Assessing India’s Unbundled and Distributed Model of Public Wi-Fi

According to the Telecom Regulatory Authority of India, total broadband subscribers increased in the country from 525 Million in 2018 to 885 million in September 2023 and to 904.54 million in December 2023, registering an annual growth rate of 20.9% between 2018 to 2023. During this period, the growth rate in rural India was 17.05%, with currently only 375.60 million having a broadband connection.

This pace and dispersion of growth coincided with the National Broadband Mission (NBM) launched under the National Digital Communications Policy (NDCP) 2018 that aimed to facilitate universal and equitable access to broadband services nationwide, especially in rural and remote areas. To achieve this, the NDCP set a target of 10 million public Wi-Fi hotspots across India by the end of 2022. To this end, the Wi-Fi Access Network Interface (WANI) infrastructure framework was launched in 2020.

Over 96% of internet access in India is through mobile, a business dominated by a handful of private actors. Conversely, a mere 0.12% of internet subscribers access the internet through fixed wireless modes such as Wi-Fi. Moreover, despite the introduction of the WANI framework and the increase in broadband users, the total number of public Wi-Fi hotspots in 2023 was a paltry 0.16 million, far from the 10 million target. In fact, the number of hotspots declined by 0.22% from September 2023 to December 2023. When compared globally, on a per million population, the number of public Wi-Fi hotspots is 175 times that of India in the UK, 50 times in the US, and 75 times in China. In contrast, mobile has thrived, including the envisioning of 6G services under the Bharat 6G Vision.

The decline in the number of Wi-Fi hotspots under WANI deserves scrutiny, especially given the government's goal of deploying a total of 50 million public Wi-Fi hotspots by 2030. The article explores the operationality of WANI, which governs the public Wi-Fi hotspots in India. It aims to understand the decline in hotspots by analyzing the competitive milieu facilitated by the ‘India stack’ philosophy.

WANI and the ‘India Stack’ Philosophy

The WANI, as an institutional design, aimed to create a Digital Public Infrastructure and address the issue of a significant section of the population lacking cheap access to broadband services in remote areas due to limited reach and incentives offered by existing service providers. To address this, existing wired Internet Service Providers (ISPs) and wireless Telecom Service Providers (TSPs), along with new small entities, were allowed to enter the public Wi-Fi ecosystem.

WANI chose to follow the so-called ‘India Stack’ philosophy of completely unbundled, distributed, and interoperable systems so that a large number of small entities can participate in delivering broadband services at lower prices. India Stack is a set of application programming interfaces (APIs) that includes the Aadhaar for Authentication, which provides paperless and digital identity verification for accessing various services such as purchasing mobile SIMs, opening bank accounts, etc.

It also uses e-Know Your Customer (e-KYC) documents that are safe deposit lockers for issue, storage, and use of documents, a Unified Payment Interface (UPI) for financial transactions, and privacy-protected data sharing within the stack of Account Aggregator API to enhance interoperability. These features allow governments, businesses, startups, and developers to utilize a unique, unbundled, distributed digital (public) infrastructure. This involves different players providing separate functions and creating a new market for each function to move India towards presence-less, paperless, and cashless service delivery.

Following this ‘India Stack’ philosophy, WANI has facilitated the creation of three new sub-markets: aggregators who play functions related to authorization and accounting of hotspot users; app developers who specifically work on providing an interface to users to register and discover hotspots; and, Wi-Fi access points providers who provide internet connectivity to the users. This has also ensured interoperability for payment and authentication, making it less cumbersome for users to access Wi-Fi at different access points.

Under the distributed architecture and unbundling of functions, the WANI eco-system is being operated by three types of players. The first is the Public Data Office (PDO), which establishes, maintains, and serves only WANI-compliant Wi-Fi Access Points and delivers broadband services to users. Second, operating as an aggregator of PDOs, Public Data Office Aggregators (PDOA) perform the functions relating to Authorization and Accounting. Thirdly, to facilitate the smooth provision of the internet to the users, app providers have developed apps to register users and discover WANI-compliant Wi-Fi hotspots in nearby areas, and they display the same within the app for accessing the internet service. The PM-WANI Central Registry, maintained by the Centre for Development of Telematics (C-DoT), looks after the functioning of actors. Per the WANI architecture and specifications, it maintains the details of App Providers, PDOAs, and PDOs.

Furthermore, WANI has distributed the infrastructure in two parts: network providers and service providers. Network providers, including ISPs and telecom operators, are often hesitant to provide services to rural and remote areas due to the high cost of infrastructure and limited return on investment. PDOs/PDOAs can now enter as new service providers to ensure connectivity in rural and remote areas that are untapped by these larger network operators.

The Downside of Too Much Competition

By distributing the infrastructure, separate entities perform all functions, i.e., authentication, authorization, accounting, aggregation, and service provisioning, thus reducing the entry barriers for the new players and increasing competition in the already concentrated market of service providers. The ease of entry of these news players was ensured by removing any license requirements and only obliging them to register as resellers of data or bandwidth

By easing market entry, WANI introduced competition in the service market. New players, such as PDOAs/PDOs, have entered under WANI to use parts of the network to enhance competition in the final customer/retail market. This has led to lower prices and a distributed yet competitive ecosystem of public Wi-Fi hotspots.

This newly introduced competition in the market is multi-dimensional and takes place at various levels. First, PDOs can set up as many internet networks as they want, and the number of networks they provide directly affects their revenues. This creates competition among PDOs to offer more networks and better services to attract more customers. Secondly, PDOAs can register as many PDOs as they want; thus, their profits are directly proportional to their number of PDOs. Hence, they compete to attract more PDOs to their platform.

Lastly, cheaper public Wi-Fi hotspots offered by PDOs compete with pricier cellular data and home broadband services that directly reach the houses provided by TSPs and ISPs. Competition is further intensified by the fact that PDOs source their internet bandwidth from the same TSPs and ISPs through Internet Lease Lines (ILLs), which provide PDOs with a dedicated data connection with a fixed bandwidth. This means that the market for cellular data and home broadband services has an integrated model where TSPs and ISPs act as both network providers and service providers. Meanwhile, in the case of public Wi-Fi hotspots, the same TSPs/ISPs function as network providers who provide internet bandwidth to PDOs, which are their competitors in the broadband service market.

Rather than improving last-mile connectivity, this competition has limited the profits of many PDOs, including small owners of Kirana stores (general stores) or tea stall owners, who lack the scale to thrive in the market. Consequently, it is more challenging for them to flourish and serve hard-to-reach communities.

Problems with the Revenue Model

Payments between PDOAs, PDOs, and service providers are made upfront and are not based on a revenue-sharing model. PDOAs or PDOs must also pay the upfront amount for ILLs, where the profits and revenue would depend on internet usability. Similarly, PDOAs will directly receive the payment from the end users, and later, the profit will be shared with PDOs based on the ratio agreed upon between both parties. However, the latter remains negotiable; in the former case, the power lies in the hands of service providers.

No price caps on ILLs or prescribed revenue-sharing models between PDOAs and PDOs leave room for a longtail in the market. Regulatory silence is posing a challenge for PDOs who provide last-mile connectivity, making it difficult for them to sustain themselves in the market. The revenue model has proved to be one of the drawbacks of WANI, as it contradictorily restricted the new small players from flourishing or sustaining themselves in the market.

Moreover, the framework also sought to reduce end-user tariffs on data packages offered by PDOs to attract more users by making it easier and cheaper for them to set up access points. Although the former is a success, the latter remains questionable as TSPs and ISPs impose hefty tariffs on ILLs, making it difficult for PDOs to set up access points. There are two possible reasons for these inevitably high tariffs. Firstly, the emergence of PDOs is intensifying competition in the market for home broadband services and cellular data, which are lucrative for TSPs and ISPs. As a result, they are aiming to encourage growth in the home broadband and cellular data market by imposing restrictions on PDOs, potentially leading to market foreclosure. Secondly, they don’t have other financial motivations to invest in the infrastructure to provide ILLs as they don’t gain any additional monetary benefits and low value on investments from WANI.

Additionally, due to low end-user tariffs and hefty tariffs on ILLs, PDOs' operational expenses exceed their incoming revenues. This is exacerbated by their dwindling returns from data package sales, coupled with escalating ILL costs. Consequently, this undermines their motivation to extend connectivity to remote areas despite reduced entry barriers facilitated by the removal of licensing requirements.

Conclusion

Although there are fewer regulatory interventions on all the actors in WANI's value chain, the excessive and unsustainable competition caused by the unbundled and distributed framework, coupled with regulatory silence on the revenue model, has constrained PDOs, resulting in a decline in the number of public Wi-Fi hotspots.

The WANI initiative, to date, has not increased the number of public Wi-Fi hotspots for two reasons. Firstly, because of regulatory silence on the revenue and pricing model employed by all the actors in the distribution chain, it has failed to attract existing TSPs and ISPs to invest in the WANI infrastructure and new players such as PDOs/PDOAs Secondly, due to a lack of financial incentives for ISPs and TSPs, they fairly compete with the new small players in the concentrated market, the model is not attracting existing TSPs and ISPs to invest in the WANI infrastructure or new players such as PDOs/PDOAs.

As a result, WANI has failed as a solution to connectivity and a mechanism for de-concentration. This regulatory and market failure accounts for the increase in broadband connectivity through the mobile wireless mode of access and the corresponding decline in fixed wireless connection due to regulatory silence on the revenue system despite the ease of entry barriers. Incorporating price caps on Internet Leased Lines (ILLs) and establishing provisions for revenue-sharing models within the regulatory framework could effectively alleviate the financial burden on Public Data Offices (PDOs), thereby facilitating their growth in the market and potentially catalyzing the proliferation of public Wi-Fi hotspots across India.