The telecom sector has seen a huge impact of the evolution in technology and the need to meet digitization targets. Operators who are upgrading networks to expand fiber coverage and have invested in the future ready technology, are leading the innovative offerings and are building cost-efficiencies. 5G is intended to support critical and innovative applications where low latency and higher capacity networks are a prerequisite for achieving reliable communications and realizing the full potential of Internet of Things (IoT). Global deployment of 5G services is likely by 2020 and many developed markets are currently in trial-cum-preparatory stages. Operators globally are in the process of finalizing strategies to create financially viable business model for 5G. Meanwhile, the telecom regulator in India has a target for 5G launch by 2020.
The thrust of the draft National Digital Communications (NDC) Policy 2018 has been on fiber deployment and fiber connectivity to accelerate the migration to 4G/5G. India has approximately 1.5 million km of OFC, and less than one-fourth of the towers are fiber-connected. The draft policy aims at implementing a Fiber First Initiative to take fiber to the home, enterprises, and institutions. Effective implementation of the right of way (RoW) policy is critical for achievement of fiber coverage targets. India has also embarked on the world’s largest rural optic fiber rollout aiming to connect 250,000 villages by broadband under project BharatNet by March 2019. So far 150,000 villages have been linked. The policy aims at providing universal broadband coverage across India at 50 Mbps speed by 2022.
Fiber versus Wireless
India has emerged as a very large consumer of data over the last few quarters. Current data consumption by Indian users increased to 2 GB per user per month, increasing 120 percent YoY in December 2017. The wireless broadband subscribers have been growing steadily, registering 53 percent YoY growth in January 2018. If continued at the current run rate the mobile broadband subscribers would reach 480 million by end of 2018 from 394 million as of March 2018. As wireless platforms are not equipped to handle the gigantic increase in data traffic, optic fiber connectivity is the prerequisite for realizing the country’s broadband goals.
Telcos are continuously expanding their fiber footprint which is future ready to offer fiber-to-the-home (FTTH), IoT, and other digital services which would support large data consumption. Reliance Jio Infocomm Limited (RJio) has over 100,000 sites, which positions it as one of the largest network operators in the country. In addition to fiber backhaul, extensive last mile fiber connectivity is being rolled out to address the FTTH potential. Acquisition of fiber infrastructure from Reliance Communications Limited would help (RJio) in achieving pan-India FTTH roll-out. Bharti Airtel Limited has also expanded its optical fiber coverage to 237,893 route kilometers (R km) from 229,856 R km in 2017.
Upgrade to 5G will require significant investments to be made in spectrum and fiber rollout. The draft NDC policy recognizes spectrum as a key natural resource and aims at ensuring availability for new spectrum bands for access and backhaul segments for timely deployment and growth of 5G networks and next-generation access technologies. The policy also aims at optimal pricing of spectrum and further liberalizing spectrum sharing and trading regime. Pricing for the 5G spectrum will remain a deciding factor for telcos to make further investments. 5G device ecosystem will also be a constraint in massive 5G adoption, due to high cost of chipset. As it stands today, Indian telcos capacity to invest in 5G in 2018 could be restrained due to weaker operational cash flows, already high debt levels, pressure on EBITDA, currently low level of 4G penetration, and pending consolidation.