The Covid-19 pandemic has accelerated the pace of digital transformation in India by fast-tracking the consumption of digital services by two to three years. There has been an almost 36 per cent spike in data traffic during the pandemic. Meanwhile, the data traffic per smartphone per month has risen almost 1.2 times to 15.7 GB. Apart from the massive digital uptake in urban and semi-urban areas, there has been a significant roll-out of optical fibre cable (OFC) networks in rural areas and a 400 per cent increase in rural data consumption via BharatNet fibre.
Stepping into the 5G era
With 5G roll-outs around the corner, the country is set to witness another wave of digital transformation, which will help open up new avenues of technology adoption. 5G promises to set the tone for the future and spur the next round of telecom infrastructure investments, including large-scale fiberisation. By 2025, 330 million subscribers will enjoy the benefits of 5G. Data traffic is expected to rise 2.7 times to 40 GB per smartphone per month. To keep up with the fast evolving digital world, enterprise spend on business and technology is expected to grow by almost 1.4 times. Owing to the adoption of advanced 5G technology, the e-commerce market is expected to thrive at a compound annual growth rate of 30 per cent by 2025. Moreover, sectors such as online education and digital healthcare are poised to flourish further with the adoption of 5G. However, leveraging these opportunities calls for scaling up fibre deployments. Fiberisation offers nearly limitless bandwidth, which will be the key to unlocking 5G’s full potential. During 2002-08, 607 million fibre kilometre (fkm) was deployed, majorly led by 3G. However, during 2009-17, this number increased to almost 2,681 million fkm, majorly led by 4G and fibre-to-the-home networks. Now, with the launch of 5G services expected in India in the latter half of 2022, fibre deployment is poised to grow to roughly 5,362 million fkm – twice the current figure.
The advent of 5G not only promises to catalyse the pace of digital transformation, but is also set to open up a plethora of opportunities. With regard to strengthening the core network, 5G brings in opportunities in the form of enhanced fibre deployment, installation of small cells in street furniture, and modernising Wi-Fi and in-building solutions. These core activities would possess immense potential in terms of creating a revenue stream with the introduction of 5G.
Exploring adjacencies is another area of opportunity in the 5G world. 5G is expected to have a major impact in areas such as smart cities, electric vehicle charging, data centres/edge data centres, power-as-a-service and warehousing. Such adjacencies would open up multiple monetisation streams with respect to realising the full potential of 5G technology. Moreover, fiberisation brings with it an adjacent opportunity in the form of field maintenance, since OFC is subject to wear and tear. Moreover, pivoting the 5G customer base and setting up of satellite earth stations can serve as new growth models for digital infracos.
Emergence of new business models
On the infrastructure side, migration to high speed broadband has compelled industry stakeholders, especially infrastructure providers, to rethink their existing models. This has led to the emergence of new models such as fiberco and neutral host. The fiberco model involves the formation of an exclusive fibre company offering benefits such as extensive coverage, quicker roll-out, economies of scale and options for telcos to monetise. Meanwhile, the neutral host model offers advantages such as increased uptake rates, infrastructure sharing, faster time-to-market and leveraging of specific expertise by service providers.
Though 5G technology is poised to play an unprecedented role in the field of communications, there are some key considerations that need to be taken into account. The country needs to legally enforce right-of-way rules to enable speedy roll-out of 5G technology. In addition, India lacks an efficient policy for use of street furniture for small cells. Availability of input tax credit is another area that the country needs to revisit. Moreover, there is a growing need for rationalisation of property tax across states. Further, the Ministry of Power needs to categorise electricity tariffs under the industrial category instead of the commercial category for infrastructure providers.
Based on a presentation by Swapnil Srivastava, Portfolio Leader, Consumer, HSW, TMT & Service Lines, and Global TMT Analyst Leader, EY at tele.net’s conference on “OFC Networks in India”