The upsurge in data services is redefining telecom dynamics across the world. The bandwidth promised by 4G/5G technologies is setting new benchmarks for operators. Meanwhile, the increased uptake of video-on-demand and HDTV services is changing data consumption patterns. Every hour a new device is being added to the ever-growing-network of connected devices, strengthening the evolving internet-of-things ecosystem globally. Further, emerging technologies such as the cloud, M2M, virtual and augmented reality, and artificial intelligence are all contributing to data growth.
As the world stands on the verge of a data explosion, optic fibre cable (OFC) is being seen as the most suitable medium to make networks smarter. The fact that fibre-based networks are capable of delivering almost unlimited bandwidth makes them ideal for telecom services. Most leading global telecom operators are in the process of strengthening their OFC reach to deliver high speed data services.
While the Indian telecom market mirrors global trends in data uptake, the story of OFC deployment in the country is starkly different. As per KPMG, at about 20 per cent, India’s fiberisation is much lower than that of the Southeast Asian region (50 per cent) or the developed markets (70 per cent). For a population of 1.2 billion, the fibre kilometre per capita in India stands at 0.09 against 0.87 in China with 1.3 billion people, and developed markets such as the US and Japan, where the score is 1.3 and higher. Various industry reports suggest that the amount of fibre that the Indian telecom industry deploys every year is not even half the actual requirement.
While this paints a very poor picture of fibre infrastructure in the country, it also indicates a huge untapped potential. India is currently riding on a strong digital wave, which is set to transform the country’s OFC landscape going forward. The densification of 4G networks and the introduction of 5G will bolster fibre demand, as will government initiatives like the Smart Cities Mission and the BharatNet project. Adding fibre to backhaul networks for enhancing capacity will be critical to enabling next-generation wireless services. The industry will also see more fibre being added to the last mile as the uptake of high bandwidth services such as video-on-demand increases. Apart from telecom, the digitisation of cable TV networks has been mandated, which is also driving the demand for OFC.
Emerging opportunities
Fiberisation of tower sites
The current level of site fiberisation for Indian operators stands at a meagre 20 per cent, which is very low compared to global players such as China Mobile (90 per cent for all sites), AT&T (90 per cent for 4G sites) and T-Mobile USA (95 per cent for 4G sites). According to Bharat Bhargava, partner, EY India, “Microwave backhaul can only support a maximum bandwidth of around 200 Mbps. Thus, to support increased loading, operators will need more backhaul capacity, which would come from site fiberisation. Approximately one in two sites in India would need fiberisation in the next three years.”
In the coming years, site fiberisation will become crucial with the increasing demand for data and the emergence of heterogeneous networks. Fiberised backhaul will be a key strength for operators in the face of growing competition. All sites owned by Reliance Jio Infocomm Limited (RJIL) are fiberised. In fact, 50-60 per cent of the sites that it leases from other operators are also fiberised.
As per HSBC research estimates, the industry would have to pump in investments of around $8 billion in fiberising their networks (converting existing backhaul networks from microwave to fibre based) across the country in the next five years.
Interestingly, telecom tower companies are now foraying into the OFC space as their revenues from the tower business are declining. Seeing a lucrative business opportunity in fibre and small cell deployments, they are looking to become end-to-end network infrastructure providers. ATC is one such player with strong plans of venturing into the fibre business. The global major has already invested in fibre networks in Mexico and is now planning to bring this experience to India.
Tower companies can set up fibre infrastructure and lease it out to operators through long-term contracts. Serious action is expected on this front as stronger players emerge from the ongoing industry consolidation.
OFC in the last mile
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 users. Despite the dismal state, FTTH roll-out remains a promising growth strategy for operators as it will allow them to diversify their revenue streams. It will work best with service and content bundling.
The current size of the Indian home broadband market is estimated at $2 billion, which is expected to reach $6 billion over the next five years owing to the growing uptake of high speed internet content, particularly for web surfing and online streaming of services in urban households.
Going forward, the industry will witness stiff competition in the home broadband space as operators, internet service providers and multi-system operators all fight for wallet share. Operators such as Bharti Airtel and Bharat Sanchar Nigam Limited (BSNL) have already started offering attractive home broadband plans in a bid to counter RJIL’s soon-to-be launched “JioFibre” FTTH offering. Under the preview offer, the operator will reportedly offer 100 GB of free data at 100 Mbps per month for three months.
The industry may also witness a strong FTTx asset acquisition drive by operators that currently have limited play in this space. A case in point is Vodafone India’s purchase of You Broadband’s FTTx assets. Operators may also explore collaborations with local cable operators and other stakeholders as well.
As India embarks on the path of digital empowerment, OFC will serve as the backbone of this transformation.
Monetisation of fibre infrastructure
In a bid to monetise their existing investments in OFC infrastructure, operators have resorted to several strategies. For the deployment of OFC, they are trying to move beyond competition towards co-opetition. They are also entering into partnerships for developing optic fibre networks. Sharing or leasing reduces the strain of deployment and management of infrastructure on the operator, bringing down both opex and capex. This also helps eliminate the issue of infrastructure duplication. The recent wave of consolidation in the sector will further result in the merging of the fibre assets of big industry conglomerates.
The various monetisation models adopted by the industry include indefeasible rights of use, wherein the operator lays dark unlit fibre and leasees strands of fibre; bandwidth leasing, wherein an operator installs electronics (routers, switches, amplifiers) and takes up the operations and maintenance (O&M) in addition to laying fibre; end-to-end solutions to enterprises, wherein the OFC provider directly services all the needs of the enterprise customers including MPLS and cloud hosting; and services to retail consumers offering triple-play services (voice, data and TV).
Smart Cities Mission
Telecom infrastructure is at the core of smart city development. Setting up an OFC network in cities will be fundamental to enabling Wi-Fi services, video surveillance for public safety and security, smart lighting, smart parking, traffic management and environment monitoring through sensors. Given the significance of ICT in the proposed architecture, the Smart Cities Mission is being viewed as the next big opportunity for the telecom sector, and has attracted several players from the OFC industry.
Sterlite Tech is a leading player in smart cities development. As per the company, services under the Gandhinagar Smart City Project were rolled out in December 2016 while the Jaipur Smart City Project is complete and is currently in the O&M phase. The Ahmedabad project, which focuses on enabling an OFC backhaul infrastructure to interconnect the city’s bus rapid transit system (BRTS) corridor to the main data centre through passive network integration, will be completed soon. In June 2017, the company won the Kakinada Smart City Project and will work with the government and top telecom operators for the implementation of the project in Andhra Pradesh. Sterlite will help in building a smart optical transport network with an OFC backbone to ensure stronger communications between the city officials and citizens of Kakinada.
Recently, Aksh Optifibre won a project worth Rs 460 million from Jaipur Smart City Limited (JSCL), which is implementing the Jaipur Smart City Project. JSCL had invited bids for the development of smart roads in the area-based development (ABD) parts of Jaipur. Under the project, Aksh will deploy an OFC network, which will be used to install a Wi-Fi network, a smart lighting system, an IP-based surveillance system, environment sensors and a smart parking system across 16 km under the smart city project. The company will also be responsible for the O&M of the OFC network for a period of five years.
BSNL is also looking to increase its revenue prospects with the Smart Cities Mission. It has won bids on a nomination basis in Dharamshala, Himachal Pradesh, and Bhagalpur, Bihar, as well as through the tender route in Ahmedabad and Rajkot. The operator expects to generate revenues of up to Rs 10 billion from such projects. BSNL will provide OFC and connectivity on its own as well as partner with private firms including system integrators and technology firms/original equipment manufacturers for offering smart city solutions over its infrastructure.
BharatNet
Under Phase I of the project, 100,076 gram panchayats have been connected with 219,477 km of OFC as of July 2017, although 75 per cent are yet to get active broadband connectivity. However, the fact that the government has managed to at least carry out the basic OFC laying activity nearly within the timeline (which was earlier revised from March 2015 to March 2017) brings some hope for the industry. This means that the government is set to start work on Phase II, which aims to connect another 150,000 gram panchayats by March 2019, and a fresh round of OFC procurement tenders will be launched soon. Moreover, the government has decided to involve state agencies/departments and private players to expedite the laying of OFC under Phase II. It is expected to deploy a mix of underground and aerial optic fibre during this phase. It is currently in discussions with states and distribution companies for laying aerial OFC on the electricity lines. So far, 10 states have submitted their plans for survey/GIS mapping of their power lines. Of these, five have received approval – Madhya Pradesh, Chhattisgarh, Gujarat, Bihar and Tamil Nadu.
5G roll-outs
The Indian market has taken early steps to create a favourable ecosystem for 5G deployment. However, to make commercial 5G a reality in India, fibre-based backhaul support is key. To this end, the percentage of fibre-based backhaul will need to be increased from the current 20 per cent to 70-80 per cent. 5G will also require a significant increase in small cell deployment, with each small cell to be backhauled through fibre.
Need of the hour
Since fibre is critical to the country’s Digital India vision, it is important that relevant policy and regulatory steps are taken to remove the bottlenecks impeding the roll-out of OFC infrastructure. There is an urgent need for strict implementation of the right of way (RoW) rules, as no success cases have emerged even after seven months of notification of the rules.
Operators are still struggling to make a rational business case for the exorbitant charges levied by various state agencies. Even state-run operators like BSNL have faced difficulties when dealing with the municipalities.
In addition, the government should mandate that major infrastructure projects include a clause in their architectural design requirements to ensure the provision of a utility duct for laying OFC. In May 2017, the Telecom Regulatory Authority of India floated the idea for a common duct policy that will reduce operator costs and help overcome RoW challenges. To this end, the regulator had initiated a pilot project for proof of concept at Deoghar in Jharkhand, wherein it is building a common duct that can hold fibre and cables from multiple service providers, eliminating the need for repeated digging of roads. This common duct will be available for the next 20-25 years for any entity that wants to pull its cable, be it a telecom company or any other utility. It will also allow the municipality to earn revenue. The pilot project is in progress and a report will be brought out at the end, indicating whether such a model is replicable in other larger and smaller cities.
Further, strong administrative and legal provisions need to be made for compensation in case of cable cuts/damage by government agencies or private third-party agencies executing digging work. The industry is also demanding critical infrastructure status for fibre networks.
Outlook
As India embarks on the path of digital empowerment, OFC will serve as the backbone of this transformation. It will play a pivotal role in improving digital connectivity in the country and building robust backhaul capabilities for 4G/5G services. The industry is heading for exciting times with significant activity expected in the OFC space in the coming years.
To take stock of the recent developments in the Indian OFC space, and focus attention on emerging growth drivers and opportunities, tele.net recently organised a conference, “OFC Networks in India”. This section highlights the growth trends in the OFC space, key government and private sector initiatives, the major issues and challenges, and the market potential.
Akanksha Mahajan Marwah
