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Making Cities Smart: Opportunities for telecom players

June 28, 2017

The Smart Cities Mission was launched by the government in July 2015 to achieve urban transformation, drive economic growth, and improve the quality of life of people by enabling local area development and harnessing technology for deploying smart solutions. The government envisages the creation of 100 smart cities at an initial investment of Rs 1 billion per city per year for five years (2015-16 to 2019-20). An equal amount is to be contributed by state governments/urban local bodies.

The core infrastructure elements in a smart city include smart energy management, smart mobility, smart waste management, smart education, e-governance, smart healthcare, smart housing and smart environment management. The implementation of these “smart” components requires a robust information and communication technology foundation, comprising devices that are connected through telecom networks. The data generated through these devices gets stored in data repositories, to be later leveraged for decision making, budget allocations, and the creation of services and applications.

Opportunities for telecom players

The Smart Cities Mission presents significant business opportunities for all players operating in the telecom domain – infrastructure vendors, network vendors, optic fibre cable (OFC) manufacturers, Wi-Fi and internet service providers, and telecom operators.

Tower providers are set to witness accelerated growth in installations owing to the rise in data usage because of new smart city applications. According to industry estimates, the number of towers is expected to grow at a compound annual growth rate of 3 per cent over the next five years. The industry tenancy ratio is expected to increase from 1.77 in 2014-15 to 2.48 by 2020, with the overall site tenancies expected to reach 1,487,000 by 2020.

The solutions offered by tower companies can be a mix of passive infrastructure, small cells, Wi-Fi, fibre connectivity and service level agreement-driven maintenance support. While small cells are necessary to supplement the operations of existing macro towers and manage increased capacity requirements, Wi-Fi is necessary to provide high speed wireless broadband access to consumers. A total of 44 per cent of the mobile traffic is expected to be offloaded to Wi-Fi and small cells by 2020, with small cells offloading 7 per cent of the data traffic. Along with Wi-Fi, optical fibre, with its high capacity, will act as the backbone for ensuring broadband connectivity. It will also facilitate the installation of sensors, which are key for developing intelligent solutions for a smart city.

Internet of things (IoT) applications that leverage ubiquitous connectivity, big data and analytics are also imperative for enabling smart city initiatives. In a bid to ensure real-time data management, alerts and information processing for improved city administration, embedded systems and a host of devices such as smartphones, sensors, radio frequency identification tags, chipsets and actuators have to be inducted into the physical infrastructure set-up. This will keep city planners abreast of key developments, making a city much smarter by enabling new ways of transport management, traffic control and environmental pollution monitoring. According to NASSCOM, the Indian IoT market is expected to reach Rs 102 trillion by 2020.

Key risks involved

While smart cities offer a plethora of opportunities across the telecom value chain, players participating in the project have to face several challenges. The key among these is the involvement of low revenue generating components in the Smart Cities Mission such as surveillance, which may be useful for the city’s police department but not capable of generating revenues for the cities per se. At present, there is a lack of viability gap funding from the authorities and absence of a minimum revenue sharing commitment. For the success of the Smart Cities Mission, it is crucial to devise self-sustainable smart city models that can operate without government subsidy.

Released in November 2016, the right-of-way rules provide a clear framework for the grant of approvals and settlement of disputes in a time-bound manner with regard to the installation of mobile towers, and laying of OFC and copper cables. However, the implementation of these rules is a key issue, with considerable differences in its execution across states and across multiple local bodies within the states.

Further, under the Smart Cities Mission, all telecom components are required to be deployed in the first year itself and not against on the basis of telecom requirements over the concession period. Another major issue is policy uncertainty due to frequent changes in municipal by-laws and policies, particularly due to change in the ruling dispensation. For maintaining policy stability, it is imperative to grant statutory backing to rules and regulations for a period of at least 10-12 years. s

Based on a presentation by R. Ramanujam, Chief Executive Officer, Delhi Circle, Indus Towers

 

 
 

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