India’s telecom sector seems to be getting out of the woods. TRAIs Telecom Service Performance report of Quarter Oct-Dec 2020 released in April 2021 shows good growth in the financials of Indian telecom companies.
Gross telecom Revenue during the last quarter of 2020 was Rs715.8 billion, a YoY growth of 12.27 per cent. Overall Wireless ARPU (Average Revenue per User) grew by 29.06 per cent backed by a huge growth in usage. The licence fee grew YoY by 16.49 per cent which should bring some relief for the government at a time when its income is strained due to reduced economic activity because of the lockdown.
The growth in internet traffic and subscriber base is also very encouraging. The total internet subscriber base in December 2020 increased to 795 million.
In the present Covid lockdown situation, telecom is now a very important infrastructure element that impacts our lives and the economy, even more than the roads and ports. The improvement in the financials of the sector is very encouraging and beckons telcos (Telecom Companies) to invest more.
As per an ICRIER study, every 10 per cent increase in the usage of internet in India will add Rs4.5 trillion (equivalent to $71 billion or €66 billion in 2019) leading to a 3.3 per cent increase in the GDP of India. So, telecom in general and internet in particular is a key component of the $5 trillion GDP target of our PM.
With this positive trend in the Indian telecom sector and growth in demand for telecom services, what should be the priorities of the sector in the coming years? Let’s evaluate.
While internet penetration in urban areas, as per TRAI’s report, is 103 per cent, same in rural areas is a low 34.6 per cent. During Covid lockdowns, students in several rural areas suffered without access to online classes due to non-availability of good network among other reasons. With work from anywhere becoming prevalent, and semi-urban and rural areas adopting digital means for shopping, entertainment and also education, network in non-metro cities, towns and villages would be critical for growth of the digital economy and to support jobs. So, semi-urban and rural internet needs lot more focus and immediate further investment to help reduce the digital divide.
Total fibre/wireline broadband user penetration is still 3.21 per cent of the total internet base in India. Dependence on wireless for internet is too high in India. Though Covid has accelerated the rollout of Fibre to the Home (FTTH) in metros, there’s need for huge investment to make it more widely available for enabling better WFH (Work from Home) and Study at Home.
Growing digital economy needs reliable network. Network availability or uptime has improved considerably in India over the years. However, with very high dependance on networks for several aspects of our day to day life and for business activities, continuous further improvement is needed in reducing network outages due to fibre cuts impacting corporate and also home users. This needs investment in deploying new fibre in place of old fibre which often has multiple joints due to cuts over the years. There is a need to build multiple diverse fibre routes for redundancy. Investment is also needed in network portions where fibre is laid in open, ensuring all fibre is buried underground, for higher reliability.
Networks are also very critical for the Data Centre industry which is growing in India at a breakneck speed and is expected to grow 150 per cent from 400 MW to 1,000 MW with an expected investment of around $4 billion in 4 years, most of it being FDI. Data Centres need highly reliable, scalable, and affordable bandwidth between the various data centres and corporate office buildings in the same city and more importantly connectivity with other data centres in different cities and with the Cable Landing Stations.
For desired reliability, telcos need to invest to connect a data centre with at least three diverse paths which in many cases today is done over two paths. Investment is needed to meet the growing demand of large Cloud providers and OTTs (like YouTube, Netflix, Amazon Prime) for Metro Ethernet networks supporting multiple 100 Gbps over multiple redundant fibre paths to connect their PoPs (IT set up) in the same city and across cities. Another growing demand is for Edge Data Centres in multiple cities, beyond metros, for bringing content closer to users. For that, reliable, scalable and cost effective connectivity options in non-metros are critical.
While India boasts of the lowest retail mobile tariff, intercity and intra-city bandwidth prices for networks of corporates, OTTs, Cloud Service Providers and ISPs are still quite high when compared to other countries. So, investment in big expansion of metro high speed DWDM (Dense Wavelength Division Multiplexing) intra-city and intercity networks providing cost effective and reliable 100/200 Gbps bandwidth, is necessary to match the pace of growing demand for digital content and cloud services, without which the growth of the digital services in India and also of data centers industry will be hampered.
However, all the recent discussions for the near and long-term future for the telecom world now are all about 5G. It is great to see telcos in India doing their limited trials and one operator is working on plan to build its own 5G technology.
It’s very well understood that 5G rollout is a must for any country as a future roadmap. However, specially for a country like India, where as per ICRA, the combined debt of telcos is expected to reach Rs4.7 trillion ($60 billion) in 2021, capacity to spend maybe limited and hence the concern that 5G rollout should not be at the cost of investment that are necessary to improve the network performance in immediate future to support the burgeoning traffic and the digital economy.
Let’s look at some aspects of 5G rollout in India to argue about the right approach for the rollout.
The real benefits of 5G is achievable at millimeter band (24-100Ghz). At this very high frequency and short wavelength, since the coverage area reduces drastically, number of mobile base stations and towers needed is several times of what’s needed for 4G, without which network performance in certain areas like inside homes would be worse than in case of 4G. The current pan India average number of towers per 1,000 population is 0.42 and as per National Broadband Mission, the tower density should reach to 1 by 2024 for good broadband availability, anyway needing immediate investment.
Moreover, 5G is just the highway between mobile base station and user’s smartphone device. This needs to be supported by fibre backhaul, from base station to the telecom service providers Hub. Today, only 34 per cent of mobile towers are connected on fibre which has to be 100 per cent for 5G. Even today, poor internet speed and poor video quality leading to frequent interruption in Zoom calls is often due to poor backhaul.
There is also an urgent need to improve connectivity in certain rural areas in India, as highlighted earlier. However, 5G, for a considerable time, would be a service for the few in urban areas who have access to expensive handsets. There is a fear that cash strapped telcos in India would stop other major investment in rural areas and divert funds to build 5G networks in cities.
It is great to see telcos in India doing their limited trials and one operator is working on plan to build its own 5G technology
Customers in general are technology agnostic and typically look for good connectivity for voice and data, every time, everywhere. If we evaluate 4G, we find that worldwide 4G networks are providing 15/20+ mbps of bandwidth on average, which is more than sufficient for most of the applications of today. Netflix HD Video recommends 5 mbps and for most gaming applications 3-10 mbps is enough, most other applications need much lesser bandwidth and are feasible on well deployed 4G network.
The problem lies not with 4G access technology, but with deficiencies in deployment because of which we often do not get the desired bandwidth and network performance. Without addressing those fundamental aspects like adequate number of mobile base stations (towers) and fibre backhaul for each mobile tower, just upgrading to 5G would not serve much purpose. Moreover, worldwide the 5G network rollout is ahead of real applications to use the broadband highway of 100+mbps to 1 Gbps and low last mile latency of 1-3 msec. And there are still gaps in technology harmonization and agreement of standards for 5G. The infrastructure and handset costs are also expected to fall in coming years.
So, telcos in India, those who do not have the luxury of heavy capex budget, instead of diverting most of their capex for 5G network deployment, should consider using the time to continue with extensive 5G trials in a limited area and meanwhile use their strained capacity for capex spend to strengthen their present network by increasing the number of mobile towers/base stations in a big way and providing fibre backhaul for all mobile base stations, laying more fibre to connect more buildings, expanding intercity network capacity and redundancy for reliability, replacing old fibre with new fibre, manifold increase in Fibre to Home network and investing to improve availability of good network in rural areas.
These steps would ensure achieving several fold increase in bandwidth availability to handle the growing traffic and fuel growth of digitization of the economy. Many of these will then be the necessary building blocks for rollout of 5G network in future.
To summarise, users are looking forward to a network which provides 15+ mbps bandwidth, all the time and everywhere which allows good quality Video Conference calls, uninterrupted voice calls and good OTT video experience and supports IoT applications. Enterprises, Datacentre service providers, the Cloud Service Providers and OTT platforms need highly scalable and reliable inter and intra city bandwidth at internationally comparable costs to enable them to provide cost efficient services to customers and grow the market in India for their services.
With improved financials of telcos, we should look forward to investment by them happening in the right areas that provide improved and reliable telecom services. 5G is necessary for a country like India and telcos should prepare themselves for 5G launch, sooner rather than later, but after the building blocks discussed are ready.
(Views expressed are personal)