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Sunday, March 25, 2012

India's Exploding Digital Economy

Let's start with Internet access. Today, India's population of Internet users is 80 million, which equals a penetration rate of just seven percent (or 17 percent of the urban population). That is about to change. The government is rolling out what it calls its National Broadband Plan, a $4.5 billion initiative to build a country-wide fiber optic network that will connect an additional 160 million Indians by 2014. An Indian investment bank, Avendus, projects 376 million Indian Net users by 2015.

Part of what's fueling growth in Net penetration is an explosion in mobility. The Indian government sponsored the introduction of 3G services in 2011 with a $30 billion spectrum auction. Morgan Stanley projects that 3G penetration will reach 22 percent by 2015. Government and the private sector have spent something like $55 billion on related infrastructure. Further, we'll see a roll-out of 4G wireless services across the country in 2012. While there are nearly 800 million mobile subscribers in India, very few use smart phones; most have feature phones that deliver, at best, premium text-based services. As unit economics enable ever cheaper smart phones (the lowest price in the market is now $65), their penetration will rise.

Fueling this explosion is a fact of national culture: Indians love media.
No one aware of the nation's obsession with "ABC" (Astrology, Bollywood, and Cricket) will be surprised to learn that the average Indian consumes 4.5 hours of media and entertainment a day, while 70 percent of the national population spends money on content, both online and off. Time spent online already comes to 40 minutes per capita per day.
Jeffrey F. Rayport in Harvard Business Review. Here

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