A wide range of connected devices have come to the fore in recent times. From connected cars to connected homes, the world is moving to towards a connected ecosystem, which can only be sustained with the provision of uninterrupted connectivity solutions. As India witnesses surging levels of data consumption, optic fibre cable (OFC) is being seen as the most suitable medium for catering to this burgeoning demand. Moreover, with the launch of the Smart Cities Mission, the need for fibre roll-out has become paramount. Some key expectations from a smart city in terms of infrastructure are the provision of 100 per cent mobile coverage through a 100 Mbps internet backbone, and OFC connectivity to every building and home within the city. Further, as 80 per cent of the data traffic is generated indoors, the deployment of fibre for providing in-building connectivity is of paramount importance.
While fibre roll-out is gaining traction these days, challenges in its deployment such as right-of-way (RoW) issues remain a key hindrance. There is an urgent need to address these RoW-related issues to ensure an expeditious fibre roll-out. Moreover, sharing of this valuable asset must be considered in order to enhance the country’s fibre footprint in a timely manner.
A look at why fibre roll-out is gaining traction, key challenges encountered in its deployment, changing market dynamics with the entry of Reliance Jio and the way forward….
FTTH and in-building connectivity
The need for significant OFC capacity in the last mile has only multiplied in recent years due to the increased consumption of bandwidth-intensive applications such as high-resolution videos. Today, most of the data generation is happening inside buildings. But the kind of coverage and capacity that we get inside building premises is severely restricted. Further, as fixed and mobile services are becoming increasingly converged, the need to deliver fibre-to-the-home (FTTH) or fibre-to-anything (FTTX) is becoming even more apparent.
Fibre brings along various benefits. With fibre, there is no limitation on applications that a user can access. In addition to internet TV, several smart home applications can be used. All the home appliances can be connected for smart monitoring. Moreover, most of the data consumption happens indoors today. Homes, offices and commercial establishments are seeing the maximum data consumption. With wireless, there are issues of penetration loss indoors, which, in turn, impacts the user experience. In order to deliver a high speed experience on certain premises, it is important to offload data traffic on to a medium that is available inside the building. This is where fibre can help. Not only does fibre provide better bandwidth and data speeds, it also addresses the problem of network outage that is often encountered in wireless connections.
Despite a wide array of benefits, the penetration of fibre broadband to homes in India still remains low. FTTH connections currently account for less than 1 per cent of the country’s total broadband users. This is because laying out fibre in the country is not an easy task and is laden with several challenges.
The foremost challenge hindering the widespread roll-out of fibre is the various RoW-related issues. Exorbitant fees, the process of obtaining approvals, liaising with multiple local bodies and dealing with restrictions during digging, all add to the stress of laying fibre. Further, inadequate maintenance of fibre infrastructure and uncoordinated development activities such as road expansion, which result in fibre cuts, add to the problem.
Moreover, fibre roll-out is highly capex intensive and given the various hindrances encountered in the execution process, the return on investment also gets diluted.
Current market dynamics
Challenges notwithstanding, FTTH roll-out remains a promising growth strategy as the uptake of bandwidth-exhaustive applications grows further. Every telecom operator today is putting in efforts to fiberise homes. While operators such as Bharti Airtel and BSNL are already offering fibre-based broadband services, Reliance Jio also recently forayed into this space with a competitive offering.
The company launched its Jio GigaFiber in September 2019 and is targeting 20 million homes and 16 million enterprises over the next 12 months. The service is being rolled out across 1,600 cities in India, offering speeds starting from 100 Mbps, all the way up to 1 Gbps. Breathtaking in its scale and dimension, this launch could provide a big boost to the country’s fixed line broadband penetration and the FTTH market.
At present, fibre-based broadband services offered by the existing internet service providers (ISPs) are either FTTB (fibre-to-the-building) or FTTP (fibre-to-the-premises) where the optical fibre reaches only a common distribution node in the building or premises. Hereafter, data is transmitted to users’ houses using traditional copper cables, which cannot match the high speed data transfer requirements of the modern age smart applications that are highly bandwidth exhaustive. However, under the Jio GigaFiber service offering, even the last few metres, the “last mile” will be connected using fibre, thereby ensuring high broadband speeds at all times. This will be a key differentiator of the Jio GigaFiber service. The installation of FTTH broadband will bring the fibre optic line right to the local home connection or modem, allowing users to enjoy high-speed connectivity with a minimum loss of speed that usually happens during transmission from the common distribution box to the homes of users. While it is all good news for the consumers, things might not be very rosy for the existing players in the FTTH market, particularly the cable operators and ISPs.
Commenting on the impact of Jio GigaFiber on the competitive landscape, Rajiv Sharma, head, institutional equity research, SBICap Securities, said, “The competitive pressure faced by telcos, ISPs and cable operators will be mostly around enhancing speed and reliability. While cable operators currently offer very high speeds, instances of network outages are also high. Jio’s services are expected to have a significantly low downtime. Currently, the high speed wired broadband market, which falls under the FTTH category, stands at just 4 million-4.5 million. So, I do not think it is going to be so much about the user churn from Bharti Airtel and BSNL to Jio. Also, much will depend on the OTT offerings that Jio plans to bundle with its services.”
Inderpreet Kaur, senior analyst, Ovum, is of the view that service providers will now need to leverage the rise in speeds to offer more value to customers such as a superior customer and content-viewing experience. “Protecting high-end subscribers and growing into stronger players require deep-rooted content strategies. The incumbents need to be more innovative with their bundling and pricing strategy – like launching long-term plans to lock up customers to minimise customer churn. If incumbents are to be part of the growth story, they have to expand their networks quickly, and not just stick to upgrading what they already have.”
The way forward: A shared approach
Going forward, an increased focus is needed on sharing of infrastructure to enhance the in-building connectivity. As of now, there is limited infrastructure sharing. Each operator installs its own in-building connectivity solution to provide indoor coverage, depending on its expansion plans and timelines. Such a model of operation not only leads to repetitive incurring of common costs, but creates inconvenience for building residents because of constant digging.
As per the industry view, towercos can explore the option of becoming neutral hosts for FTTH services. In the future, towercos may take up the role of neutral hosts to cater to telcos’ need for providing FTTH services. The neutral host model offers multiple service provider options to the customer, leading to an increased uptake. Further, it leads to a reduction in the overall capex per service provider. Moreover, the specific expertise of the neutral host can be leveraged by service providers to achieve a faster time-to-market.