As per the FTTH Council Asia-Pacific, India currently has about 1.25 million fibre-to-the-home (FTTH) connections, accounting for a mere 0.5 per cent of the country’s total broadband user base. In contrast, Singapore has 95 per cent FTTH penetration, South Korea 82.9 per cent, Hong Kong 71.4 per cent and Malaysia 16.4 per cent.
There is a need to improve FTTH penetration in India as the technology has several benefits. It can be leveraged by operators to deliver services directly from the switching equipment to homes, avoiding connectivity issues in the last mile. Fibre has the least downtime and the lowest cost per GB, making it the most preferred medium for connectivity. Given the limited availability of wireless spectrum and the increasing data traffic, FTTH is emerging as a key alternative to wireless technologies for delivering broadband in the last mile.
Passive optical networks and point-to-point Ethernet are architectures that are capable of delivering triple-play services over FTTH networks directly from the operator’s central office. Of late, major telcos have been introducing low-cost FTTH plans, which are expected to drive demand for the technology. Further, with the growing penetration of cloud computing, smart grid, e-learning, e-health and e-governance services in the country, the FTTH market is expected to grow multifold by 2025.
Growth drivers
- Demand for bandwidth: The increasing demand for higher bandwidths to access data-intensive applications is a key driver for FTTH deployment. Customers are demanding blazing internet speeds to support data-heavy applications such as online streaming. This demand can be best met by laying fibre up to the customer premises. At present, several operators and internet service providers (ISPs) are offering gigabit speeds over fibre networks, although mostly in metro cities.
- Government impetus: The government’s efforts for ensuring connectivity through several initiatives such as Digital India and BharatNet have also given an impetus to FTTH deployments. Through the National Digital Communications Policy, 2018, the government aims to create a national digital grid by establishing a National Fibre Authority. It also aims to build common service ducts and utility corridors in order to develop open access next-generation networks, and standardise costs and timelines.
- Diversification by telcos: Over the past year, operators have witnessed a sharp decline in their ARPU levels and telecom tariffs, which are at an all-time low. Intense competition has driven out inefficient players and led to market consolidation. In such a hypercompetitive business environment, operators are going beyond traditional telecom services and are diversifying their operations through content creation, fixed line broadband, etc. Vodafone India, Bharti Airtel and Bharat Sanchar Nigam Limited (BSNL) are already offering broadband services, either directly or through subsidiaries. The newest addition is Reliance Jio Infocomm Limited (RJIL), which recently announced the launch of Jio’s GigaFiber.
- Multiple system operators: Traditionally, cable operators use the DOCSIS 3.0 standard for offering broadband services. With the DOSCIS 3.0 standard, though cable operators can offer gigabit services in the downstream, they are constrained by limited upstream throughput. Further, increased competition from FTTH players, which offer ultra high speed broadband services, is prompting them to become FTTH operators and undertake deployment themselves. Fibre deployments entail a lower total cost of ownership than DOCSIS 3.0 and provide a better return on initial investment.
Deployment and expansion plans
Several major operators and ISPs are investing significantly in FTTH. Recently, in July 2018, RJIL announced its entry into the fixed broadband space. The company launched Jio GigaFiber, an FTTH broadband service, which will reportedly offer speeds of up to 1 Gbps. The company plans to operate in 1,100 cities and target 50 million households, almost thrice the country’s total current fixed line subscriber base. Bharti Airtel has announced the formation of an independent fibre company to leverage the growing fibre opportunity. The telco will be leasing out its fibre to other players in the market. Bharti Airtel’s Project Leap, a Rs 600 billion network improvement and modernisation initiative, will oversee the deployment and fiberisation of broadband sites along with the expansion of optic fibre cable (OFC) networks. Vodafone India’s You Broadband will invest a capex of Rs 6 billion over the next two years, a significant increase from Rs 540 million in 2017-18. BSNL has announced a capex of Rs 60 billion for network expansion in the coming years and is in the process of upgrading its FTTH network across 100 cities in the country.
Meanwhile, Spectra, which has operations in eight cities, will invest around Rs 2 billion during 2017-19 to ensure a deeper penetration of its OFC network in these cities. Further, Sun Direct has planned a capex of Rs 14.75 billion for service expansion over the next three years, a good part of which will be spent on laying OFC. ACT Fibernet has earmarked a capex of Rs 12 billion-Rs 15 billion over the coming two years, of which 60 per cent will be used for building underground networks.
Key challenges
Although the FTTH segment offers several opportunities, the roll-out of these networks has been slow owing to several regulatory, financial and demand-related challenges. While the government has released the right-of-way (RoW) rules, getting approvals and permissions continues to remain a cumbersome process owing to the multilayered structure of local governments. In most cases, RoW charges are very high, ranging from Rs 100,000 to Rs 5 million per km for laying fibre. Further, the financial burden of installing customer premises equipment and optical network terminals will add to the existing debt burden of telcos. The lack of service-level agreements for making time-bound RoW decisions and the unavailability of a skilled workforce are other major hurdles.
The lack of government incentives for high capex FTTH equipment and services is yet another limitation. Finding skilled manpower for fibre-related works is quite challenging. On the demand side, the provision of high speed wireless connectivity contributes to the declining value of FTTH. Further, the lack of relevant applications and content, low demand for broadband, and lack of awareness in the rural segment undermine the business case for FTTH.
The way forward
Despite its poor implementation in the country, FTTH remains a promising growth strategy for operators. Therefore, they are drawing expansion plans to achieve deep fibre penetration. They are looking for companies/investors that can build and own fibre networks and lease dark fibre on a need basis. Currently, the viability of the stand-alone FTTH model remains uncertain even in dense urban areas, mainly due to the requirement of large investments and the limited availability of high definition content. Going forward, the effective implementation of the RoW rules and the rationalisation of RoW charges would facilitate the growth of last-mile OFC in the country. Further, a single-window clearance mechanism and a time-bound decision-making process need to be in place. In sum, while the potential of FTTH is huge, its on-ground implementation has been slow and is expected to continue at a slower pace than wireless broadband deployment.
Aditya Kumar
