In Part 1 of our interview with K Srinivas, President of Bharti Airtel‘s B2C business unit, which includes all its consumer business and market operations, including Mobile, Telemedia, Digital TV and emerging segments like M-commerce, M-Health, he spoke about losing money on 2G data, and about processes put in place for improving billing practices in VAS (i.e. addressing false billing and reducing unethical practices), on developer revenue shares and how Airtel was thinking about the developer ecosystem and app store integration. In Part 2, he speaks about offloading traffic to Wifi, smartphone addition, revenue sharing with web companies, data pricing, IPTV and broadband operations, among other things:

MediaNama: On video, how many simultaneous streams can your network support?
Srinivas: I can’t answer that (laughs). At a conceptual level, we do dimension our network for the peak utilization. When you’re constrained with 5MHz on 3G, you have limitations. That’s where we need to create one backdrop of a packet core, where for 2G, 3G, DSL, is a common packet core, across all devices, technologies, and we have that little advantage. Is 5MHz enough to manage millions of people on 3G? Obviously not. It’s a technical impossiblity.

MediaNama: What’s your take on offloading traffic to Wifi?
Srinivas: That’s something which is core to our strategy. We have started building our Wifi Hotspots. To start with, we’ll have cafe’s, airports, malls etc. We have over 1,000 odd hotspots, which is not enough, but it needs to get into hundreds of thousands. There is a team which is aggressively pushing that. The presence of copper and fibre costs are inhibiting. In the western world, when they wanted to put up hotspots, they just walked into a place and it was fibred. Here you’ll need to start building that. What we’re experimenting with is using LTE for hotspots. It is a slower process that what you would see…if you go to a café and you want to Wifi that, how would you backhaul it? Copper and Fibre are not available in every single building. It’s a slow process, but we’re absolutely sure that we are going in that direction.

MediaNama: Would you offload traffic, or would you price it separately?
Srinivas: We’re looking at multiple models, but the core reason why we would like to do this is to offload to WiFi Hotspots. We know that 5MHz spectrum is not enough. Even today, though, there are hotspots which get choked. There are pockets near Delhi University and some pockets of Gurgaon get choked during peaked hours.

MediaNama: How many smartphones is the country adding every month?
Srinivas: The industry is adding about 1.1 -1.2 million devices per month. That has moved up from 0.6-0.8 million a month some 8-9 months ago. It has been slightly slower than what we thought it would be. If the price points come down to the sub-$100 mark, then it would proliferate. The data customers are around 100-120 million, but how many are active is anybody’s guess. Our definition is someone who has used at least once in a month.

MediaNama: So when it comes do data consumption, where do you stand on charging sites like Google for letting consumer use them?
Srinivas: (laughs) I knew you were going to ask about this. The notion is that everything on the Internet is free. So Google doesn’t charge the customer, Facebook is free. There are billions of dollars of investment going in. This is not just an Indian issue, it’s a global issue. We’d not even rolled out 3G and 4G has dawned upon us. The industry, and the costs of rolling out, building a backhaul. Backhaul costs in India are backbreaking. In South Bombay, if you want to put up a kilometer of fibre, the Right of Way cost is almost about Rs 1 crore. Show me one business model, with the data consumption going up, that supports these continuously increasing costs. The data ARPU the world over is flat to declining. The notion that telecom operators are making tons of money is incorrect. Show me one company in India or anywhere in the world that is thriving on data. You need to have the right kind of model. There is no free lunch.

MediaNama: But as a customer, I’m paying you for this access.
Srinivas: If you’re paying me 100 bucks for 1 gb, but beyond that you’ll have to pay.

MediaNama: So don’t charge me Rs 98 for 2gb.
Srinivas: At some stage, Rs 98 will become Rs 200 for 2gb.I’m not getting into whether this pricing is right or wrong. Even on voice, the current rates are not sustainable. Every single operator is sitting on huge sets of investment. This pricing for data or voice is not sustainable. Lets build the right business model. On one side you compete, and on another you collaborate. The point you were making (in your post) was that I need Google and Google needs me. Very true. The issue is that the amount of investment that goes behind. Tell me one product or commodity in the country which has not changed its price upwards in the last 10 years, or even the last one year. You’ve seen everybody drop prices. I pay in dollars for all my investments and I earn in paise. There is significant investment.

MediaNama: How would you respond to a situation in 2013, where Reliance comes in and drops prices?
Srinivas: We have dealt with that more than adequately. I don’t want to talk about what we will do, and we’ve dealt with it in the past, and there is a solution going forward. If there is one company which can survive and sustain, and there are bigger issues in the market.

One other thing I wanted to talk to you about was that a lot of guys actually believe that speed doesn’t cost money. It’s completely untrue.

MediaNama: What’s going in on Broadband in this country?
Srinivas: It’s because your costs of setting up broadband is prohibitive. The cost of setting up a link is almost about Rs 25,000.

MediaNama: Have you decided that the customer base you have in broadband now is enough? That it’s now about milking that base instead of trying to grow it?
Srinivas: I’m selling you Rs 1,000 for 10 GB. The notion of a fair usage doesn’t exist.

MediaNama: There are concerns that people haven’t reached a particular limit, and they get alerts that they have.
Srinivas: We do alert people when they reach 80 percent. If there are specifics about bugs, we can check them out. We have an elaborate testing protocol. We do give people an option to buy additional GBs.

MediaNama: Is wireline Internet profitable for you?
Srinivas: It is profitable, but our approach has been about picking and choosing areas to roll out in. It is not like mobile coverage. We’ve identified colonies, high rises to cover. But a lot of guys believe that once you put the network up, speed doesn’t cost you money. Speed does. It’s speed that costs you money. Every time you want to upgrade customers – it’s a pipe. If I want to keep a uniform experience and upgrade everybody, I need a thicker pipe.

MediaNama: What will reduce costs for you?
Srinivas: Right of way. Let there be a smoother, quicker right of way. There are multiple agencies.

MediaNama: Why not point to point Wimax for last mile access?
Srinivas: Whatever wireless options. We’ve kept Wimax away. For the last mile, if you need to throughput big volumes, you need wireline. The fixed internet is making its way back the world over. Spectrum is limited.

MediaNama: Is IPTV dead?
Srinivas: For us, IPTV is like VAS. Mainstream is DTH. Once the satellite is up, it can get anywhere. IPTV requires 4mbps connectivity. If you’re far away from the node, you’ll have a problem. You’ll not get a consistent experience. The moment I go to HD, you’ll need fibre. When Fibre does make inroads into homes… the disadvantage of DTH is that there is no return path.

MediaNama: Who’s going to put in the fibre? The National optical fibre rollout is going to the villages…
Srinivas: The costs of fibre in this country is an issue. In the western world, the government incumbent operators made that effort, and everybody was mandated after it was unbundled. Unbundling of the last mile is still an issue in India.

MediaNama: You think unbundling of the last mile might happen in India?
Srinivas: Now it might. You’ll have to look into the quality of the fibre that exists. Right now there are bigger issues on the table.

Corrigendum: we’d incorrectly quoted Srinivas as saying that Airtel doesn’t alert people when they reach 80%. Our apologies for the typo.