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The fiscal 2004–05 was a very good year for the modem market, which crossed Rs 200 crore. The industry saw a 43 percent growth with a revenue of Rs 207 crore for FY 2004–05. Leased line modems had registered high unit sales with ADSL broadband showing strong growth. DSL also showed high traction with very little contribution from the dial-up segment to the overall modem market. As of now the ISPs are deploying ADSL broadband modems.

Dial-up Phasing Out
The dial up industry, though dismissed by the industry earlier, continued to see a sizeable market share till FY 2003–04. But now, with the onset of broadband to home, the dial-up market is phasing out. This has primarily resulted from broadband getting into the mainstream. What little business dial up saw was mostly for internal modems card for residential users and SME segment. These modems will be replaced predominantly by DSL and ADSL type of modems. But the dial-up cannot be written off completely yet. It will have around 20–25 percent market, to be deployed mainly as internal modems and used by those with minimal usage patterns. Even an increase in PC penetration and adoption will not support the dial-up market as users are shifting to the broadband option.

The market share of dial-ups has been dropping despite lowering of prices.

Even the technology has reached a saturation point and the technology itself is being replaced by the likes of DSL, leased line, cable, and ADSL.

Broadband Access
Broadband modems are replacing dial up Internet access because they offer the customer higher speed, low competitive costs, and an always-on capability. Additionally, cable service providers are getting aggressive and are promoting data and even voice-over-cable using their existing cable infrastructure. Broadband clearly is the buzzword right now and as far as the foreseeable future is concerned.

Although broadband technologies-DSL, ADSL, and cable-are being aggressively promoted, most people have access only to analog phone lines, which is the reason why dial-up technology is still in the market. Broadband will find the desired traction once it reaches the B and C class cities. In metros and class A cities-thanks to increased ISP deployments-most of the SOHOs (small offices, home offices) and SMEs (small and medium enterprises) are increasingly shifting their access to Ethernet. If today one looks at the pricing of broadband services in India-base model CPE is approximately Rs 2,500 including installation and usage charges of up to Rs 500. Broadband is set to be the success story in the market as at this relatively low price it offers five times higher speeds (256 kbps) compared to dial-up.

On the Flip Side
Though the market is moving very gradually to broadband access technologies. In reality, most users have access only to analog phone lines. In addition, broadband has not yet become the default choice. A truly converged platform can change this. However, for a converged platform to emerge, service providers will have to aggressively promote data and voice-over-cable.

At the moment, cable is the only proven last-mile, wire-line access method to provide video, voice, and data. However, the distribution of analog lines is still very large among the masses and it would remain the primary technology and means of accessing the Internet (from work or home) for some time going ahead.

Business was Good
The major business was from the leased line modems for most vendors. The bulk purchases came from the BFSI, telcos, and retail sectors.

Overall, the modems market is experiencing better times. In the networking market, sales of modems registered a healthy growth of over 60 percent. Consumption of modems in the household segment grew by 46 percent because of cost-effective internal modems. Today, almost all laptops and home PCs are equipped with internal or soft modems. Internal modems are able to function and perform like external modems, and customers have started to accept them as an integral part of the PC purchase.

Leased line held majority of market share, and was followed by DSL and ADSL technologies for access. Most of these went to banking and financial institution customers, who took lines from BSNL, MTNL, and private ISPs.

The DSL modem market saw and will continue to see traction in demand for DSL modems, given the aggressive rollout of Internet services by BSNL, Reliance, Tata, and Bharti. DSL is becoming the prevalent and popular technology, and showing significant growth. Also, the dropping cost of leased lines gave an impetus to the growth of the leased line modem market.

The cable modems have not registered significant growth in spite of the overwhelming statistics for the cable industry. There are over 47 million cable homes in the country. The sale of cable modems primarily suffered due to the stagnant cable Internet business.

On the dial-up market, trend is towards internal/built-in modems. External modems have more or less seized to exist.

Last year, almost all modem manufacturers predicted that there would be a dive in the modem market. However, unit sales increased since leased line seem to be the most prevalent and popular technology to be connected, also because of a substantial dip in leased line prices.

Outlook
The biggest innovation in the modem market, of late, has been that low-cost chipsets from chipset vendors have become available and it is these that will drive growth in the dial-up, leased line, cable, DSL, and ADSL modem market. Leased lines followed by DSL and ADSL modems will show substantial growth in the future. Cable modems are not expected to grow in any large measure.

DSL will take some time be the prevalent and popular technology. An interesting trend will be the integration of other technologies like wireless/firewall-VPN into ADSL. Service providers will start providing more value-added services rather than just the traditional Internet access services. Applications over the Internet (like VoIP and enterprise access) will fuel the growth of value-added services in the DSL segment. The dropping cost of leased lines will drive growth in the leased line modem market too.

Players
D-Link registered a shade over 100 percent growth raking in Rs 70.5 crore from the modem market and moved up from the runner-up to the winner's spot. It has a significant market share in dial-up, leased line, and DSL; which is why it ranks among the leaders. The biggest strength of the company is its nationwide network infrastructure and territory distributors.

Atrie technologies continued to be at the number two position with a 44 percent growth at Rs 52 crore in FY 2004–05.

MRO-Tek was in the third position with revenue of Rs 45.5 crore. This company offers products for dial-up and DSL technologies. It is heavily focusing on the DSL market and is geared to provide more end-to-end solutions on the DSL front.

Bharti Teletech came in fourth netting revenues of Rs 9.73 crore from modems, however it showed an exponential growth of 234 percent.

Dax Networks was amongst the few that registered a decline in revenues. From Rs 9 crore in FY 2003–04 it came to Rs 7 crore in FY 2004–05. Its modem offerings include dial-up, ISDN, and leased line modems. Dax products are availed used ISPs, who bundle the modems with their offerings; OEMs who ship these modems along with PCs; and its distribution channels in the country.

Minu Sirsalewala