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Infrastructure calling: Keeping pace with changing industry dynamics

March 29, 2017

The telecom sector in India has witnessed significant growth over the past two decades. From mobile technology being a niche product to becoming almost ubiquitous, the industry has come a long way. While there are a number of factors that have supported this growth, the role of the telecom infrastructure industry has been paramount. Moreover, strong and robust tower and fibre infrastructure across the country has ensured that mobile services reach a large part of the population.

Moreover, with competition among operators increasing and data consumption increasing at an exponential pace, the infrastructure industry, too, is gearing up to meet the changing needs of the sector. There are also new opportunities arising from the government’s digital push.

Growth in data demand

With the demand for data growing rapidly, operators have been constantly upgrading their networks to tap the emerging opportunities. Most of them have launched 4G services in order to offer better customer experience. In fact, the proliferation of affordable smartphones and the availability of 3G and 4G services at affordable rates have coincided with the demand created by the growing popularity of m-commerce, social media, instant messaging, video entertainment, etc., further clogging the existing capacity at tower sites. Therefore, apart from rolling out new services in new geographies, operators have been adding capacity to their existing networks. All this has led to an increase in the number of sites being rolled out as well as tenancies on the existing sites. Further, tower companies are exploring new opportunities in areas like in-building solutions, fiberisation of sites, microcells and Wi-Fi hotspots apart from providing just tower installation services.

Government initiatives create demand

In the past couple of years, the government’s thrust on digitialisation of the economy has provided a fresh impetus to the telecom industry. The Digital India and Smart Cities initiatives have opened up new investment avenues for the industry. Therefore, it is imperative to have a robust telecom infrastructure for implementing various services envisaged under these initiatives. Meanwhile, the ambitious BharatNet project, which aims to connect all rural areas, has finally made notable prog-ress. About 75 per cent of the work under Phase I was completed by end-2016 and the remaining will be completed by March 2017. The government has allocated Rs 100 billion to the BharatNet project under the Union Budget 2017-18. These developments are likely to boost demand for telecom infrastructure in the short-to-medium term.

Easing the policy regime

Policy uncertainty has been one of the major issues facing the telecom infrastructure industry for the past several years. The government has taken measures to address the challenges faced by the industry, the most important one being the release of right of way (RoW) rules. The rules aim at facilitating the installation of mobile towers, as well as optic fibre and copper cables in a time-bound and non-discretionary manner. The new rules, effective from November 15, 2016, are likely to resolve the long-pending issues faced by the industry, and help cable/tower companies and telecom operators realise the Digital India, Smart Cities Mission and BharatNet targets. They may also help address the call drop issue and facilitate the transition to 4G networks.

According to T.R. Dua, director general, Tower and Infrastructure Providers Association (TAIPA), “During the past year, the government undertook path-breaking initiatives such as providing adequate spectrum through spectrum auctions; issuing policy around the installation of towers on government land and buildings, which will help improve call drops and coverage related issues; releasing RoW rules; and issuing amendments in building by-laws, allowing the installation of towers on residential buildings. All these will help the industry create a robust telecom infrastructure and will enable the ease-of-doing-business.”

Other trends

The industry is also witnessing increasing instances of mobile network infrastructure sharing among operators. With the government’s approval of active sharing, infrastructure sharing is expected to become more prevalent. In fact, several telecom operators have also started adopting the optical fibre cable sharing model as it helps them optimally utilise their existing data networks and expand 3G and 4G networks cost effectively.

Meanwhile, managing operational costs, including energy costs remains the key focus area for the infrastructure industry. During 2016, the industry installed 89,000 diesel-free sites in an attempt to reduce energy costs and the carbon footprint. In addition, the industry is increasingly using automation and real-time monitoring solutions, as well as green and energy-efficient solutions. Batteries and storage solutions have also become an important part of a tower company’s energy management strategies.

Case for fibre

Mobile technology is evidently evolving at a rapid pace. However, all these technologies (3G, 4G or 5G) need massive capacity in the backhaul to offer a seamless customer experience. The entire data transmitted on wireless networks such as 4G and 5G need to be transmitted through optical fibre, which is a future-ready technology. In India, less than 20 per cent of mobile tower sites are fiberised as compared to 70-80 per cent in developed countries. With increasing competition, it is important to have a robust mobile backhaul network that ensures seamless voice with data connectivity across 2G, 3G and 4G/LTE technologies.

With increasing network capacities, optical fibre is emerging as the best-suited backhaul technology. Moreover, government initiatives like Digital India, BharatNet, the Smart Cities Mission and Network for Spectrum, as well as the private sector’s focus on setting up a scalable broadband infrastructure to ensure a true broadband experience are expected to further drive the demand for fibre. Besides, with the introduction of new technologies such as fibre-to-the-x (FTTx) and 5G, demand for fibre is likely to increase in the long term.

Challenges and outlook

Although the infrastructure industry’s underlying trends have been positive, it continues to face certain challenges. Ma-naging the escalating energy costs remains a key area of concern. While several steps are being taken in this regard, a structural change is yet to be seen. Moreover, the growing competition on the operators’ side is forcing the industry to change its business approach. As consolidation on the operators’ side looms, the infrastructure industry will not remain untouched by it.

Despite bottlenecks, there are immense opportunities arising from programmes such as Digital India and Smart Cities. This will call for infrastructure development to enable pan-Indian connectivity. The unprecedented growth in terms of adoption of digital services like payments, e-governance and entertainment will facilitate more investment in the telecom infrastructure space.

According to Dua, “With the increase in data explosion, the tower industry will witness huge growth in deployment of towers and tenancies. The accelerated network investments will drive revenue and tenancy growth for the tower companies. Further, the government’s vision of a digital India will fuel the requirement and deployment of telecom infrastructure as it is the backbone for facilitating connectivity. Besides, the government’s digital push towards cashless payments will enable more people to adopt smartphone-based payment methods. India will also see rapid adoption of the internet, garnering significant interest from digital entrepreneurs in years to come. These will lead to a rise in consumption of on-demand videos on the second screen. Payments bank launches in 2017 are also expected to increase mobile linkages.”

Net net, with the telecom industry undergoing consolidation and the emergence of data revolution, the infrastructure segment is likely to witness fresh dynamics in the near future.


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A Shared Vision: Collaboration key to 5G development and deployment
  • Jean Pierre Bienaimé, Secretary General, 5G IA
  • Satish Jamadagni, Vice Chairman, TSDSI and Vice President, Reliance Jio Infocomm Limited
  • R.K. Pathak, Member Secretary, 5G HLF, and Deputy Director General (International Cooperation), DoT
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