Over the past few years, fibre has emerged as a buzzword in the telecom industry. The massive surge in data consumption coupled with the increasing use of over-the-top platforms and social media applications has amplified the need for scaling up fibre connectivity as it is the only medium capable of catering to the burgeoning data demand. There is a huge dearth of fibre in the country although the government, telcos, internet service providers (ISPs) and other key stakeholders have been trying to scale up its presence.
This need for fibre-to-the-home (FTTH) broadband with high bandwidth has become more pronounced during the ongoing Covid-19 pandemic, which has led to a shift to working from home. As unfortunate as it is, the pandemic has given a new stimulus to in-building solutions such as FTTH and Wi-Fi, which require huge investments for roll-out inside buildings and to the curbs. Going forward, the post-Covid era is set to bring in new digital networks like 5G, thereby driving stakeholders across the ecosystem to undertake large-scale investments in the fibre space.
Market overview
In India, optic fibre cable (OFC) roll-outs have more than doubled during the past five years. As of September 2019, India had around 2.68 million km of OFC deployed across telecom networks. However, the Indian market witnessed a dampening of OFC demand during 2019 as telcos scaled back their OFC consumption, mainly due to financial issues. In fact, OFC demand dropped sharply in the second half of 2019, and some cable manufacturers had to subsequently adjust their production schedules. That said, the Indian market remains the world’s third largest optical cable market and is expected to witness a rise in demand owing to government programmes, the advent of 5G and a surge in the uptake of FTTH services due to Covid-19. As per industry estimates, the Indian OFC market, which stood at $881.5 million in 2019, is projected to grow at a compound annual growth rate (CAGR) of 19.7 per cent to reach $2.1 billion by 2024.
Growth drivers
The primary growth driver for future-ready fibre networks is the surge in data usage being witnessed by the country. The onset of the Covid-19 pandemic and its accompanying trends such as remote working, videoconferencing and telemedicine have acted as a catalyst for data consumption, thereby strengthening the case for fibre-based networks. OFC is crucial for the delivery of high quality and content-rich home broadband services, whose uptake is on the rise. The need to build future-ready 5G networks is also a key driver for fibre roll-out as 5G requires almost 100 per cent tower fiberisation. Another major growth driver is the increasing use of cutting-edge technology solutions such as IoT, M2M communications, artificial intelligence, augmented/virtual reality and autonomous vehicles.
Government initiatives
The government has been playing a key role in scaling up fibre roll-out in the country through initiatives such as BharatNet, the Smart Cities Mission and the National Broadband Mission, which are a part of the larger Digital India programme.
BharatNet project
The BharatNet project is being implemented in a phased manner to provide OFC-enabled broadband connectivity to all gram panchayats (approximately 250,000) in the country. It is one of the biggest rural telecom connectivity projects in the world. The total OFC network size envisaged under the project is around 700,000 km. As of September 25, 2020, 456,856 km of OFC has been laid across 157,223 gram panchayats. Further, a total of eight states, Andhra Pradesh, Gujarat, Telangana, Maharashtra, Chhattisgarh, Jharkhand, Odisha and Haryana, are rolling out a total of 286,714 km of OFC under BharatNet Phase II. Of these, Maharashtra and Andhra Pradesh have the biggest targets of around 55,000 km each.
Recently, the government has also launched the “Ghar tak Fibre” project under the BharatNet initiative to extend optical-fibre connectivity to villages across India. The project has initially been launched in Bihar and aims to provide FTTH connectivity to 45,945 villages. It will be executed by the Department of Telecommunications (DoT), Ministry of Electronics and Information Technology, and common service centres, and will soon be extended to other parts of the country.
Smart Cities Mission
The government’s ambitious Smart Cities Mission has provided a major fillip to the deployment of fibre-based backhaul, which is essential for enabling intelligent solutions and systems in smart cities. OFC connectivity is a core component of ICT infrastructure under the mission as it enables services such as Wi-Fi, video surveillance and security, smart lighting, smart parking and smart traffic management. As of January 2020, more than 32,000 km of OFC has been laid under the Smart Cities Mission.
National Broadband Mission
The government launched the National Broadband Mission in December 2019 with the aim to fast-track the growth of digital communications infrastructure, bridge the digital divide and provide affordable and universal broadband access to all. The mission aims to increase the route length of OFC in the country from 2.2 million km to 5 million km, and increase tower fiberisation from about 30 per cent at present to 70 per cent. The likely investment under the mission has been pegged at Rs 7 trillion. Of this, only about 10 per cent or Rs 700 billion will be allocated through the Universal Service Obligation Fund and the rest will be mobilised through industry stakeholders.
Telcos driving fiberisation
Apart from the government, telcos have been driving fiberisation. Together, they had an OFC network of around 2 million km as of December 2019. Among telcos, Bharat Sanchar Nigam Limited has the largest OFC network in the industry spanning close to 800,000 route km (rkm). Currently, it is not being shared with or leased to other private/industry players. Further, Reliance Jio has a fibre layout of 700,000 rkm, which it plans to extend to 1.1 million rkm; Bharti Airtel has a national long distance fibre network of around 300,000 rkm; while Vodafone Idea has an OFC portfolio of nearly 356,000 rkm.
In terms of future plans, Airtel is planning to expand its Xstream Fibre offering to 25 more cities in the coming months. It has also been accelerating collaborations with local cable operators for the upgradation of its copper network to FTTH. Meanwhile, Reliance Jio plans to expand the reach of JioFiber services to 20 million residences and 15 million business establishments across 1,600 towns by the end of 2020.
However, a major cause for concern is that the majority of the OFC of all telcos is present in core/metro networks, with a limited presence in backhaul and last mile. This scenario needs to change as India ushers in 5G. Therefore, telcos need to ensure that the majority of new OFC deployments take place on the backhaul side, bringing fibre to the tower. This would be essential for the success of 5G in India. As per industry estimates, some 100,000 towers are likely to be added in the next three years to India’s existing portfolio of 500,000. About 70 per cent of these would need to be fiberised to match the 5G requirements. Further, FTTH/wired residential broadband will assume a bigger role in telcos’ portfolio, especially owing to the Covid-19 scenario. According to India Infrastructure Research, telcos look to enhance their fibre reach at a CAGR of about 18-20 per cent over the next four to five years.
Moreover, telcos must look at fibre sharing to expedite fibre roll-out. The sharing of fibre will result in a reasonable return on capital while bringing down the cost of deployment, easing right-of-way requirements and avoiding the duplication of infrastructure.
Initiatives by ISPs
ISPs, multisystem operators, cable operators and direct-to-home service providers are also investing heavily in building OFC networks to improve their FTTH reach. This is especially true after the Covid-19 pandemic, which has led to a substantial increase in demand for FTTH services. Among ISPs, ACT Fibernet is the largest non-telco FTTH provider in the country and owns around 2,500 km of underground network infrastructure. Further, Excitel has a fibre network of 20,000 km, including its partners’ networks. YOU Broadband India has a size of over 3,000 km of OFC and 17,000 km of last-mile coaxial cable, and GTPL Hathway owns over 35,000 km of OFC and has leased over 5,500 km.
In terms of future plans, Excitel aims to completely overhaul its copper-based network and convert it into a pure-FTTH network by end 2020. The transition will lead to an addition of 12,000-13,000 FTTH users monthly during the year. It is also working towards expanding its fibre-based network to around 50 Tier 2 and Tier 3 cities by the end of 2020.
Opportunities for other stakeholders
The trajectory of fibre roll-out in India is expected to move onwards and upwards. The government, telcos and ISPs alone cannot ensure this, and other stakeholders like towercos, OFC suppliers and manufacturers will also have to play a key role. This is because ensuring expeditious and enhanced coverage as well as a reasonable return on capital for OFC roll-out calls for new OFC roll-out/sharing models that involve many more players.
For instance, towercos are well positioned to leverage the fibre opportunity with their existing experience in managing distributed infrastructure assets. The Telecom Regulatory Authority of India has recently recommended enhancing the scope of infrastructure providers (IP-1s) to allow them to take up a bigger role in deploying active components such as fibre, antennaes and Wi-Fi. DoT’s nod to these recommendations can be a game changer for OFC roll-out in the country, and also for India’s digital transformation. Meanwhile, utilities in sectors such as power, gas, water and railways, which are already deploying fibre networks, can operate as neutral wholesale providers for telcos. At present, RailTel, Power Grid Corporation of India Limited and GailTel have a total OFC capacity of over 125,000 km, which can be utilised.
Moreover, the ambitious target of rolling out 700,000 km of OFC to connect 250,000 gram panchayats under the BharatNet programme, of which about 243,144 km is yet to be rolled out, will result in an opportunity for both OFC manufacturers and firms that can deploy fibre on an engineering, procurement, and construction (EPC)/public-private partnership (PPP) basis. According to Sarvesh Singh, chairman and managing director, Bharat Broadband Network Limited (BBNL), “There is a significant opportunity for industry stakeholders as currently only 55 per cent of the project has been completed. Financially too, BBNL will be spending close to Rs 200 billion in times to come, which will ultimately go to the private sector for the supply of OFC and other material, GPON equipment, laying of fibre, etc.” In fact, BBNL is in the final stages of launching bids for laying the OFC network in around 27,000 GPs in PPP mode. The PPP contract is likely to involve the creation, maintenance and utilisation of the network. Operations and maintenance companies too can bid as part of a consortium and benefit under this arrangement as the network maintenance contract will cover a time period of 20-25 years.
The way forward
Going forward, the country needs to create a favourable ecosystem that enables collaborations among stakeholders and helps in the creation of a robust and ubiquitous OFC network. The relevant government authorities should play the role of facilitators and allow stakeholders to share infrastructure and enter into collaborations wherever needed. This would enable India to leverage the strengths of all stakeholders in building a fibre infrastructure, and thus emerge as a front runner in the forthcoming 5G world.
