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PowerTel: Riding on the demand for high bandwidth services

October 25, 2012
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During the past decade, the Indian telecom sector has witnessed a surge in demand for data and broadband services. The number of internet and broadband subscribers increased from 0.08 million in March 2000 to 22.86 million in March 2012. The growing demand for high bandwidth services has led to a need for deploying extensive optic fibre cable (OFC) networks. However, private operators have not been able to roll out adequate OFC networks due to the high costs related to right-of-way (RoW) and establishing greenfield telecom infrastructure. In such a scenario, national utility players such as Power Grid Corporation of India Limited (Powergrid) have played a significant role by providing their readily available networks to private operators to meet the increasing demand for capacity.

Powergrid established its telecom venture, PowerTel, in 2001. The aim was to utilise the spare telecommunication capacity of its unified load dispatch centres by leveraging its countrywide power transmission network. What started as an interesting business proposition to capitalise on the internet and telecom boom during the 2000s has now become a significant business segment for Powergrid.

The company’s telecom fibre network grew from 19,500 route km in 2006-07 to about 25,000 km in 2011-12. The revenues from the telecom vertical more than doubled from Rs 770 million to Rs 2 billion during the same period. Besides having a strong client base, the company is partnering with the government on various projects such as the National Knowledge Network (NKN) as well as the National Optical Fibre Network (NOFN).

Connectivity and network

Over the years, PowerTel has expanded its telecom operations and has built a strong fibre network. Currently, the company provides connectivity to over 206 cities through optical ground wire (OPGW) laid overhead on its power transmission lines, comprising around 16,500 km. Other overhead cables used by PowerTel include wrap-around overhead cables, where OFC is wrapped around ground wire, and all dielectric self-supporting cables, where OFC is strung separately on transmission towers as a conductor.

OPGW is most suitable where ground wire is available. Since it is laid on extra high voltage power transmission lines, it offers a distinct advantage over underground OFC networks in terms of robustness and being rodent- and termite-proof. Moreover, PowerTel takes into consideration the loading of OPGW while designing new transmission lines. The company also has an underground OFC link spanning nearly 8,500 km.

PowerTel has an edge over other telecom operators in terms of readily available RoW for the installation of cables and limited challenges in the form of forest clearances, etc. The process of acquiring RoW is both expensive and cumbersome, which poses a challenge for private operators in rolling out robust networks. Further, the company has a strong cable network in remote areas such as the Northeast, Jammu & Kashmir and Himachal Pradesh that can be leased by other operators for providing services in these areas. Most service providers have extensive fibre backbone coverage in the metros and Tier 1 cities, and extremely low coverage in other cities and rural areas. This gap is bridged by the well-established networks of organisations like Powergrid. For private operators, the option of leasing this infrastructure is both economically viable and operationally sound as compared to undertaking a fresh network roll-out.

Over the years, PowerTel’s client base has increased and it currently serves over 50 key customer segments. These include government agencies and public sector utilities such as the National Informatics Centre, the Indian Army and the Intelligence Bureau; telecom operators that do not have their own network such as Sistema Shyam TeleServices Limited, MTS, Uninor and Loop; as well as operators who use their own network both for captive use and selling in the market such as Bharti Airtel, Reliance Communications, Vodafone India, Idea Cellular and Tata Teleservices Limited. Its clients also include managed service providers such as virtual private network (VPN) service providers and companies providing end-to-end solutions such as HCL and Tulip Telecom; companies like Infosys and HSBC seeking PowerTel’s support for captive usage in the service enterprise segment; and international players such as Cable & Wireless Worldwide and Verizon for carrying global traffic from captive customers.

PowerTel has set up regional telecom centres in Delhi, Mumbai, Kolkata and Bengaluru. It is also in the process of establishing international telecom connectivity with neighbouring countries such as Bhutan, Nepal, Sri Lanka and Bangladesh. It is already offering domestic support for international connectivity between India and Bhutan on two different routes – a 50 km link from Bongaigaon (India) to Galephu (Bhutan) and a 98 km link from Siliguri (India) to Malbase (Bhutan). Connectivity to Sri Lanka will be achieved through undersea cables and OPGW, while that to Bangladesh and Nepal would be provided through Powergrid’s power transmission network.

Other PSUs like RailTel and GailTel have an OFC network of around 45,000 km and 13,000 km respectively. RailTel is also the lead creator of NKN and is partnering with Bharat Sanchar Nigam Limited and Powergrid to build the NOFN network.

New business avenues

Considering the growing demand for telecom infrastructure, PowerTel decided to leverage its network of transmission towers by leasing them to operators for mounting telecom antennas. The company had high expectations from this business given its strong network of around 150,000 towers. However, only 800 transmission towers are currently being leased for the installation of telecom antennas. The poor response has been attributed to the recent licence cancellation and prevailing regulatory uncertainty in the sector. Moreover, some of PowerTel’s customers such as S Tel have exited the country’s telecom sector.

PowerTel has also ventured into multiprotocol label switching (MPLS) services as a value addition to its SDH/DWDM based point-to-point telecom network. The implementation of its MPLS-VPN networks across the country is in progress. PowerTel aims to provide high speed communication links for its national transmission asset management centre and enterprise resource planning system, covering 400 locations across India. The company is also exploring opportunities for venturing into the enterprise service segment and data centre business.

Key projects

Powergrid has partnered with the government to implement the Rs 60 billion NKN project. It is a multi-gigabit, pan-Indian network project that will provide a unified high speed network backbone to over 1,500 educational, government, agricultural, health care and research institutions, with connectivity up to the district level. As the project’s service partner, PowerTel will provide core/distribution links with a bandwidth capacity of 10 Gbps/2.5 Gbps and EDGE links of 1 Gbps/100 Mbps. Powergrid’s revenue share in the project is Rs 9 billion, which is to be realised over a period of 10 years.

Powergrid along with BSNL and RailTel is also the implementing agency for the NOFN. The project aims at providing fibre connectivity to India’s 250,000 gram panchayats at an estimated cost of Rs 200 billion. Powergrid will connect 50,000 of the 250,000 panchayats and will implement project worth Rs 40 billion over the life of the project. Currently, it is in the process of connecting 17 gram panchayats in Visakhapatnam, Andhra Pradesh, as a part of the NOFN’s pilot project. The procedure of laying OFC in the area is expected to be completed by mid-October 2012.

The way forward

Given the high growth in telecom usage and the growing demand for data services, PowerTel can expect lucrative business opportunities in the coming years. The launch of 3G and 4G services will drive the consumption of bandwidth-intensive services amongst consumers. This, in turn, would drive the demand for OFC deployment by operators to cater to the high data traffic generated. However, given the RoW challenges, operators would find it difficult to roll out their own networks and are likely to utilise PowerTel’s network. Moreover, the company is planning to expand its existing fibre network by 33,000 km covering about 122 additional cities and towns. Besides, the NKN and NOFN projects will also generate substantial revenues for PowerTel.

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