In an effort to encourage quicker rollout of telecom networks, the Department of Telecommunications (DoT) has accepted the Telecom Regulatory Authority of India’s (TRAI) recommendations, allowing sharing of active infrastructure such as electronic components, antennas, feeder cables, nodes, radio access network, transmission systems and backhaul by telecom operators. A long-standing demand of the telecom industry, this is a big step forward as until now, only sharing of passive infrastructure such as repeaters, shelters and generators was allowed.
The move is expected to bring down network-related expenditure by nearly 50 per cent. Apart from the obvious savings on operational costs and capital investment, operators can now provide mobile services to their subscribers even if their own networks are down. This will expectedly ensure that the overall quality of service is maintained and will allow operators to increase their coverage with almost no additional costs.
While DoT has accepted TRAI’s proposal of not making infrastructure sharing mandatory, it has not permitted sharing of spectrum. The modalities of the commercial agreement have been left to the service providers. However, in the case of passive infrastructure sharing, DoT has stepped in to indicate that the levies charged on operators sharing passive infrastructure should not be more than 1.2 times the amount charged from a single player, and the same amount of processing fee and other levies should not be charged from all operators sharing a site. However, DoT is reluctant to take this up with the state governments, which impose different levies for setting up towers and other infrastructure, including registration charges, processing fees, stamp duty, octroi, etc.
Given the target of 500 million subscribers by 2010, active infrastructure sharing makes sense. According to TRAI estimates, the country would require 330,000 towers by 2010 (against 100,000 towers currently), entailing not only huge capital investment but also extended network rollout time.
By allowing infrastructure sharing, DoT hopes that rural telephony will get a major fillip as rolling out networks in remote areas is not only difficult, but also expensive. Besides, services like Wi-Max will receive a major push as the resources of the existing operators can be shared. Wi-Max is expected to take off in a big way in 2008 with companies such as Tata Communications and Reliance Communications (RCOM) aiming for greater internet penetration.
The change in policy is extremely timely for the new entrants who recently received letters of intent from DoT, and for operators like Idea Celluar, Shyam Telelink, RCOM, Tata Teleservices Limited (TTSL) and Vodafone Essar, which were looking to roll out networks in their new licence areas. They can now ride on the infrastructure of the existing players, saving on costs and network rollout time.
With the subscriber base growing rapidly and no spectrum allocation policy in sight, the operators’ need for cellsites or tower sites is expected to increase significantly. Sharing infrastructure will allow operators to accommodate more subscribers and allow greater reuse of the radio frequency allotted to them. This is especially true in dense urban areas, where space constraint is a major consideration. DoT may, therefore, mandate sharing of passive and active infrastructure in areas where there is high network congestion and where urban planning restrictions make it difficult for operators to install more towers.
However, while the advantages of infrastructure sharing are evident, the concept is yet to take off in a big way. Currently, only 25 per cent of towers/tower sites are actually shared by operators, which translates into a tenancy of 1.2-1.5 operators per tower. In comparison, in the US, which is known for its infrastructure management, there is a tenancy of 2.7-3 operators per tower.
Still, given the many benefits of infrastructure sharing, analysts expect a massive swell in investor interest in this segment in 2008. Leading telecom service providers are already gearing up for this. RCOM, TTSL, Bharti Airtel, Vodafone Essar and Idea Cellular have hived off their tower businesses into separate entities to attract strategic investors.
Advocating sharing of telecom infrastructure, Sunil Bharti Mittal, chairman, Bharti Airtel, said: “We are open to sharing active infrastructure with other mobile operators, even with new companies.” Clearly, a strategy other operators intend to increasingly adopt as well.
