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Teledata

Tele Data

Mobile Subscribers Yearwise comparision

Managing Traffic: New infrastructure needs owing to growing data adoption

June 23, 2017

India is witnessing a surge in high speed data uptake. This can be attributed to factors such as falling data tariffs, hyper competition, availability of affordable smartphones with better specifications, continued 3G and 4G network expansion and coverage, and growing popularity of over-the-top services. The entry of Reliance Jio Infocomm Limited (RJIL) has forced telecom operators to offer bundled services with effective data prices as low as Rs 10-Rs 12 per GB.

The average 4G data consumption per month per user in India stood at 1.4 GB as of December 2016. While India’s data traffic has increased, there is still a significant growth potential. Data usage trends observed in developed and developing countries show that when mobile broadband becomes mainstream it leads to fall in prices and increased customer adoption, which in turn leads to much higher data consumption per subscriber. India’s monthly data usage per subscriber is lower than that of South Korea (4.2 GB), Japan (3.8 GB) and Hong Kong (3 GB), which indicates that there is a significant potential to increase data consumption per subscriber in the country.

Impact on tenancy demand

On the supply side, 3G/4G network expansion by RJIL and other incumbent operators is expected to be a key driver of tenancy demand.

There will be limited expansion of 2G networks in the future as incumbent operators have already reached significant population coverage. Smaller operators do not intend to deploy a considerable number of 2G base transceiver stations for further network expansion, while RJIL is focused on rolling out a long term evolution (LTE) network. As a result, there will be only limited tenancy demand on account of 2G network expansion in the future.

Meanwhile, incumbents are looking to expand their 3G/4G coverage, which will create tenancy demand. However, the infill capacity demand (which could convert into full tenancies) is expected to come from their leadership circles, especially from Metro and Category A circles in the future.

That said, RJIL will be the primary driver for tenancies in the market with its roll-out of the time division-LTE (TD-LTE) network. The frequency division-LTE network will be overlaid on the TD-LTE network and hence will not contribute to tenancies. In order to counter RJIL’s threat, other operators are looking to step up their LTE investments in priority circles.

Scope for IBS and fiberisation

As the data surge continues, operators are looking forward to becoming future-ready by investing in in-building solutions (IBS) and fiberisation. Although small cell deployment is at an early stage globally, the growing adoption of internet of things/machine-to-machine communications and increasing indoor data consumption will push deployments. Small cell deployments, in turn, will drive fiberisation given the regulatory and operational complexities of using microwave backhaul. Globally, several operators have already fiberised their networks to support the increasing data traffic. For instance, 95 per cent of China Mobile’s sites and 90 per cent of AT&T’s sites are fiberised. Meanwhile, in the case of T-Mobile, 50 per cent of its total sites and 95 per cent of its 4G sites are fiberised.

In India, only 20 per cent of the total sites are currently fiberised. With the high uptake of data services, particularly 4G, Indian operators would require optical fibre backhaul to enhance network capacities.

Site fiberisation can be seen as a key growth opportunity for tower companies as it will bring more value to the operators. For instance, US-based Crown Castle acquired Fibernet in 2016 primarily to increase its fibre footprint by about 10,000 km. It has actively increased its fibre assets both organically and through acquisitions. Small cells and fibre infrastructure services together account for 12 per cent of the company’s total revenue currently. Similarly, Indonesia’s STP used fiberisation as a means to gain competitive advantage over larger tower companies in Indonesia.

Operating model for site fiberisation

An operating model reduces the cost of fiberisation through sharing of last mile infrastructure while leveraging the operator’s existing fibre network. Under the model, a tower company connects its own site to the nearest operator’s point of presence (PoP), and invests in the capex required for site fiberisation. Operators use the tower company’s fibre from the tower site to the nearest operator PoP, on a tenancy basis. Beyond the fibre drop point, other operators are required to have a commercial agreement with the nearest operator to carry their traffic up to the nearest interconnect points. There can be a possible variant of the model wherein the tower company leases fibre from the nearest operator to the PoPs of other operators.

Massive changes ahead

Going forward, consolidation amongst operators can lead to potential losses due to resultant site sharing. Meanwhile, the intense competition in the market is leading to a severe undercutting of prices by tower companies to gain customers. Meanwhile, operators are exploring opportunities for radio access network sharing arrangements due to pressures of cost optimisation.

Tower companies will now have to think outside the box and explore additional revenue streams from advertisement, fiberisation, IBS and smart cities.

Based on a presentation by Saurabh Sinha, Senior Consultant, EY

 

 

 

 
 

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