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Fibre Connect: Data surge fuels demand for OFC
The Indian telecom market is witnessing a major surge in data uptake. The outlook for the optic fibre cable (OFC) industry is, therefore, looking up, with investments being driven by the growing demand for broadband services and the proliferation of next-generation technologies and devices.
While the current OFC roll-out status in India is not inspiring, the future demand potential is significant. As per industry estimates, the total cumulative fibre deployed-to-population ratio in India is just 0.1x as against 1.3x in the US and 0.8x in China. Further, in India, only 17 per cent of users enjoy speeds higher than 4 Mbps. These statistics highlight the immediate need for a greater fibre presence in operator networks in the backdrop of growing 3G/4G uptake.
The industry has also realised the need to have a stronger OFC network in order to meet the expected growth in demand for high speed data services across user segments. As a result, almost all operators have been increasing the share of OFC in their backhaul networks.
Last mile connectivity through FTTx deployments is also increasing, albeit at a slow pace. Currently, the viability of the stand-alone FTTH model remains uncertain even in dense urban areas, mainly due to the requirement of large-scale investments and the limited availability of high-definition content. But the scenario is likely to change soon with growing demand for such content. Government initiatives such as the BharatNet and cable TV digitisation projects are further contributing to OFC growth.
Besides telecom, public utility companies such as Power Grid Corporation of India Limited (Powergrid), Indian Railways and GAIL are enhancing their OFC networks alongside their infrastructure for better connectivity. These companies are using OFC for their own use as well as for leasing surplus capacity to mobile network operators.
The total OFC network deployed by the Indian telecom industry currently spans about 1.5 million km, of which close to half has been rolled out by Bharat Sanchar Nigam Limited (BSNL), followed by Reliance Communications (RCOM) with 192,000 km and Airtel with 170,000 km. The increase in data uptake is driving the need for fibre-connected towers. In the next five years, there will be a need for 200,000 fibre-connected towers.
Fibre presence is lacking on the access side due to right of way (RoW) issues. The costs and complexities involved in obtaining RoW are probably the biggest deterrents that impact the development of the country’s backhaul infrastructure. RoW charges currently vary from Rs 0.5-0.6 million to Rs 15 million per km across different states. This scenario is set to improve once the recently released draft Indian Telegraph Right of Way Rules, 2016 gets ratified by the Department of Telecommunications (DoT). These guidelines emphasise the urgent need to simplify the process of granting RoW permissions through a single-window clearance system in a transparent and time-bound manner.
In what may be termed a positive indicator for the industry, DoT has recently released the draft Indian Telegraph Right of Way Rules, 2016, wherein it has emphasised the urgent need to simplify the process of granting RoW permissions through a single-window clearance system, in a transparent and time-bound manner.
OFC roll-out is also getting a steady push from the deployment of fibre under the BharatNet project, for which BSNL, Powergrid and RailTel have come together to lay around 2.5 million km of fibre in the hinterland. Besides BharatNet, BSNL is also the implementing agency for the defence forces’ Network for Spectrum (NFS) OFC project. The operator has recently finalised vendors for all the seven packages, aggregating 57,015 km of OFC deployment. Package A, worth Rs 24.5 billion for 9,495 km in Jammu & Kashmir, has been awarded to Sterlite Technologies; Package B, worth Rs 14.76 billion for 7,599 km in Delhi NCR, Punjab, Haryana and Himachal Pradesh, to Vindhya Telelinks; Package C, worth Rs 14.48 billion for 9,568 km in Rajasthan, Uttarakhand and Uttar Pradesh to TCIL; Packages D and E, worth Rs 24.42 billion for 9,660 km in Maharashtra, Goa, Gujarat, Chhattisgarh and Madhya Pradesh, and for 7,154 km in Tamil Nadu, Andhra Pradesh, Kerala, Karnataka and Lakshadweep, to L&T Construction; and Packages F and G, worth Rs 11.66 billion for 6,021 km in West Bengal, Odisha, Bihar, Jharkhand, Andaman & Nicobar Islands and Sikkim, and worth Rs 18.17 billion for 7,518 km in Assam, Nagaland, Meghalaya, Manipur, Tripura, Arunachal Pradesh and Mizoram, have been awarded to ITI Limited. The packages entail the procurement, supply, trenching, laying, installation, testing and maintenance of OFC and accessories for the construction of the NLD backbone and access routes on a turnkey basis. The cost also includes an annual maintenance contract for seven years for maintaining the network once it is rolled out.
Sharing of fibre infrastructure
As has been the case with the tower industry, sharing is slowly becoming a norm in the fibre space as well. Given the exponential growth in data on the demand side, as well as supply-side challenges such as difficult geographical terrain and RoW-related issues, there is an ongoing push towards the pooling of resources to optimise costs and enhance efficiencies.
Bharti Airtel’s infrastructure-sharing agreement with Reliance Jio Infocomm Limited (RJIL) was a pioneering deal. The deal, announced in 2013, envisaged the sharing of all the infrastructure created by both the companies, including their inter- and intra-city optic fibre network. Currently, all major operators, except BSNL, are sharing their fibre infrastructure. Operators typically share fibre for redundancy purposes or to offer services in difficult terrain. For instance, Idea Cellular leases capacity from other operators in areas such as the Northeast, Jammu & Kashmir and Himachal Pradesh. It has sharing agreements with Bharti Airtel, Vodafone India, Tata Communications, etc. RJIL has adopted the fibre-sharing model in a big way and, apart from leasing capacity from RCOM, it has signed agreements with BSNL and Idea.
Sharing of optic fibre infrastructure is, however, more prevalent on the backhaul side, with limited or no deals for last-mile connectivity.
Besides telecom, public utility companies such as Powergrid, Bombay Gas Limited, Indian Railways, NTPC Limited and GAIL are enhancing their OFC networks alongside their infrastructure (transmission lines, gas pipelines, etc.) for faster and better data connectivity. These companies, besides using OFC for their own use, are leasing surplus capacity to telecom operators in a big way.
Exploring the aerial route
BharatNet, the country’s largest project to bring broadband to rural areas through fibre, has been suffering serious delays on account of poor implementation. Given its role in accomplishing the Digital India initiative, the government has now decided to explore aerial fibre implementation in Phase II to expedite execution. Aerial OFC, though a less reliable and less durable alternative to its underground counterpart, has several advantages in the short run, including lower cost, speedier implementation, easy maintenance and utilisation of existing power infrastructure such as lines and poles.
It is still unclear whether operators will take this route in a major way for their roll-outs in urban areas. However, it is expected to be used for BharatNet to make up for the implementation lag.
Last mile gaining prominence
India mirrors the global story when it comes to data traffic growth. The country’s telecom networks are currently carrying about 1,350 petabytes of traffic per month and this number is growing at a rapid clip. The spectrum that is currently available with service providers as well as the spectrum that has been earmarked for future allocation to them is clearly not enough to serve the growing demand. Therefore, FTTx is emerging as a key contender to wireless technologies for delivering broadband in the last mile. Operators state that a majority of the 30,000-40,000 km of greenfield roll-outs taking place annually is on the access side or very close to the last mile.
Vodafone’s recent acquisition of YOU Broadband is a key move indicating the growing relevance of last mile fibre infrastructure in an operator’s portfolio to ensure competitiveness. As a part of the deal, Vodafone will acquire around 3,000 km of the latter’s optic fibre and 6,000 km of last mile cables to connect homes across 12 cities, including Mumbai, a key data market for Vodafone.
Industry reports reveal that the amount of fibre that the Indian telecom industry currently deploys every year is not even half of the actual requirement. The under-investments in digital infrastructure, however, present a significant opportunity on the supply side for cable manufacturers, both local and foreign.
Industry estimates suggest that the Indian OFC market is expected to grow at a compound annual growth rate of 15.46 per cent (in value terms) between 2014 and 2020, increasing from $180.2 million to $424.12 million. The actual growth could be much higher given the improving landscape of OFC deployment and uptake of fibre-driven services. The government’s renewed focus on expediting fibre roll-out in rural areas and easing the challenges faced by the private sector in fibre deployment will go a long way in strengthening the country’s OFC network, and drive overall broadband adoption in the country.
To focus attention on the developments in this space, tele.net recently conducted its fifth annual conference on “OFC Networks in India”. The following pages highlight the growth trends in the OFC space, the key government and private sector initiatives, the major issues/ challenges, key applications as well as market potential.
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