NEW DELHI: Internet penetration in India may be on the verge of another leap forward with the launch of a cheap smartphone that also comes packaged with one year's free internet access.

"The big issue with internet has been that the cost barrier has not been broken," according to Suneet Singh Tuli, CEO of Datawind, a Canadian company best known for its low cost Akash tablets but which is now moving into smartphones.

The new offering, as Tuli outlined to The Hindu, is "a stepping stone for basic internet, because if the consumer has to pay for it, he is not sure. If he has it for free, he will try".

There are some restrictions – consumers will have to surf the internet using Datawind's own UbiSurfer web browser and if they want to access audio and video streaming content they will have to buy data packs.

Falling hardware prices have made smartphones increasingly accessible – although Tuli noted that feature phones still accounted for two thirds of monthly phone sales – but data costs are a barrier to consumers going online.

Datawind claims to be able to offer a free internet service – it pays the operator for all consumer usage – thanks to its technology which significantly reduces the consumption of bandwidth.

"If you use a normal Android browser, it uses about 14-15 MB/hour of data consumption," Tuli explained. "Opera Mini is around 6 MB and we are 1.5 MB. That reduction is so significant that I can recover the cost of data on a Rs 2,000 device."

"Not only does it [data] go through faster but the cost of data too is low," he said.

The firm is targeting tier 2 and tier 3 cities in an ambitious drive to shift around 5m units in the next year through tele-shopping networks and physical retail outlets.

Separately, a report from retargeting business Vizury said that mobile commerce in India had grown 130% in 2014 and now accounted for 58% of all online sales.

Data sourced from The Hindu, Economic Times, PR Newswire; additional content by Warc staff