With over a billion mobile subscriptions and half a billion internet users, the country is witnessing un­precedented growth in data consumption. In order to sustain this increase in data uptake, there is a need to simultaneously expand the telecom infrastructure, comprising telecom towers and fibre. There are currently over 0.5 million mobile towers in India and an optic fibre cable (OFC) network of 1.5 million km. According to experts, this is insufficient to support the exponential growth in data and overcome the service quality-related issues that have emerged in the past few years.

Industry estimates suggest that at least 100,000 additional telecom towers are needed in the next two to three years to provide pan-Indian connectivity, and support the proliferation of next-generation technologies such as 5G, internet of things and artificial intelligence. Moreover, with the country embarking on the path to digital empowerment, it has become imperative to ramp up telecom infrastructure to ensure the success of programmes such as Digital India and the Smart Cities Mission.

Telecom infrastructure emerges as a key focus area of the new telecom policy

The telecom infrastructure sector has received significant attention in the new telecom policy, the National Digital Com­mu­nications Policy (NDCP), 2018. One of the key missions envisaged under the policy is “Connect India”, which seeks to create a robust digital communications in­fra­­structure in the country. Paying heed to the long-standing demand of industry stakeholders, the policy has proposed to accord critical and essential infrastructure status to the telecom infrastructure industry, thereby bringing communication infrastructure at par with other connectivity infrastructure like roadways and railways. To facilitate the installation of mo­bile towers, the policy proposes to extend the existing incentives and exemptions for the construction of telecom towers, and grant right-of-way (RoW) permissions to fast-track the deployment of telecom towers on government premises.

With regard to fibre infrastructure, the policy has suggested implementing a “Fibre First Initiative” to expand the reach of fibre networks to households, enterprises and key development institutions in Tier I, II and III towns and rural clusters. Under this initiative, optic fibre cables would be given the status of a public utility. It also aims to devise new collaboration models involving the state government, local bodies and the private sector for the provision of shared duct infrastructure in municipalities and rural areas as well as on national highways. Moreover, it has proposed to make the installation of telecom infrastructure and associated cabling and in-building solutions mandatory in all commercial, residential and official spaces by amending the Natio­nal Building Code of India.

The policy has also suggested implementing a “fibre-to-the-tower” program­me to enable the fiberisation of at least 60 per cent towers for the speedy migration to 4G and 5G services. Another significant proposal of the new policy is to create a national digital grid by establishing common service ducts and utility corridors in all new city and highway road projects. This can be achieved by creating a collaborative institutional mechanism between the central government, the state governments and local bodies to enable a common RoW permission process, and standardisation of costs and timelines.

To address the issues associated with the roll-out of telecom infrastructure, the government issued a set of uniform RoW rules on November 15, 2016. These rules lay down a framework to provide appro­vals and settle disputes in a time-bound manner as well as improve the coordination between telecom companies and government autho­rities. In addition, the rules allow online filing of applications to ease the pro­­cess of telecom infrastructure roll-out in the country. Recently, the government has also clarified that tower infrastructure providers will be considered as licensees un­­der the RoW rules. The actual implementation of these rules, however, has been disappointing owing to considerable differences in execution across states and multiple local bodies within the states. Only 12 states have adopted these rules so far.

Government initiatives provide much-needed impetus to telecom infrastructure

With a view to transform the country into a digitally powered and technology-driven economy, the government has announced several initiatives such as Digital India, the Smart Cities Mission, BharatNet (providing high-speed broadband connectivity to gram panchayats), GramNet (connecting key rural development institutions), Na­gar­­­­­­Net (deploying 1 million public Wi-Fi hotspots in urban areas), Jan W-Fi (deploying 2 million Wi-Fi hotspots in rural areas) and the Digital Village programme. The success of all these programmes hinges on the availability of a robust communications infrastructure. For instance, the roll-out of various services under the Digital India initiative, such as e-governance, e-Pathshaala and digital money, is possible only if there is ubiquitous high-speed internet available, which can only be provided through a robust fibre or wireless infrastructure.

Through the Smart Cities Mission, the government plans to develop 100 sm­a­­rt cities at a total proposed investment of Rs 2.03 trillion. A smart city is founded on highly advanced ICT infrastructure and derives actionable insights from connected devices. The devices need to be connected through high speed and low latency networks that are capable of transporting huge volumes of data. With its unlimited capacity, fibre is the perfect communication technology for providing high speed connectivity in a smart city. OFC also facilitates the installation of sensors which are critical for providing smart solutions. Moreover, the roll-out of new technologies such as 5G, artificial intelligence and augmented reality in smart cities is not possible without a strong fibre network. The Smart Cities Mission has provided a business opportunity to tower companies. Cities are collaborating with major tower companies to install smart poles that can provide services such as Wi-Fi, smart lighting and surveillance. For instance, Bharti Infratel has been awarded a contract for setting up intelligent street poles across Bhopal smart city. Meanwhile, Indus Towers has collaborated with Vadodara Smart City Develop­ment Limited to install smart poles in the city that will provide Wi-Fi services, apart from hosting digital billboards, environment sensors, public address systems, emergency call boxes, traffic signals and LED lights.

The demand for OFC is also getting a push from the BharatNet project, which envisages an OFC network of 700,000 km for providing high-speed broadband connectivity to 250,000 gram panchayats (GPs) across the country. Under the first phase of the project, 100,000 GPs have already been connected. The second phase is expected to be completed by March 2019. Meanwhile, an OFC network of around 60,000 km has been planned under the Network for Spectrum project, which is a pan-Indian OFC-based communication network being developed for the defence forces.

Key trends in the tower infrastructure space

  • Investments in 4G networks continue to drive growth: For the past few ye­a­­rs, telecom operators have been ramping up their investments in 4G networks. Operators have set up new 4G tower sites in uncovered areas and en­hanced their existing network capacity and tenancies. Further, the surge in data consumption has increased the demand for infill sites in metro cities and Cate­go­ry A circles. The expansion of voice over LTE services has fuelled the de­ma­nd for tower sites. Going forward, higher backhaul capacities and site fiberisation will become crucial. Some industry experts feel that tower companies are in a better position to undertake site fiberisation as they can easily extend synergies of the tower sharing model to fibre in­fra­structure at site locations.
  • Monetisation of tower assets emer­ges as a key debt reduction strategy for telecom operators: Traditionally, the majority of the telecom towers in the country have been controlled either by telecom operators directly or by tower companies owned by these operators. How­ever, in the past few years, operators have been divesting their sta­kes in non-core tower assets to reduce their debt burden and also to comply with the government’s spectrum holding guidelines. For example, before the com­pletion of their merger, Voda­fone India and Idea Cellular sold 10,200 and 9,900 stand-alone telecom towers, respectively, to American Tower Corpo­ra­­tion. The government has also hived off Bharat Sanchar Nigam Limited’s (BSNL) tower assets into a separate com­­­­­pany to monetise the debt-laden op­e­rator’s telecom tower infrastructure. In January 2019, Reliance Jio Infocomm Limited decided to spin off its fibre and tower businesses into Jio Digital Fibre Private Limited and Reliance Jio Infra­tel Private Limited in order to re­duce its debt, go asset-light and transfer the future capex to the new entities.
  • Consolidation in the telecom tower sp­a­­ce picks up pace: Apart from the emergence of independent tower companies, which are free from operators’ influence, the industry is also witnessing consolidation among the existing players. This will help them improve their operational strategies and leverage economies of scale. According to ratings agency ICRA, the number of players in the in­­d­us­­try is expected to reduce from 10 at pr­esent to four or five in the next few years.
  • In-building solutions (IBS), small cells and Wi-Fi open up new business avenues for tower companies: Besides providing plain tower services, telecom companies are exploring op­por­tunities in the IBS, small cell and Wi-Fi domains. The uptake of these services is rising on the back of increasing demand for superior coverage both indoor and outdoor. Tower companies have adopted the neutral-host model for providing such solutions. Under this model, the tower company pays for the system set-up and leases the access rights to operators. The co­m­pany off­ers end-to-end solutions inclu­ding acquisition of RoW for buildings, and planning, deployment and maintenance of the telecom infrastructure.
  • Operators step up energy management initiatives: Managing energy needs and the associated costs has been a key challenge for tower companies. The industry is now working to minimise its diesel consumption by exploring alternative and cost-efficient technologies, in­creasing the adoption of renewable energy sources and adopting high efficiency storage solutions. Tower companies are also converting their highly energy-intensive indoor sites to outdoor sites by replacing air conditioners with free cooling and natural cooling units. They are also partnering with speciali­sed operations and maintenance, and da­ta analytics companies to manage their energy needs and consumption.

Key trends in the fibre infrastructure space:

  • Fiberisation of tower sites presents a huge growth potential: At present, less than 20 per cent sites in the country are fiberised, as compared to 75-80 per cent in the US, China and Japan. The low rate of site fiberisation in India is a matter of concern, as microwave backhaul can only support bandwidths up to around 200 Mbps. To support the rising data consumption, operators will need more backhaul capacity, which will come from site fiberisation. Moreover, the demand for site fiberisation will be driven by the fact that operators will have to carry traffic across multiple access networks such as 3G, 4G, IBS, Wi-Fi and fixed line in the next few years. Industry estimates suggest that approximately one in two sites in India will need fiberisation in the next three years.
  • Fibre-based backhaul enables the transition to 5G: The government has repeatedly expressed its intention of not missing the 5G bus and rolling out the technology in India in line with the global timelines. However, to migrate to 5G technology, telecom operators need to make a number of changes to their existing networks, especially in the wireless backhaul infrastructure. They will have to increase fibre-based backhaul, which can offer unlimited capacity and low latency that are prerequisites for 5G applications such as 4K video. The fiberisation of small and macro-cell sites is important to upgrade these cell sites to 5G in the coming years, as copper and wireless backhaul options cannot be scaled to cater to the large amount of backhaul traffic that will be generated by a 5G network.
  • FTTx witnesses increased uptake: The need for significant OFC capacity in the last mile has increased manyfold in recent years due to the increased consumption of bandwidth-intensive applications such as high-resolution videos. While fibre-to-the-home (FTTH) connections currently account for less than 1 per cent of the country’s total broadband users, FTTH roll-out remains a promising growth strategy as the uptake of such applications grows further. Operators such as Bharti Airtel and BSNL are already offering fibre-based broadband services, and RJIL plans to soon launch its FTTH services, GigaFibre.

The way forward

Policy uncertainty has been one of the major issues facing the telecom infrastructure industry. The government has taken several measures to address this issue. The key among these is the release of the new telecom policy. The policy is focused on creating an enabling framework that would spur the telecom infrastructure development in the country. It seeks to resolve the long-pending issues in the industry and facilitate the installation of both overground and underground infrastructure. Going forward, while the in­dustry will continue to step up its investment in telecom infrastructure to improve network quality and support the roll-out of new technologies, the government’s role is equally important in ensuring a seamless and cost-effective installation of new telecom infrastructure.