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Faster Roll-outs: Opportunities and challenges in the tower industry

June 15, 2015

After having experienced a slowdown for two years, the telecom infrastructure industry now seems to be on a revival path, with an increase in demand for new towers and tenancies, and the roll-out of next-generation technologies like 3G and long term evolution (LTE) to cater to the growing demand for data services. The recently concluded spectrum auction will further drive up tenancies as most operators that hold spectrum in both the 900 MHz and 1800 MHz bands are likely to move their 2G (GSM) networks to the latter band in order to free up the 900 MHz band for 3G. Despite the ongoing initiatives and significant growth potential, the telecom infrastructure industry continues to face several regulatory and operational challenges. At a recent tele.net conference, “Telecom Infrastructure in India”, industry stakeholders commented on the tower industry’s performance, opportunities, challenges and the way forward. Excerpts…

 

umangDevendraBimal_Dayal_Indus_Towers

Umang Das, Chief Mentor, Viom Networks, and Vice Chairman, TAIPA

Back in 2005, we started off with the shared tower concept by sharing 50 towers, which have, over time grown, to a 400,000+ industry and represents the backbone of the Indian telecom ecosystem. The Indian telecom tower industry is the largest in the world. While growth in the sector has been voice-led so far, it will be data-driven in the next phase. This will bring about characteristic changes both in society and in the kind of infrastructure that will be required to support the telecom networks of the future.

The government’s Digital India initiative focuses on bridging the digital divide and has laid down specific targets in this context. In addition, its National Optical Fibre Network  project will be instrumental in enhancing broadband reach in rural areas. The project is expected to provide broadband connectivity to 250,000 gram panchayats across the country. We are, therefore, seeing the emergence of a mobile internet society or a digital society, and the tower industry will play a key role in creating an ecosystem important for such a society to flourish. The tower industry will be the fulcrum on which the entire digital ecosystem is expected to come up. Here, the tower industry’s ability to rapidly roll out relevant infrastructure will be crucial. The country’s data growth strategy will ride on this infrastructure.

However, there is a visible disconnect between policy formulation at the centre and its implementation at the state level, which is perhaps the single biggest bottleneck that the entire industry faces. Another challenge is the growing concern over tower radiation taking a toll on public health. Further, matching end-user aspirations with the speed of infrastructure roll-out is a key issue that needs to be looked at. The launch of 3G and 4G will create an impetus for the roll-out of more infrastructure in terms of tenancy growth, better utilisation of the existing infrastructure and fresh tower roll-outs.

Tower companies need to explore new business models as the current model is space based, wherein tower companies invest in the setting up of the site, then get an anchor customer on board and share the site with other operators. The revenues also have been linked to space utilisation. However, we are now entering an era of multi-technologies on individual bands that were, until now, sacrosanct for voice or data. This will have a strong bearing on the tower industry as it is now required to adopt new revenue models for sustainability. Energy management at tower sites also needs to be a key focus area. We believe that tower companies can be an anchor to the esco model.

Bimal Dayal, Chief Operating Officer, Indus Towers

There had been a lot of scepticism regarding the survival and sustainability of the tower industry when it first came into existence in India. However, the industry today comprises around 400,000 towers and more than 700,000 tenancies, and has a high level of operational efficiency. All this clearly indicates the well-developed ecosystem in which tower companies operate. In fact, the mobile revolution in the country has been brought about on the back of these towers.

During 2014, tower roll-outs grew at around 3 per cent while tenancy growth was nearly 9 per cent. Notably, this growth has been achieved against a backdrop of industry uncertainty, wherein there was pressure to win back spectrum in several circles. However, the uncertainty has now settled and we can look forward to good times ahead as we are entering an era of phenomenal data growth. As per some analyst reports, 40 per cent of the global LTE growth during 2015-20 will come from the Asia-Pacific. Further, 50 per cent of the world broadband subscriptions will come from the Asia-Pacific during the same time frame. Data growth in India as reported by Airtel in its last quarter is almost 73 per cent and as reported by Idea is 100 per cent.

This data growth will require the tower industry to move from the conventional ways of setting up sites to explore new models and solutions. The sites that need to be built in urban areas now require a great element of camouflaging and we intend to design sites in a way that the towers can double as stands for advertisement hoardings. It is not only about changing the way we roll out sites but also the speed at which these get rolled out.

After the recently conducted spectrum auction, there will be a lot of network realignment between technologies as well as between frequency bands. 3G will be rolled out extensively and intra-circle roaming will come down to a minimal level. Spectrum in the 900 MHz band will be opened up to many more technologies. Further, the LTE story is expected to take off at least in two bands during 2015. With the realignment of all access technologies, a robust backhaul network will be created. This creates pressure on infrastructure providers to facilitate faster roll-outs and serve their customers better. While a number of opportunities are available to the tower industry, it continues to be plagued by several issues. We still have coordination problems regarding policies between the central and state governments. Further, the controversy surrounding tower radiation is a pain point.

Another big challenge facing the industry relates to the growing requirement for energy and its management at tower sites. The race for developing the best energy solutions is on and the industry is open to cutting down on diesel consumption to an extent, wherein we may just do away with it in the future. However, to ensure this, we need help from partners since we are not experts in power generation. It is worth mentioning that grid power availability, especially in our experience at Indus Towers, has improved in recent times.

Devender Singh Rawat, Chief Executive Officer, Bharti Infratel

Data is growing at an enormous speed not just in India but globally too. For me, telecom networks and infrastructure are highways that need to be shared so that the end-user gets the optimal cost. In the last revolution, it was about sharing infrastructure, which caused immense growth to take place in the market. Going forward, fibre and backhaul connectivity are going to be the limiting factors for most operators.

India is still one of the countries with the lowest spectrum availability for operators, given the number of subscribers they service. Eventually, this spectrum will go into the hands of the select few operators that are able to win the data battle and provide service differentiation to customers. The recent auction is expected to bring in more operators that will roll out data networks. For the first time in India, we are going to launch 4G simultaneously with the rest of world. This puts immense pressure on the way we are going to build infrastructure. The rest of the world has mature wireline infrastructure, homes connected with fibre, etc. In India, the limiting factor is not only tower infrastructure, but also the high site requirements. Fibre is one area that is expected to provide immense opportunities to be shared among multiple operators, thereby improving the end-user experience. Wi-Fi is another area that can be used to offload some of the traffic.

Traditionally, operators have been managing networks that had good outdoor coverage but poor indoor coverage. However, 70-80 per cent of data globally is now being generated indoors. Therefore, the focus of operators will shift towards making indoor quality better.

Speaking of the changes that are likely to take place in the tower infrastructure space, tower sizes will reduce. The tall towers that were traditionally needed for microwave backhaul will no longer be needed. However, operators are still not moving to equipment that is lighter in terms of shared antenna. It has to do with policies, which do not clearly allow antenna and in-building sharing. If the government issues clearer policies, a number of companies will come forward with their existing assets and will be keen to build more assets, going forward.

Further, fibre in building are solutions that are capital-intensive. Operators today have started to rely increasingly on infrastructure providers for building a large part of the engineering infrastructure that is needed to make sure that their time-to-market is reduced. We will have more fibre being laid out within the city than over long distances. In addition, regulatory challenges still remain for tower companies. The green targets that have been set are unrealistic and difficult to achieve, even on paper. We are working with the states to see that uniform guidelines come in, but all the state agencies should treat telecom infrastructure as a critical area.

 
 

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