See http://www.ashwin.name/papers/bb-india.pdf
(This post found on a mailing list posted by Tarun Dua...)
The way ISPs operate in India is also a reason for high
bandwidth prices. ISPs act as bandwidth resellers rather than
network operators [7]. No effort is made to peer with other
networks, reach out to content owners or optimize network
operations. The network is designed hierarchically for the ISP
alone – no gateway traffic with other providers is assumed at
the beginning, and as the inter-provider traffic (peering)
increases, the pricing for the same rises near exponentially.
Growth of Internet in India has been impeded because of
high prices, a flawed pricing model and weak demand for
Internet related services. Artificial shortage of international
bandwidth, poor network operations, and difficulties with the
last mile have lead to high cost of bandwidth in India despite a
decent metro and core networking infrastructure. The usage
based pricing model has not allowed content or demand to
grow. Localized content is unavailable resulting in low
demand for Internet connectivity by retail customers. Hence,
we have a scenario where the growth of Internet in general and
broadband in particular has slowed down. Unbundling the
international cables, better peering by ISPs, and competition
through regulation will decrease the price of bandwidth in
India propelling the much needed increase in broadband
demand. Employing the flat-rate pricing model will increase
demand for content and services. These steps will enable
acceptance of the Internet to grow at rapid rate in India.
(This post found on a mailing list posted by Tarun Dua...)