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Growing Takers - Infrastructure sharing gains currency among telecom operators

February 15, 2009
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With benefits such as faster network rollout into rural areas and reduced costs, passive infrastructure sharing has gained sizeable ground in the Indian telecom market over the past three years. However, active infrastructure sharing, introduced in early 2008, is yet to pick up momentum. Leading telecom operators share their views on the status of active infrastructure sharing, its impact on passive infrastructure sharing and the way forward...

What is the status of active infrastructure sharing in India? What are the likely business models in this space?

Inder Bajaj
Active infrastructure sharing can be classified into sharing of backhaul and sharing of the radio access network (RAN), that is, antennaes, base transceiver stations (BTSs), base station controllers (BSCs), etc. Sharing of RAN was permitted by the government in April 2008, while backhaul sharing had been permitted earlier. Under RAN sharing, operators share various elements of the network using the spectrum allotted to them. This means that spectrum is not shared while RAN electronics is.

Infrastructure sharing, both passive and active, is an enabler for industry players. It offers substantial savings in network deployment costs as well as network operating costs. Active infrastructure is possible in 3G as well. The emerging models are:

  • In-building solutions
  • Connectivity backhaul, that is, sharing of bandwidth
  • Sharing of RAN, BTS, BSC and antennaes for outdoor sites.

    Active infrastructure sharing amongst operators has already begun under the first two models. Sharing of RAN in outdoor sites, under the third model, is also possible. Operators are keen to do so, particularly in the rural and remote areas and highway sites, where sharing offers more advantages.

    2G RAN active sharing is being discussed by operators and equipment vendors. Like 3G active sharing, which has happened in different parts of the world, 2G active sharing between operators will also happen in India.

    Jagbir Singh
    Before we go to active infrastructure sharing, we need to look at how operators are benefiting from sharing passive infrastructure from the perspectives of deployment speed, savings in capex and also moving from the capex model to the opex model. For operators who are facing a crunch in capex, it is a good model to move to opex. From a government and civic viewpoint, sharing of passive infrastructure results in fewer cell sites and towers and cities look cleaner. I therefore think that passive infrastructure sharing is a good initiative.

    It could be a similar case with active infrastructure sharing. It could be implemented as an extension of passive infrastructure sharing. Active infrastructure sharing has two parts. One part is sharing of antennas, cables and transmission equipment for mediums like microwave or synchronous digital hierarchy (SDH).These take up a lot of space on telecom towers and prevent tower companies from having too many operators on the same site.

    I think sharing of antennas, cables and transmission equipment can be started immediately and does not need any sort of software or hardware development or change in the ownership of the equipment.Operators will actually welcome the move.

    The second form of active sharing is that of BTSs and BTS equipment.Depending upon traffic growth, operators need space inside the BTS cabinet.In the case of new operators who do nothave much traffic or customers sharing the same equipment, having this space is likely to be easier. However, typically this space is not available. Then, a lot of coordination is required among operators for sharing this infrastructure. I think it is preferable to have a third company –­ a joint venture company serving multiple operators –­ that should handle active sharing. This becomes an easier model to implement.

    Anil Tandan
    Active infrastructure sharing could take place in two forms –­ intra-circle roaming and sharing of RANs or base station subsystems. Vendors are just about getting ready with the software for RAN sharing.While they had been claiming that they would be ready with the software by the end of 2008, they are yet to conduct trials with any of the operators. As a result, operators in the country are yet to share components of active infrastructure.

    While in the major towns, operators can roll out independent networks, in the rural areas, where traffic is so slow that the same BTS should be able to handle more than one operator, there is a business case for active infrastructure sharing. But of course, the business models in active infrastructure sharing can continue to evolve.

    Senior BSNL official
    Infrastructure sharing offers the twin advantages of accelerating service rollout and improving the rate of return. Since India is one of the most competitive mobile markets in the world, operators are trying to minimise costs and optimise capex on infrastructure. As a result, operators are more inclined to share their towers and passive infrastructure. Recently, the government has also permitted the sharing of active components such as antennas, RANs and feeder cables. However, this is still at an initial stage.

    How is active infrastructure sharing likely to impact passive infrastructure sharing? How will the passive infrastructure industry evolve in India?

    Inder Bajaj
    As an integrated service provider, Reliance Communications (RCOM) offers its customers a range of services across the telecom value chain. These include passive infrastructure services, providing connectivity, carrying national and international long distance traffic, and active infrastructure services.

    Passive sites can be offered with connectivity and sharing of active RAN for 2G and 3G. This has a positive impact on integrated telecom infrastructure service providers. Active infrastructure sharing complements passive infrastructure sharing. It also helps operators attain wider network coverage, meet rollout obligations and avail of Universal Service Obligation Fund incentives. Moreover, a customer access service provider can focus on the core business activity and reduce its capex burden.

    Jagbir Singh
    Tenancy rates may rise as the number of operators increases on the same site. If operators share the same antenna and the same cables, space is created for operators in the tower, and by sharing the same cabinet, space is created in the shelter. Tower companies can bring operators together and provide the same quality of service to the operators by ensuring that the antennas, cables, etc. are shared.

    Anil Tandan
    Business models of tower companies are based on the number of tenancies that they get. With active infrastructure sharing, tenancy is likely to reduce. This is because an operator would put up a BTS which would serve two or more operators. So previously, if a tower company was looking at rentals coming in from two operators, it would now get rentals from only one operator. Therefore, active infrastructure sharing will clearly impact tower companies' revenue models.

    Senior BSNL official
    There are currently 250,000 towers in India. The growth of the passive infrastructure sharing industry is expected to continue with new players rolling out networks, service providers setting up operations in rural areas and rising environmental concerns associated with the mushrooming of towers.

    The current credit squeeze and the sharp rise in the cost of capital have also brought telecom infrastructure sharing into renewed focus.

    BSNL has entered into an agreement with various infrastructure providers for hiring towers. Currently, 10,000 sites are at various stages of hiring by BSNL for faster rollout of its mobile services. The creation of a separate tower company is also under consideration by BSNL.

    Though active infrastructure sharing has been allowed in India recently, spectrum sharing is still not permitted. It will take some time to assess the impact of active infrastructure sharing on the economy. However, passive infrastructure sharing will definitely grow.

    What are the issues and challenges associated with the sharing of both active and passive infrastructure?

    Jagbir Singh
    First of all, 2G sharing has mostly been done in India. Globally, a lot of sharing has happened but primarily for 3G networks.In India, there is scope for active infrastructure sharing in the 2G space. But this will need a lot of coordination. There has to be an understanding between the tower companies and the active infrastructure companies, so some changes will be rrquired in the model of working.Coordination is also required between equipment vendors, operators and tower companies. There should be new service level agreements and key performance indicators to establish the working model in the case of two or three outsourced partners. Certainly, it will be a struggle for the first one year but it can be done. In the passive infrastructure space, the issues have already been resolved.

    Anil Tandan
    Passive infrastructure sharing has been on since 2001. Earlier, it was more in terms of bilateral sharing. Now it has been firmly established and has further evolved with tower companies like Indus coming up over the past two years. There are no major issues in the passive infrastructure sharing space. But going forward, existing sites may not be able to take on the requirements of 3G. This is likely to be more from the loading of antennae and power requirements at the site, and not so much from the footprint of the equipment that is there. The latter is, in any case, becoming smaller by the day. As a result, operators would not be able to use the existing sites beyond a certain limit, and new sites would be required.

    In active infrastructure sharing, if I were to go by the 3G model, the experience has usually been that while the initial launch period is successful, when expansion or further augmentation is required, most operators tend to go their independent ways. This is the correct thing to do in any case because initial investments tend to be on the lower side but as the operators start earning revenues, they can afford to make the additional investments.So, active infrastructure sharing does not really work in the long term.

    In the Indian environment, active infrastructure sharing will mainly be useful for rural area rollouts.

    Senior BSNL official
    Though infrastructure sharing mostly has only benefits, there are a few challenges too. With respect to active infrastructure sharing, it is still at an initial stage and must be tested and managed properly.Active sharing between multiple operators must be done in such a way that there is no asynchronous network build-up.

    How will the entry of new players and the launch of 3G and Wi-Max services impact this industry?

    Inder Bajaj
    This is a positive development. The introduction of technologies like 3G and WiMax will increase the number of sites required by the unified access service licensees and internet service providers.

    Jagbir Singh
    When 3G is introduced, active infrastructure sharing can be carried out for 3G networks. It may not be then required for 2G networks. If two operators want to launch 3G networks, there is scope to implement active sharing. It will, in fact, gain momentum with the launch of 3G services. On the passive infrastructure side, tower companies will also be keen to serve 3G operators, as this will translate into additional tenancies. The same towers and shelters, with some modifications, can be used for 3G operators.

    Anil Tandan
    Obviously, the increase in the number of players and the introduction of 3G would necessitate the setting up of new sites. It would partly be met by sharing the existing sites, leading to an increase in tenancies, and partly because new sites would have to be erected. From the tower company's point of view, it clearly makes good business sense.

    It remains to be seen, however, how many new operators would roll out networks and to what extent. They may, for instance, only roll out networks in some top cities and not go beyond that. But we do not think that they can make much of a business case with such a step.

    Active infrastructure sharing could take off in a big way in the case of 3G.For instance, if one operator is successful in one circle and another operator is successful in another, the two operators can opt for active infrastructure sharing and can ride on each other's infrastructure and share RAN.

    So, that sort of active infrastructure sharing should come in but it will depend upon how the 3G auctions go, and which operators are successful.

    Senior BSNL official
    With 3G services in the pipeline, tower sharing will drive cost competitiveness and will be one of the determinants of who wins and loses in the long run. For new players, infrastructure sharing will be the way forward. The cost of towers constitutes nearly 50 per cent of the total mobile capex, and opting for infrastructure sharing will enable operators to roll out services cheaply and effectively.


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