Infrastructure Providers 2.0: Making India Digitally Ready

Infrastructure Providers 2.0: Making India Digitally Ready

Telecommunications in India has emerged as a key driver of economic and social development in an increasingly knowledge intensive global scenario. The telecom infrastructure facilitates connectivity of 1.2 billion subscribers through 474,000 towers housing 18.5 lakh BTSs. In the past one year, almost 1000 BTSs have been added daily to connect the unconnected.

The Tower and Infrastructure Providers Association (TAIPA) recently held its 3rd annual general meeting (AGM) 2018. The AGM emphasized on the proactive role of infrastructure providers to facilitate a robust telecom infrastructure for smooth rollout of newer technologies such as 5G, IoT, M2M, IoT, AR, and VR, thereby making India digitally ready.

The AGM 2018 deliberated on the enhanced version of the infrastructure providers and termed it as infrastructure providers 2.0. The theme signifies the evolution of new business opportunities that the IP-1 will foray into such as street-level infrastructure, in building solutions, infrastructure for smart cities, common ducts, and fiberization that will accelerate deployment of telecom infrastructure and give a fillip to the realization of visionary programs of the Government of India like Digital India, Smart Cities, and BharatNet.

There is a need for enhancement of scope of the IP-1s as it would result in cost efficiencies by leveraging the sharing concept to the newer business model such as leasing out common duct, and fiber on a non-discriminatory basis. For example, sharing of towers has resulted in potential savings of Rs. 23,000 crore, since 2006 due on CapEx savings for creation of a telecom infrastructure.

The AGM was graced by ministers and senior government officials from DoT, TRAI, and state government officials who shared their thoughts on infrastructure providers’ role in making India digital ready.

Manoj Sinha, Minister of State for Communications was the chief guest. Dr R S Sharma, Chairman, TRAI, and N Sivasailam, Special Secretary, DoT were the guests of honor.

The tower companies have been continuously challenging business efficiency models thus bettering themselves to provide more effective solutions.

The tower industry enabled rapid growth in telecom subscriptions as the number of telecom towers increased from a meagre 100,000 towers in 2006 to well over 471,000 currently. The industry now boasts a tenancy ratio of over 2 and has about 1.8 million base transceiver stations installed on their towers. The Indian tower industry introduced a unique Infrastructure Sharing model which has many benefits like reduced CapEx & OpEx, increased connectivity, faster roll-out and higher energy efficiency, offering a ready-to-go solution to operators in building a scalable and successful Indian business model which is proven and is now being emulated the world over including China. The same is also a case study at Harvard Business School. The robust telecom infrastructure will help implementation of visionary programs like Jan-Dhan Yojna, My Gov Online, Make in India, Digital India, Smart Cities, Financial Inclusion, and Direct Benefit Transfers.

NDCP-2018 is a forward-looking policy and will enable the sector to have a successful future. Our special focus is on fiberizing of towers, which will enable newer technologies like FTTH, IBS, and DAS to come into play. Implementation of Smart Cities projects across the country will give a fillip to the way the telecom sector will enable everyday lives from smart homes and smart traffic management systems to smart waste management.

Data is emerging as the focal point of telecom growth in India and we at the helm of policymaking for the industry are working at our best pace to ensure that the communication connectivity reaches the remotest corners of the country and the Digital India vision becomes a reality. In this context, I state with satisfaction that our biggest success story has been connecting the unconnected through BharatNet, which by December 2017 had connected more than 100,000 gram panchayats, and the remaining 150,000 including the remotest corners of the country are being targeted to be completed by March 2019.

Moving forward, I can confidently say that India will not miss the 5G bus. When 5G is launched globally, India will be at the forefront. Work is on schedule and DoT is setting up an open test bed at IIT, Chennai. The government is working extensively with the academia and the industry. A high-level committee has held consultations with DoT, IIT, and various other stakeholders. The high level forum is preparing a roadmap and submitting recommendations. 5G will be the necessary evolutionary technology for Internet of Things, machine-to-machine learning, augmented reality, virtual reality etc. whose capabilities extend far beyond the previous generation of mobile communications.

The infrastructure providers have a critical role to play as the new technologies will need high speed and high-quality internet connectivity. In order to ensure world-class ubiquitous connectivity, deployment of a robust telecom infrastructure is a necessity. Towers need to be connected through fiber, small cells, and wi-fi hotspots. The residential and commercial buildings need to be fiberized and provide all the connectivity and ensure early adoption of new technologies.

Through introduction and implementation of innovative renewable energy and storage solutions, the tower companies have been continuously challenging business efficiency models thus bettering themselves to provide more effective solutions. The tower infrastructure industry also works on some key aspects like environmental sustainability, promoting education, digital learning, empowering women, and Swachh Bharat initiative as per their CSR mandate. To uphold environmental sustainability, the industry has undertaken projects that help the ecological balance and the conservation of natural resources. Their exemplary efforts during natural calamities, be it Mumbai rains, Bhuj earthquake, the recent floods in Kerala and north-eastern states deserve applause. The tower infrastructure companies along with telecom operators have ensured that connectivity to such severely damaged areas is restored at the shortest possible time.

Manoj Sinha
Minister of State for Communications

have three points to make here.We have come some distance, since we met at the last AGM of TAIPA. We have been able to address the issue of licensing by considering infrastructure providers (i.e., IP-I companies) in a category distinct from the telecom service providers (TSPs) who are the customers of the IP-1 entities. IP-1 registrees constitute a category of licenses under the IT Act, 1885. Simply stated, the distinction between the two forms of licenses are that IP-1 registrees are in the B2B space while TSP licensees are in the B2C space. An important advantage of IP1 being exclusively in the B2B space is that, the B2B player is in a position to organize infrastructure sharing. The contribution of IP-1 institutions is through ensuring better and optimal utilization of infrastructure resources since in the absence of institutions organizing infrastructure sharing, lots of national resources will be inefficiently deployed. Since IP-1 constitute a distinct category of licensees, they are governed by a different regime of charges for the legal concession.

The second issue, which we addressed, is right of way (RoW). The RoW issue under the Telegraph Act became a rule after 130 years! This point of governing the subject through rules was missed completely, maybe because it was a sovereign monopoly for 100 years and issues relating to RoW became important as a bottleneck for enhanced and quick deployment of telecom infrastructure only recently, over the last two decade or so. I am happy that the government considered a rule-based solution as opposed to administrative guidelines. The challenge now is to create systems, procedures to implement the provisions of the rule. But, one thing is here to stay – telecom infra providers now have a justiciable right to RoW which administrative guidelines are incapable of providing. This throws up opportunities for telecom infra business opportunities.

As a start, let us address the fiber protection issue. Here, the initial actions are entirely in our hands to create scope for an ecosystem to evolve. As long as the fiber is identifiable through a GIS system, it is possible to provide legal protection that will substantially reduce fiber cuts and thus risk mitigation and protection through insurance may be possible. So a whole lot of business opportunities can be there once the operator or IP-1 businesses takea decision that they shall put the fiber on GIS mapping, put it on a current platform, and facilitate legal protection.

The third important thing is the issue of RoW charges. The policy is very clear on this – RoW charges are zero. The charges that can be legitimately levied under the rules are for restoration cost, that is restoring the area, which has been dug or affected in the process of infrastructure creation. And this is an issue where integrity comes into play. Permission is taken to dig 3 feet, restoration charges are paid for 3 feet, and yet 4 meters of the road, which is public infrastructure, is destroyed. This is an area, which the industry needs to address and once enforced strictly at its level, DoT can hold hands with the industry and enforce RoW with the state, local bodies, and parastatals such as railways and NHAI. Once the concerned authorities are assured of this aspect, there will be no need to hold conferences with IT secretaries to plead for implementation of rules. I am confident there will be smooth implementation of the central government legal order. Besides, digital communication infra is vital for development of institutions at all levels. States, local bodies, and parastatals are hungry for it. Yet, they are also afraid of the enormous costs that will be imposed on them in the process of its creation. At the moment with poor implementation in the matter of restoration of affected civic infrastructure,we are on weak moral ground before the state authorities, local bodies, and parastatals. A pro-active approach from the IP-1 companies to put in place a professional restoration mechanism followed by certification from a reputed public institution toward third-party certification will immensely help create new business paradigms in the sector which will enthuse governmental authorities at the field level to confidently trust digital infra creators.

I conclude by bringing to your notice that the NDCP 2018 released today very clearly states that it stands committed to ensuring RoW for provision of all digital communication infrastructure and the industry represented by this august body has a great opportunity to shape the ecosystem through its actions serving as a beacon for others to follow.

N Sivasailam
Special Secretary (T),
Department of Telecommunications

On behalf of our members, I convey total commitment to the mission of creating infrastructure and sharing the same on a non-discriminatory basis with all the operators.

The enhancement of scope of the infrastructure providers is essential and a critical part of the overall telecom ecosystem, as they facilitate adoption of technologies of the future and make India digitally ready. In India, only 25 percent of the telecom towers are fiberized whereas in the US, China, and Japan more than 75–80 percent of the telecom towers are fiberized to meet growing data demands. The draft NDCP 2018 also emphasizes on fiberization of 60 percent of the BTSs.

TAIPA, represents the tower industry, which provides tower infrastructure to all operators on a nondiscriminatory basis. Our members operate about 450,000 towers and we have roughly 750,000 co-locations across India, in every nook and corner of the country. Since inception, we collectively have invested close to `100,000 crore in this industry, which has now truly come of age, not only in India, but what was pioneered in a big way in India is being emulated across the world. This is one area where India has been a role model for China too. China Towers, which was formed on the lines of Indus Towers, where three telecom service providers came together and set up a company has consulted us many times and recently went in for a very large IPO too.

I am proud that, one, our industry stands up and excels in providing quick relief and in restoring the telecom network every time there is a calamity in the country. And secondly, with unconditional support from the government, each of our members has worked very hard at environmental protection. We have been able to reduce diesel consumption in a very significant manner over the last four years by using renewable energy. Also, our dependence on imports has been brought to zero. Equipment worth thousands of crore used by us is all made in India. It is well-established that infrastructure sharing and enhancing scope of IP-1s are crucial for the telecom industry, as has also been reinforced in NDCP issued by Union Cabinet today. At TAIPA, we are grateful that IP-1s has been included in the ambit of these rules. Ten states have already issued their respective tower guidelines and five are in the process of finalization.

We are playing an important role in formulating global 5G standards, unlike earlier in 3G and 4G when had missed the bus in giving inputs for relevant standards. The 5G implementation will require massive additional infrastructure, we will need hundreds of thousands of new towers, and many of them will be of small cells. Fiber optic network, on an unprecedented scale will have to be spread across cities and towns all over India. It is imperative that we move toward shaping of this infrastructure. If we want to rollout quickly, this will have to be done, else there will be no rationalization of capital and operating cost for the operators, with the result that it would not be possible to offer 5G services and the services which ride on 5G to the average Indian at an affordable price.

Given the enormity of the rollouts required, I would like to make two requests to the honorable minister. Firstly, a high-level round table conference of IT ministers and secretaries from every state needs to be convened. While there is growing acceptability and general support of infrastructure rollouts, at local levels we continue to experience massive resistance, and are treated as cash cows by many local authorities. This will need to change. A conference would provide an alignment of the grand vision of Digital India and enable us to have robust and progressive ground rules and smooth implementation.

And I would appeal that the only criteria for enhancing the scope should be that wherever such infrastructure results in providing services to the end-customers, which require a license by the government, the IP-1s must ensure that the infrastructure is made available only to licensed operators. NDCP includes the creation of 5 million wi-fi hotspots by 2020 and 10 million by 2022 as also a massive project for fiber-to-the-home. Enhancement of scope of IP-1s is rapidly creating the infrastructure, which can then be provided to all service providers and operators on a non-discriminatory basis and they in turn could then offer their services.

Akhil Gupta
Chairman, TAIPA;
Vice Chairman of Bharti Group and Executive Chairman of Bharti Infratel Limited

Changing data usage patterns and rapid technological evolution will offer new opportunities for towercos to move beyond their traditional business models.

The telecom industry is undergoing a transformational change. Slow growth in traditional macro-site rental business brings its own set of challenges and opportunities for the various stakeholders. A quick glimpse at the Indian tower industry scenario reveals MNO consolidation, which led to a reduction in existing sites and future tenancy BTS demand; abundance of spectrum, indicating slower growth ahead for S-RAN deployment; and demand for alternatives with a focus to shift toward small cells for network densification.

However, changes in consumer behavior and technology present new opportunities for towercos. With 4G monthly data usage per subscriber >10 GB, the total traffic is expected to grow 8× in five years. New technologies (including 5G) will require a more dense and heterogenous network, with more robust backhaul, both of which promise new opportunities.

MNOs would require support to offer high-quality mobile broadband services. Fiber backhaul, DAS, IBS and small cells, and wi-fi hotspots would need to be put in place. New services in smart cities and IoT would also bring new opportunities.

Towercos in India and globally are preparing themselves to address these opportunities. Cheaper tariffs, availability of better network devices, and content is driving demand for fiber. There is a direct correlation between fiberized towers and MBB penetration. Indian towercos have been able to charge more than 10 percent premium over base package prices for fiberized towers. It also helps address small cell opportunity. All this is only possible when there is a robust infrastructure and backhaul available to connect towers to the internet.

New opportunities for towercos

Towercos can venture into fiber backhaul to support increasing traffic and bandwidth demand.

A high-level correlation between percentage of towers fiberized and MBB penetration exists and for India to reach about 70 percent MBB penetration, 70 percent of towers would need to be fiberized by 2022. Leading towercos globally have diversified into fiber backhaul. American Tower and Crown Castle in the United States of America, in Southeast Asia, and STP in Indonesia are all focusing on fiber infrastructure now. They are building a strong portfolio of fiber network to support data growth. In India also, towercos have been deploying fiber and venturing into this space. But a lot remains to be done.

Towercos could play an important role in small cell deployment due to their prior experience; global examples suggest this could contribute to large portion of revenue.

Though the small-cells opportunity is large (running into thousands of sites), towercos may need to adopt a different approach and a business model of high volume and low margins to be successful in this space.

Potential towercos role in small cells ecosystem could be in:

Network deployment. Help getting necessary permissions, faster deployment through established processes, and ensuring compliance to the regulations.

Backhaul. Offer fiber backhaul, which is the critical component of small cells deployment.

Network management. Ensure availability of small cell infrastructure through network monitoring and fault management may be vested with towercos.

Similarly, towercos could benefit from deploying open access wi-fi as it is expected to drive the next wave of opportunity in the face of rising demand for data.

Currently the Indian market has around 0.5 million wi-fi hotspots, predominantly owned by MNOs. NDCP-2018 is looking at 5 million wi-fi hotspots in the next couple of years.

There is a strong opportunity for towercos to get into this space and help the government realize this vision. They in turn would get additional revenue stream, be able to retain existing MNO clients, and achieve cost synergies. The MNOs would be able to reduce network congestion via offload and avoid CapEx investments.

As the overall ecosystem matures, the management of smart cities infrastructure and supporting deployment of IoT infrastructure also offer a significant opportunity.

Currently, smart cities and 5G both are at a very nascent stage in India. There is no staff and established business models, yet telecom infrastructure will be a fundamental part of smart cities and 5G. Globally, towercos such as Cellnex have started developing their Smart City solutions. In fact, Indian towercos too have started participating in Smart City initiatives. The towercos would benefit with a higher collaboration with municipalities and in turn a higher potential revenue opportunity. IoT still remains in its infancy and timing of IoT deployments could synchronize well with 5G rollouts.

Towercos may benefit from a combination of new opportunities and incentives to existing business once NDCP 2018 is effectively implemented.

New infrastructure deployment (passive and active) opportunities exist under enhanced scope of infrastructure providers and there would be growth opportunities emerging from proliferation of new technologies such as 5G, IoT, and M2M.

On the core business, NDCP has positive aspects as incentives and exemptions for construction of towers, accelerated RoW permissions for towers in government premises, and promoting deployment of renewable energy solutions and energy efficient storage solutions such as Li-ion batteries.

To conclude, changing data usage patterns and rapid technological evolution will offer new opportunities for towercos to move beyond their traditional business models. Towercos could support MNO’s current business through offering fiber backhaul and small cell/wi-fi hotspot infra and help deployment of smart cities and IoT. And finally, policy intervention such as NDCP, if implemented well, may benefit towercos by offering new opportunities as well as incentives for core business.

Sameer Gupta
Analysys Mason

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