India's Internet user base : A Hindu rate of growth

It is of some interest to understand why India's Internet user base is not really growing and remains stuck at a low penetration level.

Both the telecom and Internet sectors were privatised at around the same time in the late 90's. But the Internet user base has witnessed a Hindu rate of growth of about 20% p.a. ever since the year 2002. It was only in the boom period 1999-2001 immediately after privatisation of the ISP sector in late 1998 that the user base grew impressively, at over 200% p.a.

On the other hand, telecom has grown by an order of magnitude i.e. 10X faster. The number of Internet subscribers as of end June '07 (the latest period for which data is available from the TRAI) is 9.22 million. The thumb rule is to take at a conservative basis 3 Internet users for each subscriber (ISP industry association ISPAI's old thumbrule). Thus, there are a total of about 29 million Internet users (defined as users who access the Net at least once a month) as against 200+ million cellular users.

Yes, one hears that there is now traction in access to the Net via mobile phones. Economic Times (Oct 6,'07) reports that 38 million Indians now access the Internet via their mobiles. And that this number grew from 31 million the previous quarter. And Indian Cellular Association Pankaj Mahindroo is quoted as saying that of the 7 million handsets sold every month, over 4 million are net-enabled.Some confusion here. Not clear whether 38 million mobile users are today Net-enabled i.e. GPRS subscribers etc. or just Net-ready handsets. And, even if they are Net-enabled, whether they actually log in.

Even assuming these are all Net-enabled / GPRS-enabled handsets, it is likely that these 38 million mobile Net users overlap with the very 29 million ones who use the Net via the PC.

Thus on a population of over 1100 million our Internet penetration rate is close to 3%. This is among the lowest Internet penetration rates among all countries.

The world average Internet penetration is in fact 19% (Internetstats puts the Indian penetration at 5.3% and user base at 60 million : one reason they are higher than the TRAI-derived number is that they count "ever used" numbers and not the "logged in last month" numbers).

The stats on minutes of usage per user as well as broadband penetration are not too impressive either.

The niggardly Internet usage & growth is a matter of concern to many, among them bureaucrats, Internet industry folk, VCs and all well-meaning folk. The moot question is : why has the Internet lagged in India?

There are to my knowledge no indepth studies on this, though theories there are a few. Having been involved in the industry over the last 8 years, I shall - in subsequent posts - comment on these theories and hazard a few answers myself.