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Future Ready: Vendors look forward to improved business prospects

Discussion Board , February 24, 2016

The year 2015 was a busy one for the telecom vendor community. The industry witnessed aggressive 3G roll-outs while long term evolution (LTE) deployments gained traction. Further, national programmes like Digital India and Make in India are expected to accelerate the industry’s growth momentum. Going forward, LTE is likely to become mainstream in India, promising greater business prospects for the equipment industry. Leading vendors share their views on the industry’s performance in the past one year, the expectations from the government, the key challenges, and the way forward…

satyendra_gupta_Aksh_optifibreAmit_Marwah_Head_Tech_India_NSN2Sanjay_Nayak_CEO_Tejas_NetworksRajiv_Nayyar_Business_Head_Sterlite

How did the Indian telecom industry perform in 2015?

Satyendra Gupta

The telecom industry continues to be a growing, vibrant ecosystem, expanding rapidly across a broad swathe of product, technology and service companies. There are plenty of opportunities which would continue to drive robust growth across all telecom subsectors. This growth is being fuelled by demand for high speed data. The need for building high speed information highways has never been so great. With the launch of 4G/LTE technologies by Indian operators in the past year, the number of consumers accessing information through these highways has increased tenfold to over 15 million subscribers by end-2015, as per industry reports.

Amit Marwah

The year 2015 saw some of the best technological advancements in the mobile data and broadband segments. Although 3G has been the main vehicle of mobile data in India, the industry saw the advancement of LTE technology in 2015. The industry witnessed aggressive 3G roll-outs by several operators and early 4G investments. In 2015, we also saw operators piloting a heterogeneous network and small cell solutions to manage mobile data coverage.

Sanjay Nayak

The Indian telecom equipment industry performed well in 2015. We saw increased investments in broadband backhaul infrastructure by PSUs and private telecom operators to support the 100 per cent-plus year-on-year increase in mobile data traffic. Meanwhile, Network for Spectrum, a mission-critical country-scale optical access and backbone network for defence services, entered the implementation phase. In 2015, we saw a sharp increase in the number of new telecom equipment tenders from public sector operators such as Bharat Sanchar Nigam Limited (BSNL), RailTel and Power Grid Corporation of India Limited. Meanwhile, the newly formed Telecommunications Standards Development Society for India performed well owing to immense support from the government, operators and manufacturers. In 2016, we are likely to see dedicated nationwide networks being set up by the government for disaster management, public safety, homeland security and other mission-critical needs.

Rajiv Nayyar

The year 2015 has been a revolutionary one for the Indian telecom industry. The industry touched the 1 billion subscriber mark, making it the second largest telecom market in the world, after China. Meanwhile, many operators launched 4G services and, towards the end of the year Reliance Jio gave us a glimpse of the future by launching its services, although on a smaller scale, by limiting it only to its employees and their families.

While on the one hand the country is progressing towards high speed data connectivity, on the other, it has been heavily criticised regarding issues with basic voice services. The government has taken up the issue with operators several times as public resentment about call drops is rising. We believe that one of the major reasons for this is India’s low investment in optic fibre for telecom backhaul deployments. For the past several years, operators have not invested in upgrading their network while subscriber numbers continued to swell, resulting in severe network congestion and poor service quality. Less than 20 per cent of India’s telecom towers have fibre backhaul as against 60-80 per cent in developed countries. Fibre has infinitely more data carrying capacity than microwave, thus operators now have little choice but to invest in increasing the fiberisation of their towers.

India deploys only 15 million km of fibre every year, against 150 million km each year by China. This deployment needs to increase to at least 50 million km of fibre per year to improve network capacity – both for voice and high speed data, including 3G and 4G services.

What are the emerging technology trends in the Indian telecom space?

Satyendra Gupta

With the announcement of the Smart Cities and Digital India initiatives by the government, the focus is back on last mile connectivity and increased penetration of high speed network capabilities through Wi-Fi and local hotspot technologies. Many government institutions and common service areas like railway and bus stations have already been internet-enabled to ease the access to information for people. This shows the government’s commitment to follow up on its policies, but a little more effort is needed to advance this cause. Policy related to new infrastructure development for both the government and private developers should make it mandatory to have a pre-installed optic fibre cable network with fibre reaching directly to the consumer’s home or office. Our previous experience and learning with fibre-to-the-home deployment can have a major impact on how we create a new framework for the implementation of this technology.

Amit Marwah

There are several technology trends emerging in our industry.

Telco cloud: As technologies like network functions virtualisation and software defined networks (SDN) make their real-world debuts, we are extending our portfolio and partner ecosystem to jointly define the standards needed.

Internet of things (IoT): The next growth curve of the market will be fuelled by connecting devices and sensors, particularly in application areas such as automotive, homes, cities and energy. The programmable world that Nokia is helping to build requires new kinds of connectivity and a high level of security to enhance and enrich our lives.

Evolution to ultra-dense networks: To meet the growing data demand, 1,000 times more capacity will be required by 2020. Nokia is helping operators plan ahead to maximise the use of their existing assets and achieve a 10x10x10 increase in the number of cells, use of spectrum and network efficiency.

Smart location experiences: The mobile network, our interests and our location at any given moment provide key information for matching where we are with what we like to do. Nokia enables and enriches these experiences with solutions, software and services that help us make the most of our surroundings.

Big data and analytics capabilities make it possible to measure and analyse the millions of data points generated by networks and subscribers. Nokia combines analytics and automation to help operators take relevant action and achieve a measurable outcome based on insights from these data points.

Sanjay Nayak

With the exponential growth in data traffic, the transmission domain is also witnessing a rapid transition to higher capacity networks with packet-friendly technologies. In 2015, several Tier 1 private and public sector operators in India issued procurement tenders for packet transport network products based on MPLS-TP technology. MPLS-TP has now emerged as the technology of choice for 3G/4G traffic backhaul as it combines the best aspects of the packet and transport worlds. High-capacity dense wavelength division multiplexing products utilising advanced reconfigurable optical add-drop multiplexing, optical transport network switching and 100G wavelengths are becoming mainstream, making their way from long-haul applications into metropolitan networks.

We are witnessing a huge jump in metro-optical spending with almost 70 per cent of an operator’s capex now going into metropolitan networks worldwide. This trend is likely to replicate in India as well, and operators may increase their metro-optical capex by 25-50 per cent year on year. SDN is another technology that is likely to occupy significant operator mindshare in 2016 as it promises to move compute-intensive functionality to cloud, thus making it easier to create, manage and configure complex optical networks. IoT will emerge as the first major application of 5G.

Rajiv Nayyar

What are your views on the government’s Digital India, Smart Cities and Make in India initiatives? How are these likely to benefit the telecom equipment industry?

Satyendra Gupta

Make in India is fast becoming a popular initiative not only among global manufacturers, but also among Indian ones who are willing to expand their current capacities to meet the increased domestic demand owing to the launch of large-scale government programmes. Make in India is not just about tax breaks, single-window clearances and overall ease of doing business; the initiative has brought our country at the crossroads of becoming a major technological and industrial manufacturing hub, a spot that would have been rapidly lost to China if these control measures had not been put in place. However, there is still much to be done to support this growth internally. National connectivity, for instance needs a major overhaul. Meanwhile, connectivity to major ports of dispatch like Mumbai, Chennai and Kolkata has been reeling under bad road infrastructure for years.

Sanjay Nayak

Make in India and Digital India are timely initiatives by the Indian government. The aggressive targets for achieving universal broadband access and promoting domestic electronics manufacturing are laudable and will give an additional impetus to the telecom equipment industry in the country. However, for IPR-intensive telecom products, we need high-value-added manufacturing, which can only be achieved by promoting indigenous design, development and manufacturing.

Also, for Make in India and Digital India to truly make a difference on the ground, some supporting policies such as preferential market access (PMA), the Modified Special Incentive Package Scheme, Merchandize Exports from India Scheme (MEIS) and the Electronics Development Fund have to be appropriately aligned and operational hurdles have to be removed at the earliest. Otherwise, the bulk of this growing telecom equipment demand in the country would end up being met via imports or low-value-added local manufacturing. Moreover, as per government sources, there was a 30 per cent increase in telecom equipment imports in financial year 2015 and the total electronics imports are set to exceed gold imports in the next fiscal, which is a cause of concern.

Rajiv Nayyar

All these are great examples of initiatives for improving service delivery to citizens. These are umbrella initiatives and their success will depend on the successful implementation of the projects under them. Under Digital India, the government plans to connect over 200,000 villages with broadband. Similarly, under the Smart Cities project, the government aims to develop 100 smart cities as satellite towns of larger metros as well as modernise existing mid-sized cities. What will make these cities smart is the extensive use of IT. A number of smart city features like adequate water supply, assured electricity supply, solid waste management, efficient urban mobility and public transport, robust IT connectivity and digitisation, and good governance rely heavily on connectivity.

While ambitious, both these projects are definitely achievable. The private sector is willing to play a constructive role in their implementation. Both the Digital India and BharatNet initiatives provide a huge opportunity for the telecom equipment industry as an entire ecosystem is needed not just for deployment but also for maintenance.

What are the key issues and challenges faced by vendors?

Amit Marwah

The key issues and challenges faced by vendors in the telecom industry include:

Sanjay Nayak

Domestic telecom equipment companies face the following key challenges:

Rajiv Nayyar

For a player like Sterlite that is a backbone service provider for operators, the biggest challenge is operators underinvesting in upgrading their networks. Owing to high consumer growth, operators invested more resources in subscriber addition than in network upgradation. As a result, call quality and data experience suffered due to which the government had to step in. Now most players have announced massive investment plans to gain a competitive edge.

The government is treating telecom as a golden goose and not ploughing resources back into the industry. While the government has made all the right noises about Digital India and Smart Cities, it still does not treat broadband as a utility. Once it does, broadband will become a basic right of citizens and authorities will not look at broadband connectivity from the lens of return on investment. Operators face severe challenges in procuring right of way, which other utility companies in power, water supply, gas, etc. do not have to face.

What are your growth expectations from the Indian telecom market? What is your regulatory wish list?

Satyendra Gupta

While all government projects are required to use Made in India cables only, no such policy is in place yet for private telecom operators. Private telecom operators should be mandated to use indegenously manufactured optical fibre cables. The use of high fibre count cables on the highways and inter-city could also help in speedy roll-out of networks. With the focus being on commercial deployment, upcoming national-level telecom projects must encourage the use of high fibre count cables as they have a better return on investment over a large subscriber base like India.

The Indian telecom industry is at a very crucial junction in its growth trajectory. If we get the right policy, regulation and implementation, we will have world- class telecom infrastructure in place.

Amit Marwah

In 2016, the underlying telecom market trends of mobile broadband, telco cloud (voice over LTE/voice over Wi-Fi), 5G, security solutions, IoT, etc. will empower operators to effectively manage and monetise the surging mobile broadband growth. LTE will become mainstream in India as more players launch 4G on a more efficient spectrum. This will result in massive growth in mobile data with a demand for more applications and higher smartphone penetration. With a significant increase in affordable smartphones, the usage of mobile data is likely to at least double yearly over the next few years. In sum, 2016 will see all these technologies progress further. Meanwhile, customers’ needs are expected to rise and they will continue to demand a personalised network in terms of quality of network, service and experience.

Sanjay Nayak

The increasing demand for 4G/LTE is pushing operators to increase backhaul capacities. LTE in particular requires 10x the bandwidth of 3G. Therefore, microwave-based mobile backhaul technology will be increasingly replaced with fibre optic backhaul. Globally, the fibre optic-based backhaul equipment market is expected to show significant growth in the coming years, particularly in India, where 4G/LTE deployment has just started and there is huge potential for growth. It is interesting to note that in India, only 15 per cent of cell towers are currently using optical fibre as compared to a fibre penetration of 85 per cent in China for a similar order of subscribers. Hence, the optical equipment market is expected to grow exponentially since backhaul bandwidth is a major choke point for operators to deliver a high quality broadband experience to end-users.

Tejas Networks believes that the government’s strong resolve to promote design-led electronics manufacturing with an ambitious target of “NET ZERO Imports” by 2020 augurs well for the country. As per our assessment, the Make in India initiative, in conjunction with the Digital India and Startup India initiatives, has the potential to unleash a $100 billion domestic manufacturing opportunity and create over 500 million jobs through direct and indirect employment.

A few key items on our regulatory wish list that will go a long way to help realise this potential are:

Rajiv Nayyar

In spite of subscriber addition growth plateauing, the Indian telecom sector will see sustained long-term investment to keep up with technological changes. Operators will be investing over Rs 1 trillion in upgrading their networks over the next three to four years. Data consumption will grow exponentially for many years to come.

As mentioned earlier, we want the government to treat broadband as a basic utility such as gas, electricity and water. It will encourage investments in the sector. The availability of high speed broadband can transform our health care, education and financial systems and the lack of it is limiting this growth. Services riding on the internet are fast replacing telephone services as one of the basic utilities.

In terms of broadband speeds, if we compare these to most countries, the standards have been raised to 25 Mbps download speeds (US Federal Communications Commission); however, in India, we have an average speed of 2.1 Mbps. The real potential of the internet can only be realised with broadband. It’s universally proven that the GDP growth and human capital productivity indices are directly co-related to a country’s broadband penetration. To maximise this potential, it is imperative that a policy is framed and its implementation is standardised, thereby ensuring the widespread adoption of the internet.

The government must act quickly to formulate and approve the required regulatory frameworks. Meanwhile, private players need to be willing to invest in upcoming innovative technologies for high speed broadband to work well in India.

 
 

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