Over the past two decades, technology and equipment vendors witnessed a significant rise in their order books, riding on the growth in the telecom industry. However, in recent years, there has been a dip in the industry’s growth and its financial situation has become precarious, leading to a significant slowdown in demand orders for equipment vendors. That said, government initiatives like the Digital India Mission, the BharatNet project and the recently launched National Broadband Mission have opened up new avenues of growth. As the industry steps into 2020, key equipment vendors share their views on the growth prospects and key challenges faced by them…
How have the telecom network requirements in India changed over the past two decades?
Starting as an emerging market with only 14.5 million phone connections in 1997, the Indian telecom market has grown to be the second-largest in the world now, having the highest data usage per smartphone (9.8 GB per month). In the early 1990s, wireless local-area networks (WLANs) were too slow, expensive, bulky and power-hungry. Now, WLANs are giving users the ability to move around within a local coverage area while being connected to the network. The number of internet subscribers in the country is expected to reach 829 million by 2021. With demand for data growing exponentially, Government of India has set out for building National Optical Fibre Network (NOFN) to provide connectivity to 250,000 Gram Panchayats of the country.
Both 2G mobile networks and the internet were launched in India in 1995. Since then, the industry has progressed from plain vanilla fixed voice calls to data speeds of up to 50 Mbps. The technology has changed from switching circuits to IP based. The jelly filled cables and microwave technology used earlier have been largely replaced by optic fibre cables (OFC) and software-driven networks. Earlier the network was owned and operated by telecom operators but today, infrastructure assets such as cables and towers are being shared and in the near future, even the network will be on the cloud and will be shared. Operators will become the customer interface and, therefore, the licensing regime too may require tweaking.
In the past few years, the telecom industry has transformed into a sector dominated by a few large players with intense competition. Due to the disruption caused by emerging technologies, the primary requirements of telecom service providers (TSPs) have been to reduce the cost per bit, to offer data at the lowest possible cost and enhance customer experience.
With 5G in the offing, TSPs need to become digital value providers from merely being digital service providers. We are working with TSPs to provide new offerings for enterprise clients around managed software-defined networking in wide area network services, managed collaboration services and managed security services, among others.
Security is becoming a major focus area with the convergence of 5G, AI and IoT. TSPs will have a much larger role in protecting their networks, which will allow them to offer security-as-a-service and build digital trust among their customers. Providing security atop the existing connectivity services will also help differentiate them in the marketplace.
Over the past two decades India has transitioned from a voice-centric telecom market to the world’s largest carrier of mobile data traffic. In 2019, the country consumed almost 10 GB data per smartphone per month, which is 50 times more than it did five years ago, and almost 40 per cent more than that consumed by North America. While India has made progress in providing competitive telecom services, unlike China, we have not used this opportunity to become a global powerhouse for telecom equipment design and manufacturing, and even now, over 90 per cent of the telecom equipment used within the country is imported.
Nonetheless, companies like Tejas Networks have shown that India is capable of building world-class products through indigenous research and development (R&D). India has also attracted many global electronic contract manufacturers (EMS) to set up operations and create large manufacturing capacities in the country. The government has been demonstrating its strong intent to promote domestic telecom product companies through its Design and Make in India and Preference to Make in India (PMI) initiatives that mandate stringent local content requirements in many categories of security-sensitive telecom products. The government is also keen to nurture a vibrant domestic ecosystem for 5G including core equipment, software, chips and handsets.
Over the past two decades the Indian telecom industry has gone through a prodigious shift from a voice-centric market to a data-centric one, with accelerated migrations to 4G services and smartphones. The overwhelming response to Reliance Jio’s 4G VoLTE services, launched in 2016, triggered 4G consumption with its initial freebies. Post the successful deployment of 4G, the government plans to make India 5G ready by 2021 and has signalled plans to auction 5G spectrum later this year.
How have you been leveraging the opportunities arising from government programmes such as BharatNet, the Smart Cities Mission and Digital India?
We are partnering with both the central and state governments to realise their dreams of a unified Digital India. We have successfully completed multiple projects.
Some of the initiatives are:
- T-Fiber: STL was awarded the mandate to create a high speed rural broadband network for Telangana Fiber Grid Corporation Limited (T-Fiber). T-Fiber and STL will work together for enabling affordable and high speed connectivity to 6 million rural citizens in the state.
- MahaNet: Ensuring e-connectivity to the villages through our unique Lead 360 deployment approach, we have created a smarter digital network and have partnered with the Maharashtra government to enable integrated last-mile digital services.
- Smart city projects: We have successfully completed smart city projects in Kakinada (Andhra Pradesh), Gandhinagar (Gujarat) and Jaipur (Rajasthan).
- STL Garv: It is a digital access point for villages that enables access to multiple digital infrastructure and services for rural communities. This platform has a host of features – such as Wi-Fi hotspot, interactive screen, biometric check, power backup with fast charging, camera and multidirectional microphones.
Paramount has been one of the major suppliers of OFC for the BharatNet project. We are also leveraging our cable strength for the EPC work under Digital India. In future, we hope to tap the opportunity of installing the 10 million route km of OFC that will be needed to meet the 4G and 5G requirements.
Government programmes like BharatNet, the Smart Cities Mission and Digital India are all aligned to improving the quality of life of every citizen. At Cisco, we have developed a Country Digital Acceleration (CDA) programme to work with government bodies for nationwide digital empowerment. Our CDA initiative is aligned with India’s vision to bridge the rural-urban digital divide. Currently, Cisco is working on 75 per cent of the smart city projects in the country and is also in conversation with the state governments of states such as Rajasthan, Gujarat, Maharashtra, Madhya Pradesh, Andhra Pradesh, Uttar Pradesh and Telangana for engineering solutions.
Most recently, we partnered with the Kerala State IT Mission to bring in benefits of digitalisation and data analytics to the grassroots level. We have set up an agri-digital infrastructure platform and village knowledge centres to educate farming and fishing communities and provide valuable insights on crop yields, weather patterns, plant disease patterns, soil quality, moisture content and crop forecasting. The project has already been rolled out in 15 panchayats in the Kannur region.
Another recent example is our partnership with the Directorate General of Training to roll out digital skilling programmes to students enrolled at various Indian Training Institutes, routed through the Bharat Skills portal. Over 100,000 students from the states of Tamil Nadu, Gujarat, Bihar and Assam will be trained and skilled to enable digital literacy, career readiness and employability.
Tejas Networks is proud to be associated with BharatNet for which we were the largest supplier of gigabit passive optical networks (GPON) equipment in Phase I of the project with deployments in over 70,000 gram panchayats and over 1,600 block offices. We are playing an important role in Phase II as well. The recently announced National Broadband Mission, aimed at extending broadband connections to all Indian villages by 2022, will offer additional opportunities to us. For smart city projects we are working with SI partners, consultants and other start-up companies to create an ecosystem of indigenously manufactured products.
To make cities smart, safe and sustainable, they have to be built on shared, secure and scalable networks and platforms. Nokia and BSNL joined hands to deliver smart pole solutions that have been designed and built in India. Under the partnership, Nokia will supply, install, commission and maintain smart telecom poles across India in all telecom circles of BSNL. With increasing digital initiatives, Nokia expects a major focus on fixed lines in the coming years. Nokia has won several deals with broadband service providers such as GTPL and ACT to deploy fixed access and GPON technology to upgrade and modernise their networks. Under our CSR commitment, we are digitally integrating villages through the Smartpur digital village programme to develop 500 digitally sustainable smart villages across India in the coming five years.
What are your views regarding the evolving 5G ecosystem in the country?
As the 5G ecosystem develops in the country, telcos are expected to focus beyond connectivity, leading to the creation of new business models and innovation. Since one-third of the connection base is still operating with 2G, it is anticipated that India will witness migration to 5G by 2023. To leapfrog to the 5G era, we need to go a long way in tower fiberisation and STL’s hyper scale modernisation solutions are helping our customers bridge the gap.
I believe 5G auctions should be taken up after three years so that the government can get a proper value for 5G spectrum. If it is auctioned now, the licence fees would be frozen for the next 20 years, leading to financial loss for the government. Operators will also lose since they can fully use the bandwidth only after three to five years. Moreover, the standards that will dictate the commercial deployment of 5G are yet to be announced. The current standards only serve trial and demonstration purposes. Many new users, in addition to the telcos, may wish to buy 5G waves once the technology is firmed up.
As digital capabilities improve and connectivity becomes omnipresent, technology is poised to rapidly and radically transform nearly every sector of the Indian economy. The network is at the centre of this transformation, with the roll-out of 5G in the offing. Unlike 4G, which was about speed, 5G is all about enhanced customer experience, one that will be a game changer for TSPs.
Recognising the criticality of 5G in differentiating themselves in a highly competitive market, all TSPs are planning trials in the next few months. Cisco has committed to funding $5 billion globally to help build 5G networks over the next three years to aid customers in accelerating their 5G deployments.
I strongly believe that 5G can be a potential game changer for the domestic telecom industry and we have an opportunity to leverage this to become a global player for new equipment and use cases. 5G, being an enabler of IoT, will also be all pervasive and have enormous long-term security implications. 5G will be significantly different from 4G as it will drive a new cloud-based architecture that will make the network predominantly software-driven. India, with its strong software and design talent pool, has all the necessary elements to create a vibrant domestic ecosystem of innovative companies for optical/wireless infrastructure equipment, software, chips, handsets and use cases.
Since 5G roll-out in India is still two to three years away, the government should establish a national mission to help create a domestic ecosystem. A multi-pronged strategy will need to be pursued, which would require setting up a dedicated 5G fund for R&D, mandating the use of indigenous products for government-funded projects as well as security-sensitive networks, creating centres of excellence around 5G use cases relevant to the country (rural broadband, precision agriculture, integrated access and backhaul), and ensuring the availability of background 5G intellectual property rights owned by domestic and foreign manufacturers on FRAND (fair, reasonable and non-discriminatory) terms.
Substantial investment in digital infrastructure, largely from private players, and a modernised policy and regulatory framework will be major drivers for the 5G ecosystem. Indian carriers have been implementing 5G-ready equipment as the country is expected to get 5G subscription by 2022, although spectrum charges are seven times higher than those of our global peers. The recent NDCP outlines plans to make India a $1 trillion digital economy and provide 50 Mbps per user. These goals are possible only through the early introduction of 5G services in India and with the right spectrum mix. We believe the government can offer incentives to operators that encourage investment in 5G technologies and fast-track ecosystem development.
What are the key challenges faced by the telecom network, technology and equipment vendors in India? Do you have a policy or regulatory wish list?
The telecommunications sector is going through a difficult phase. It is one of the heavily taxed sectors and requires huge investment. While India is the among the largest internet usage and consumption market of the world, the fixed line network penetration is poor. Only around 25 per cent of the towers in India relate to fibre networks, while developed countries have 70 per cent fibre network-connected towers.
My regulatory wish list is:
- Make government a more aggressive investor in digital infrastructure: The digital communications infrastructure is a key enabler in realising the country’s dream of a digital economy. The government needs to treat this as important as other utilities and make an annual budgetary outlay for it.
- Embrace new-age virtualised tech: As several governments prepare for 5G intending to store the local data in domestic stacks, new, agile, virtualised infrastructure is needed now, more than ever. Telcos, cloud companies, enterprises and the government must not be afraid of adopting new-age infrastructure.
- Simplify regulations, work with industry: The next step is to ease regulations and collaborate with the industry to enhance the quality of technology implementation. The government can create a high-powered governing/advisory group that can review the progress and set the direction for infrastructure roll-out on a quarterly basis.
Currently, the telecom industry is going through a rough phase marked with low tariffs, AGR issues and lack of credit from bankers. This has resulted in a paucity of funds for equipment procurement. Thus, even if our equipment is good to buy, we are not able to supply it to them.
The Regional Comprehensive Economic Partnership or any other free trade agreement does not apply to 90 per cent of the Chinese market as all Chinese telcos are covered under government procurement. This is true for many other countries too. However, the Indian market, 90 per cent of which is held by private telcos, is open to Chinese suppliers at zero duty.
Our regulatory wishlist is as follows.
- As India prepares for 5G, the government must ensure that we buy “technology” and not “products” from other countries.
- The government should instruct its various departments to ensure payments to MSMEs within 15 days and to all vendors within 45 days from the date of supply of material. The government should look into the payment of interest as per the provisions of the MSME Act, 2006 for delayed payments.
- The government should look into liberal funding for telecom equipment manufacturers and only PMI (Preference to Make in India)-compliant equipment should be sold in India.
- The government can come out with tenders for complete transfer of 4G technology. The core of this technology can be kept in the custody of C-DOT and other government agencies.
- The government should have a common duct policy for all its investments under the National Infrastructure Pipeline (NIP). Every infrastructure project should be asked to lay a common duct for all services and utilities with road crossovers at regular intervals.
- A scheme similar to the Sabka Vishwas Scheme, which waives up to 70 per cent of tax dues and 100 per cent of interest and penalty, should be extended partially or wholly to the AGR-related dues. In return, the telcos could be asked to buy only PMI-complaint electronics for their networks.
One of the key challenges for the telecom industry is to stay ahead of the curve and continue innovating at scale. The mobile industry is the backbone of India to create a $1 trillion digital economy by 2025. Therefore, with the upcoming 5G roll-out, the industry is facing a rising need to hire and invest in the right quality of talent.
From an investment perspective, there is critical requirement of a stable policy framework that allows investors to see value in the sector from a long-term outlook. Favourable taxation policies are already under discussion for 5G spectrum allocation as well.
Policies such as PMI should be implemented effectively both in letter and spirit, with strict monitoring of compliance before tenders are issued. PMI should apply to all government-funded projects, as well as security-sensitive networks such as defence, power, railways, smart cities, etc. Also, as recommended by the TRAI, the government should give financial incentives to private TSPs to buy domestic products. As a concrete proposal, all licensed telecom operators, both private and public sectors, should be eligible to pay lower AGR fee, which should be linked to the value of domestic telecom products procured by them in a given year. Since this is a strategic sector with serious national security implications, the government should keep a close watch on telecom equipment imports.
High competition and tariff wars, limited spectrum availability and the lack of telecom infrastructure in semi-rural and rural areas are some of the major challenges faced by the Indian telecom fraternity.
- The government must ensure that operators get bigger chunks of 5G spectrum bandwidth (about 100 MHz per operator) in 3.5 GHz and 400-800 MHz per operator in 26/28 GHz, at affordable rates.
- Fibre penetration must be encouraged through a uniform RoW policy across states and single-window clearances.
- The government must also encourage collaboration in fibre-sharing infrastructure.
- A new revised pricing mechanism of E-band must be finalised to make it easier for operators to consider these for a transport upgrade.
- The street furniture policy must allow access to operators to ease small cell deployment.
- The government must consider the WRC-19 outcomes to expedite the finalisation of the NFAP work within 2020.
The task before policymakers is to ensure that the advantages of the new technologies are accessible to all, equitably and affordably.
What is your future outlook for the sector? What trends do you foresee the telecom network, technology and equipment segments?
India has entered an interesting phase of its evolution. Today, 5G commercial launches are already under way across major markets and there are estimated to be 1.2 billion 5G connections by 2025. Several key technology implementations are crucial for 5G deployment, dense fiberisation being the most important. India has embarked on a digital transformation journey with recent technological developments, but to rule the roost, it needs to keep investing in and upgrading technology.
Over the next decade, digital experiences will be created with the amalgamation of advanced technologies such as virtual really and augmented reality, high speed streaming, artificial intelligence (AI), adaptive and predictive cybersecurity, IoT and others yet to be developed. These experiences have to be built on a cloud-enhanced, automated and secure architecture that can support the size and complex demands of the next generation of network.
India is an exciting telecom market, given the exponential rate at which data usage is growing, with an increased digitalisation of our economy. In spite of the recent turbulence in the telecom sector, Indian telcos and the government will continue to focus on providing high speed broadband services to homes as well as enterprises on (FTTX), both in urban as well as rural India. They will also be upgrading their optical network capacities and will increase fiberisation of cell towers, office buildings and homes. Both 4G and FTTx roll-outs will continue at a fair pace over the next 24-36 months, which will be followed by the 5G capex cycle.
To cater to the home and SME broadband market, we expect to see a demand for fibre broadband services on GPON technologies and broadband wireless access on LTE technology. In terms of optical technologies, we expect a strong demand for packet transport network and metro dense wavelength division multiplexing products with terabit-scale optical transport networks (OTNs) and packet switching capabilities. The rapid growth of data traffic and adoption of bandwidth-intensive applications are forcing telecom operators to upgrade their transmission networks with higher speed 100G/200G/400G/ 400G+ wavelengths and OTN technology for better capacity management. Today, Tejas has a full range of integrated optical access and transmission products, from megabyte to terabyte capacity, based on the latest global standards and technologies, to cater to these trends and effectively address customers’ needs.
The future is gigabit speed and 5G will power new waves of transformation. With just four operational telecom companies (Reliance Jio, Bharti Airtel, BSNL and Vodafone Idea) serving a country of 1.3 billion population and the highest per capita consumption in the world, the opportunities are huge. However, they come with challenges. The telecom industry is poised to see some major breakthroughs in 2020. These include the commencement of 5G trials, 4.9G evolution, transport modernisation and E-band, cloud and distributed architecture, increased prominence of VoWi-Fi, the use of AI and immersive reality, and BSNL’s 4G pan-Indian roll-out.