India's local internet service providers (ISPs) are facing mounting challenges as telecom giants Bharti Airtel and Reliance Jio aggressively expand their home broadband services, particularly through Fixed Wireless Access (FWA). The affordable and easy-to-deploy FWA technology on 5G Networks is further squeezing ISPs' revenues and margins as they fight to maintain their ground, according to an ET Telecom report.
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ISPs reportedly say that the disruption caused by FWA is temporary and that telecom companies may eventually discourage its use as 5G mobile adoption increases.
Of the 2,000 ISP licensees, 1,300 are currently active. Over the past six months, the industry has witnessed a wave of new licenses being issued and canceled, reflecting a gradual consolidation driven by shrinking margins that challenge smaller players. Even larger ISPs are facing financial strain, as they must invest in costly OTT partnerships to compete with companies like Jio and Airtel, according to the report.
Shrinking Margins, High Churn
Local ISPs, which lease bandwidth from telcos, are struggling with price pressures and costly over-the-top (OTT) tie-ups to compete. "ISPs are price-takers and not price-makers because they lease bandwidth from the telcos," Rajesh Chharia, president of the Internet Service Providers Association of India (ISPAI), was quoted as saying in the report. "Many new ISPs find it difficult to scale beyond six months."
Despite 1,300 active ISPs in India, industry experts predict consolidation. "ISPs are facing challenges on multiple counts such as capex limitations, high subscriber churn and inability to achieve economies of scale," Prateek Jhawar of Avendus Capital was quoted as saying.
"This leads to our view that the broadband space will be dominated by a few ISPs who will consolidate a long tail of local ISPs. The growth tailwinds combined with lack of scale for individual local ISPs will drive the consolidation theme in the sector," Jhawar reportedly said, adding that it is opportune time for mergers and acquisitions (M&A) in the sector.
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FWA: A Short-Term Disruptor?
India had around 46 million home broadband users (fixed and wireless) as of December 2024, with Jio (17 million) and Airtel (9.2 million), state-run Bharat Sanchar Nigam Limited (4.24 million) and ACT Fibernet (2.27 million) serving the market. Of these, 5 million were FWA subscribers—mostly from Airtel and Jio. However, ISP leaders argue that FWA is a stopgap solution.
According to the report, ISP executives remain largely unconcerned about the increasing adoption of FWA services from Jio and Airtel.
ISPAI's Chharia, reportedly said that consumers are rejecting telcos' FWA and turning to favour fiber connections.
"FWA puts load on a single BTS…it is as good as a 5G mobile connection and does not offer good speeds for high consumption. That is where local ISPs are winning," Chharia reportedly added.
Avendus' Jhawar reportedly added that telcos may scale back FWA once 5G mobile adoption rises, mirroring trends in the US, where telcos are acquiring fiber broadband firms.
"FWA is similar to an extension of your mobile internet…The average demand for data in a typical household is more than 400 GB per month, which is economically difficult to be catered by FWA and mobile internet combined versus fiber," Jhawar was quoted as saying.
In the US, telcos with the capability to deploy FWA—despite scaling its deployment—are acquiring fiber broadband companies. T-Mobile acquired Metronet, Verizon acquired Frontier, and multiple mergers are occurring, creating national broadband platforms to serve users, TelecomTalk previously reported.
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The Battle for Broadband Customers
To retain users, ISPs are turning to OTT bundles and IPTV. Airtel recently launched IPTV services in 2,000 cities, while Excitel plans to convert cable TV households into fiber broadband users with Android-based IPTV boxes. ACT Fibernet is focusing on customised hyperlocal plans.
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"These (local) ISPs may just be selling the addons at cost and not earn profit from the OTT bundle, but it helps them retain their broadband customers," Jhawar reportedly said.
"Vanilla broadband is no longer exciting…Everyone wants to know what's bundled on top of it," Vivek Raina, CEO and co-founder of Delhi-based Excitel Broadband was quoted as saying, who plans to transform India's cable TV households into fiber broadband users by replacing traditional set-top boxes with Android-enabled IPTV boxes.
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ACT Fibernet, on its part, reportedly said it is focussing on sales and service quality to maintain its competitive edge. "Unlike a one-size-fits-all approach, we offer hyperlocal plans, tailoring our broadband solutions to meet the specific needs of each city and market we operate in," said Ravi Karthik, chief marketing and customer experience officer at ACT Fibernet, according to the report.
The industry now braces for a phase of rapid consolidation, where only the strongest will survive.
