on consumer electronics,” he said. “PCs just haven’t been made affordable to the masses.” Those fees were lowered earlier in 2005 and will have a more positive impact on future growth.

Also, “access prices were too high, about $30 a month for just 128 kb/s,” Pai said. More recently, service providers such as state-run BSNL and its competitors have begun to lower their prices and roll out promotional campaigns that offer PCs and access at a bundled price as little as $10 per month. “Adoption will eventually begin to speed up,” Pai said.

In fact, despite the obvious shortfall at the end of last year, broadband growth in India actually has been on a tear the last two years, with 18-fold growth from the early 2004 figure of just 48,000 subscribers.

Still, Pai noted, “It is now clear that India needs a broadband savior to reduce the great divide” between government-targeted numbers and reality. Could that savior be WiMAX?

“In India, there is a lot of pent-up demand, and if you are going in there as a service provider right now, you don’t want to have anything to do with wires,” said Aditya Agrawal, director of marketing at Beceem Communications, a San Jose, Calif., WiMAX chipmaker that also has a large engineering center in India. “There is an under-served market to reach out to.”

Greg Caltabiano, CEO of SOMA Networks, a broadband wireless equipment vendor, added, “The government in India realizes that broadband is a big issue. There is a high level of technology sophistication there. For service providers in that environment, it’s much easier to compete against the incumbent operators if your technology is wireless.”

The opportunity may be there, as evidenced by the interest of Beceem, SOMA and several other companies, but whether or not WiMAX can take advantage of it is another matter. The IEEE’s 802.16 working group held a meeting in New Delhi earlier this month, and the WiMAX Forum recently announced the certification of products in the 3.5 GHz frequency band. However, it’s unclear on what spectrum WiMAX could be deployed in India. Pai said spectrum at 3.3 GHz is owned by the country’s space program, and other frequencies are used by the military. At the lower end of the spectrum chart, 700 MHz is a possibility.

Another issue is price. The WiMAX community is still working on bringing down the price points for chips and equipment, the cost centers that factor heavily into service price. “Unless you can keep it under $25 per month, it may be a difficult sell,” Tonse Telecom’s Pai said. “It may be a case of too little, too early.”

Aside from broadband, other services in the Indian market that hold great growth potential include VoIP and mobile. VoIP has been a factor in India since the 1995 arrival on the telecom scene of Vocaltec. Yet, until 2005 termination of VoIP calls on the PSTN was illegal, Pai said. Before VoIP was legalized, not much of India was missing out on it benefits, however, because broadband penetration, as noted, was so low. Even with the VoIP market opened, there hasn’t been much of the competitive service provider activity that seems to have accompanied the arrival of VoIP in other countries, but again, there’s an economic reason: Long-distance and access licenses have been far too expensive. More recently, the Indian government has acted to slash those entry fees, reductions that became official at the beginning of this year.

While broadband and VoIP hold great promise despite early stumbles, the mobile market may be India’s clearest telecom success story. There were about 68 million wireless subscribers in India as of October 2005, Pai said, and this figure represents almost 59% of overall telephony subscribers in the nation. About 78% of the market is on GSM networks, with the other 21% or so on CDMA.

Meanwhile, overall teledensity in India is still just under 11%, and though mobile is making fast progress, much virgin territory remains. “There are so many parts of this country where there is still no wireless coverage, and very little fixed-line coverage of any kind,” Pai said.