In recent times, there has been an exponential growth in data traffic, driven by the rising uptake of internet, smartphones, social media and video applications. The deployment of new-age technology solutions such as big data analytics, AI, IoT, cloud and blockchain across sectors and enterprises has also added to the data traffic. Further, the increasing complexities within the IT infrastructure brought in by virtualisation and consolidation, coupled with cost constraints, have motivated enterprises to adopt third-party data centre services. Sectors such as telecom, IT, BFSI and e-commerce have been significantly contributing to the demand for data centre services.
Towercos, which are looking for new revenue generating avenues, can explore opportunities in the data centre space. Both are capital-intensive businesses and depend on leasing capacity to enterprises. Towercos possess certain strengths such as a vast fibre footprint, which puts them in a favourable position to step into the data centre business. The fibre infrastructure owned by towercos provides them an edge for establishing data centres as fibre connectivity is a critical enabling factor for the functioning of these centres.
A look at the evolving role of towercos and the opportunities presented by micro data centres…
Evolving role of towercos
The telecom sector has undergone massive transformation in the past decade causing an alteration in the market structure, dynamics, player portfolio, etc. For instance, following the entry of Reliance Jio in 2016, the Indian telecom market has shrunk to a limited three plus one operator format with three private players and one major state-run telco. The tower industry, a subsegment of the telecom sector, is not immune to this transformation. As such, the shrinking number of players in the market has impacted the tenancy ratios of towercos. Further, the ownership patterns of tower companies are seeing a fundamental shift from telco-owned businesses to independent companies. All the three private players, Bharti Airtel, Vodafone Idea and Reliance Jio Infocomm, are divesting their stakes in tower companies. This is further impacting the tenancies of tower companies, which have been the main revenue generating avenue for towercos.
While revenue from the existing business segment is decreasing, new revenue generation opportunities are emerging. For instance, the telecom industry is seeing a surge in data demand. According to a recent report by EY, the data demand in India is expected to witness a 5x increase during 2018-24. This growth in data usage has created a demand for new infrastructure and services, which can be provided by towercos. As per the EY report, the revenue potential from data services for infrastructure providers can increase to
Rs 215-Rs 310 billion by 2023, requiring an investment of up to Rs 930 billion.
Micro data sites: An opportunity for tower companies
Of late, various low latency and high throughput applications have come to the fore. These include high speed video, augmented reality/virtual reality, autonomous driving and robotic surgery. These require the deployment of Edge computing technology. With the surge in data usage and high bandwidth applications, it has become essential to bring computers and storage closer to the customers. In such a scenario, deploying micro data centres closer to the network edge is becoming increasingly popular.
Micro data centres, also known as Edge data centres, are small, regional, cost-effective, automated, micro-modular data sites that can power high speed computing. Globally, telecom tower sites are emerging as the perfect infrastructure for hosting these micro data centres. Telecom tower sites have a steady power supply, ready access to fibre backhaul connectivity, the requisite real estate, and they are located right at the network edge. Often, there is enough space at the base of towers, which is an ideal place to install these data centres. Fibre connectivity can help connect the edge sites to the core/centralised data centres.
Towercos across the world are currently engaged in discussions with players from various industries, which may ultimately become Edge computing tenants. In India, the telecom tower count stands at well above 500,000 sites, and each one of these can be transformed into micro data centres. This presents a unique opportunity for towercos, which can add new revenue streams and customers by leveraging their assets. By deploying Edge data centres on their sites, towercos can onboard customers with stringent latency requirements such as content delivery network providers and cloud providers, which support edge-specific applications. As per EY, micro data centres at tower sites can also be leveraged for enabling localised cloud-RANs.
India’s data centre footprint may well exceed 100 million square feet by 2060, comprising 5,000 Edge data centres. These micro data centres are likely to come up at almost all major metros across the country.