With the proliferation of 3G/4G technologies and the launch of government initiatives like Digital India and Smart Cities, India has embarked on a digital journey. The next phase of this digital revolution will involve emerging technologies like 5G, which will substantially change operators’ backhaul requirements. The roll-out of 5G presents several challenges such as diversities in network densification, disparate data offload strategies and uncertainties around backhaul technology. Further, 5G requires the highest capacity backhaul to deliver its intended peak data rates. In this scenario, deploying fibre-to-the-tower (FTTT) has emerged as the most suitable solution for augmenting telecom networks for supporting next-generation wireless services.
FTTT deployment will significantly benefit operators, and create new business opportunities for tower companies. Amidst declining revenues, fibre and small-cell deployments can help tower companies in enhancing their operations to become end-to-end network infrastructure providers. Recognising these benefits, tower companies have started exploring opportunities in the FTTT space. 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. However, the current level of tower fiberisation in India is extremely low. At present, less than one-fourth of the telecom towers in India are connected through fibre. While this paints a very poor picture of fibre infrastructure in the country, it also indicates a huge untapped potential.
A look at the key trends in the FTTT space in India and the way ahead for this segment…
The level of FTTT deployments in India is very low in comparison to other countries across the world. Telecom markets in the Southeast Asian countries, the US, China, Japan and Korea have undertaken substantial fibre deployment in their backhaul and access networks. While the level of site fiberisation in the Southeast Asian markets stands at around 50 per cent, it lies between 65 per cent and 80 per cent in the developed markets of China, USA, Japan and Korea. The level of fiberisation achieved by global players such as China Mobile is around 90 per cent for all sites; AT&T is 90 per cent for 4G sites; and T-Mobile USA is 95 per cent for 4G sites. In contrast, the backhaul mix of operators in India is highly skewed in favour of microwave.
According to industry experts, less than 25 per cent of telecom towers are fiberised in India. Around 35 per cent of these are in metro cities while 20 per cent are in Tier II and III cities. This is a cause for concern for the industry as legacy microwave-based backhaul would act as an impediment to the adoption of upcoming technologies. 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 will come from site fiberisation. Approximately one in two sites in India will need fiberisation in the next three years.”
In the coming years, the increasing demand for data and emergence of heterogeneous networks will make site fiberisation even more crucial for operators. Most telecom operators have already started moving towards fiberisation. Reliance Jio Infocomm Limited is in the lead and has already fiberised all its telecom tower sites. In fact, 50-60 per cent of the sites leased from other operators are also fiberised. Other telecom operators such as Bharti Airtel and Vodafone India are also following suit. They have recently announced plans to double their FTTT deployments.
While operators and tower companies have started deploying FTTT, the widespread adoption of these networks depends primarily on the pricing structure. According to industry experts, pricing models remain the most important component of the FTTT business. Scaling up FTTT deployments in the country entails the implementation of the right pricing model. The pricing model currently adopted in the industry is the indefeasible right-of-use model. According to industry stakeholders, there are three primary pricing models – the price per km per month model, the price per tower per month model and the price per GB per month model. The first model has a direct correlation with the capex including right-of-way (RoW) charges, but may generate limited margins and returns. The second model is similar to the tower sharing model and is easier to understand and implement for both tower companies and operators. However, it allows cherry-picking of sites by the customer. The third model allows tower companies to share the benefits of increasing data usage and increasing revenue with operators, but it is very difficult to implement without access to the operator’s network traffic data and requires accurate forecasting to estimate the payout.
The current policy and regulatory regime will play a significant role in driving FTTT deployments. The recently released National Digital Communications Policy, 2018 is a step in the right direction. It has three objectives – Connect India, Propel India and Secure India. The Connect India mission aims to provide broadband connectivity to all uncovered areas. This entails establishing a national broadband mission to secure universal broadband access; implementing broadband initiatives such as BharatNet, GramNet, NagarNet and Jan Wi-Fi to be funded through the Universal Service Obligation Fund and public-private partnerships; undertaking a “fibre first initiative” to take fibre to homes, enterprises and key development institutions in Tier I, II and III towns as well as to rural clusters; promoting collaboration models involving state, local bodies and the private sector for the provision of shared duct infrastructure in municipalities, rural areas and national highways; facilitating the FTTT programme to enable fiberisation of at least 60 per cent base stations, thereby accelerating migration to 4G and 5G. These strategies are expected to scale up fibre deployments in the country, thus propelling growth in the FTTT space. Meanwhile, the government is planning to establish a fibre authority in India. The scope of such an authority is yet to be decided.
Challenges and the way ahead
The challenges facing the FTTT segment go far beyond capex issues. At the ground level, it is difficult to lay optical fibre networks because of RoW issues. Since fibre is critical to the country’s Digital India vision, it is important to ease the regulatory bottlenecks in optical fibre roll-out. To this end, a central or state level agency, or a task force can be set up to oversee the implementation of the RoW rules.
Challenges notwithstanding, FTTT deployments are the way ahead for the industry in terms of creating future-proof networks capable of accommodating the demands of an evolving telecom market. According to EY India, the level of fiberisation is expected to increase to 70 per cent by the fiscal year 2020. This implies that the number of towers fiberised will increase from 90,000 to about 333,000. The industry will have to pump in investments of around $8 billion for fiberising networks across the country in the next five years.
To this end, the industry expects NDCP, 2018 to encourage investments in fibre backhaul, bring in standardisation, iron out RoW issues and help develop a roadmap for digital highways in the country.
Kuhu Singh Abbhi