The Indian telecom sector has grown exponentially over the past decade. It is the second-largest in the world with 919.17 million mobile subscribers and over 450,000 telecom towers, as of 2014, which form the backbone of the Indian telecom market. Of the total telecom towers, 40 per cent are located in urban areas while the remaining towers are located in rural or semi-urban areas. According to research firm IDC, driven by high data consumption on hand-held devices, the total mobile services market revenue in the country is expected to touch $37 billion in 2017, registering a compound annual growth rate of 5.2 per cent between 2014 and 2017. Meanwhile, the broadband services user base in India is expected to reach 250 million connections by 2017, according to GSMA.
The deregulation of foreign direct investment (FDI) norms has made the sector one of the fastest growing and among the top five employment opportunity generators in the country. As per Randstad India estimates, the sector is expected to generate 4 million direct and indirect jobs over the next five years owing to a combination of government efforts to increase telecom penetration in rural areas, and the rapid increase in smartphone sales and internet usage. Over the next three years, the government is planning to roll out free high speed Wi-Fi services in 2,500 cities and towns across the country. The programme entails an investment of up to Rs 70 billion ($1.06 billion) and will be implemented by state-owned Bharat Sanchar Nigam Limited.
The Indian telecom tower industry evolved from an almost fully operator-owned model in 2005-06 to an almost operator-independent model by end-2010. The change in tower ownership took place on the back of a series of actions taken by the regulator and the industry. Towards the middle of the previous decade, the telecom regulator laid out the detailed contours of the regulatory regime governing infrastructure sharing and the role of independent tower companies. Meanwhile, independent tower companies started focusing on passive infrastructure through innovative process management, ensuring cost-effective high uptime for tower sites.
As per a Microsoft report, India will emerge as a leading player in the virtual world by 2025, accounting for 700 million internet users of the 4.7 billion global users. With the government’s favourable regulation policies and 4G services hitting the market, the Indian telecommunications sector is expected to witness fast growth in the next few years.
Challenges and opportunities
Consumers are getting addicted to connectivity and speed, leading to a relentless demand for more of each. The ongoing expansion of the mobile ecosystem, coupled with demand for high-bandwidth applications and services such as video and gaming, is building pressure on the industry to increase the availability and quality of broadband connectivity.
What does this mean for players in the sector? Carriers will continue to pursue technological advancements to handle demand, including offloading some mobile bandwidth needs to Wi-Fi, which is proving to be an effective complement to mobile networks. At the same time, long-term spectrum availability, spectrum efficiency, small cells and continued backhaul improvements are likely to be key areas of focus to ensure continued mobile broadband momentum.
What does this mean for power infrastructure? While a subscriber may be forgiving about a dropped voice call, when it come to data, the consequences of a dropped data session can be huge. For instance, a net banking session, wherein a funds transfer was active and was not completed, will be unforgivable. Power deficit in India is a continuing problem due to issues in generation, transmission and distribution. This is compounded by the variability in the energy consumption pattern of a telecom tower. A tower’s requirement varies depending on the number of subscribers served, the air-conditioning needs, the efficiency of power instruments, site location, climatic conditions, indoor or outdoor nature of the site, etc. Due to the precarious power scenario, there is frequent load shedding across India, particularly in rural and semi-urban areas. Almost 40 per cent of telecom towers face load shedding for more than 12 hours a day. The following are some of the major challenges that telecom tower companies are facing today:
- High operating expenditure: Energy costs account for 30-34 per cent of the total operational expenditure of a telecom tower company. Grid power is typically available at Rs 6-Rs 8 per unit whereas diesel generator power costs Rs 12-Rs 14 per unit.
- Diesel pilferage losses: Diesel pilferage losses of about 20 per cent have been observed in the industry, which further increase energy costs. In extreme cases, the overall generation cost has skyrocketed to Rs 22-Rs 26 per unit.
- Increased carbon emissions: It is estimated that telecom towers alone consume about 2 billion litres of diesel per year. Diesel consumption from telecom towers produces almost 5 million tonnes of carbon dioxide per year, which is 2 per cent of the total greenhouse gas emissions in India.
At present, the share of the telecom sector in global carbon emissions is low as compared to other sectors like transportation and construction. However, as an increasing number of people will become connected through fixed and mobile telecom networks, the challenges related to providing electricity to these expanding networks will become greater. Therefore, with increasing energy consumption and the rising cost of fossil fuels, it is important that we shift to energy-efficient technologies and environment-friendly energy sources to power the telecom sector wherever feasible and commercially viable.
There are a few imperatives that the industry must consider in order to manage and significantly reduce opex. This must begin with the lowest-hanging fruit – transformation of indoor sites to outdoor sites. Apart from the low implementation cost, such transformation holds the promise of robust savings of 15-20 per cent of the overall power and fuel costs if designed and implemented well.
For sites that must operate under grid deficiency of 12 hours or more every day, lithium-ion energy storage technology offers great potential for a reduction in diesel usage by increasing autonomy. The key feature of the technology is quick charge and extended and deep discharge with far less sensitivity to performance degradation through increased temperatures as compared to valve-regulated lead acid batteries.
Technology can play a role in improving the situation, but only to an extent and depending on its adoption and acceptance by the industry. Needless to say, scale and a set of industry standards for performance measurement and delivery will have to be developed, adopted and monitored for rigorous implementation to reduce opex. There are large players seeking to enter the opex model space. There is a need for a partnership approach to attract these players and give them enough play in the industry as the future of telecom in India does not depend so much on the move from 3G to 4G and beyond as it does on the availability of telecom infrastructure uptime. Players who manage the energy needs of telecom infrastructure service providers will eventually own the customer.