The roll-out of next-generation technologies, including 3G and 4G long term evolution (LTE), have emerged as a key revenue opportunity for infrastructure providers. However, network roll-outs in rural areas remain a challenge. To resolve the energy requirements in these areas, tower companies are experimenting with energy efficiency technologies as well as renewable energy. Going forward successful implementation of government initiatives in rural areas, energy management at tower sites and switching from a fixed licence fee structure to a revenue sharing model can prove beneficial for the industry. Telecom experts and infrastructure providers share their views on the current opportunities, challenges, regulatory and policy requirements in the telecom infrastructure industry…

What are the key emerging opportunities for telecom infrastructure providers in the country? How are they planning to leverage these?

Pankaj Agrawal

Telecom infrastructure providers’ core business of increasing tenancies on their cell sites will be driven by refarming opportunities. After the upcoming auction, networks will shift from the 900 MHz GSM band to the 1800 MHz GSM band. As the base networks or the GSM networks start moving to higher frequency bands, the number of cell sites required would be higher. For instance, 1800 MHz networks typically require more towers as compared to 900 MHz networks. Further, the operators that will buy spectrum in the 900 MHz band are likely to use this frequency band to provide 3G services. Meanwhile, broadband deployments on the 2100 MHz band for 3G services and the 1800 MHz band for long term evolution (LTE) services will also lead to an increase in tenancies. Therefore, the opportunities will be a mix of both loading as well as tenancies. Besides loading and tenancy, tower companies are looking at the use of shared access models to ensure data capacity.

Sharat Chandra

The biggest opportunity is presented by the emergence of broadband data, which creates a spectrum of opportunities across the value chain of equipment vendors, solution providers, and content and value-added service application developers as well as for those who manage the uptime and energy infrastructure at the telecom site. Data is far more unforgiving when it comes to performance of the site, as the impact of failure of a data call is far more severe than that of a voice call. Infrastructure providers have come to terms with offering solutions rather than products, committing to outcomes rather than guarantees, and agreeing to integrate rather than be measured stand-alone. Energy managers will play the biggest role as no communication technology can deliver a sustainable performance in the absence of consistent power uptime with adequate backup reserves, preferably with green solutions.

Amit Sharma

The Indian telecom industry is coming out of a period of uncertainty. Since 2010, there have been various obstacles impeding industry growth, such as the ban on import of equipment and licence cancellations. 3G, which was launched in 2010, had limited uptake and the industry could barely reach 70 million 3G subscribers in the past four years. However, with clearer merger and acquisition (M&A) guidelines expected and the upcoming spectrum auction, we will witness a new era of growth from hereon. Major telecom operators have reported strong growth in the last quarter, driven mostly by data growth, and have thus started committing capital again. Reliance Jio Infocomm Limited’s (RJIL) entry will give a significant boost and the incumbents too will now gear up for 4G.

Industry consolidation, new spectrum and data demand will drive growth for the telecom industry and will offer significant opportunities for tower companies in India. Although most of the existing towers will be upgraded to new technology (3G and 4G), new towers would need to be rolled out across the country to cater to this built-up demand. We will get some clarity on the new tenancy demand only after the spectrum auction, but I expect that the number will be significantly higher as compared to the past two or three years and will have a higher 3G/4G component. The tower industry in India is expected to gear up to cater to the big data demand and we should see greater infrastructure sharing in the future.

Kunal Walia

The roll-out of new technologies including 3G and LTE will provide key opportunities for infrastructure providers. The availability of additional 3G spectrum will allow operators to achieve a pan-Indian presence. The LTE opportunity will be driven by roll-outs by new players. Besides their core business, there are other opportunities for infrastructure providers such as in-building solutions, microcells and energy solutions.

Bharti Infratel spokesperson

The upcoming opportunities in the Indian telecom infrastructure space are as follows:

• Infrastructure sharing: The rapid expansion in the subscriber base has brought to the fore the challenge of increasing and upgrading the telecom infrastructure to maintain service quality. In recent years, infrastructure sharing has emerged as a profitable proposition for both parties involved. For the tenant, it lowers the capex and opex, and for the owners, it is an additional source of revenue.

Cost savings through infrastructure sharing can be passed on to customers, thereby increasing their affordability. Further, with infrastructure sharing companies can reduce the time required to roll out telecom services in rural areas. Telecom infrastructure sharing by companies can lead to the optimum utilisation of these resources and thereby improve efficiency.

• Managed services (outsourcing): With the rapidly growing subscriber base, it is becoming increasingly difficult for service providers to manage their infrastructure and networks. Therefore, many of them have been outsourcing their infrastructure or network management operations completely or partially. Given the increasing demand for managed services, telecom equipment vendors have a greater role to play across the value chain by entering into managed service contracts.

Managed services are fast emerging as an attractive proposition for many enterprises that do not want to dedicate human resources and capital towards acquiring and administering technology infrastructure. It also allows service providers to focus on their core activities. Infrastructure providers can gain significantly in terms of cost reduction and improved operational efficiency from the economies of scale that a managed service provider can offer.

What are the key challenges associated with the country’s telecom infrastructure, particularly in rural areas? How can these be addressed?

Pankaj Agrawal

The infrastructure industry faces operational and supply-chain challenges involved in managing telecom towers  including the provision of diesel at remote sites, ensuring security at a particular site and managing logistics. This is a huge operational requirement to manage, especially in rural areas, which have their own unique challenges such as limited access to electricity and issues relating to security of sites. Tower companies are increasingly using automation to address these challenges. They are installing real-time monitoring equipment to get real-time updates in terms of photographs, alarms and control signals in order to keep track of activities taking place at tower sites. In sum, leveraging technology and developing a structured supply chain can help address all these challenges.

Sharat Chandra

Accessibility, affordability and accountability are the three main challenges. The business case for the telecom operator becomes unviable if the utilisation of telecom call traffic and its resultant revenue remain much lower than the cost of running the site. This is further accentuated  by poor infrastructure, skills, tools and power availability, resulting in outages, higher opex and suboptimal viability. At the core lies energy. If energy generation, delivery and management can be made more efficient and green, sustainable and enhanced usage of the infrastructure can be ensured.

Amit Sharma

The absence and poor quality of grid power is one of the biggest issues the industry is facing. India has about 400,000 towers, of which about 10 per cent sites have no grid connectivity and another 30 per cent have less than 12 hours of power. In addition to improving conventional backup energy processes, the tower industry is trying to innovate. Tower companies have taken a number of steps for better energy management including innovations in shelter design with free cooling units and green shelters, using direct current diesel generator sets, right-sizing diesel generator sets, and adopting renewable energy solutions such as solar and biofuels. Tower companies are supporting renewable energy service companies (rescos) by aggregating the energy demand in the areas served by rescos.

However, these alternative energy solutions cannot address the huge energy gap and the telecom industry will continue to suffer till better quality grid availability can be arranged.

Other challenges include difficulty in enlisting rural consumers because of low affordability, low average revenue per user, shortage of locally relevant content and unsatisfactory literacy levels. Though the cost of owning and using telecom equipment and services has come down significantly in recent years, the rural consumer still finds it difficult to put aside money for what they perceive to be a discretionary spend.

To overcome this challenge, it is essential that the government implements its goals of getting voice coverage for every Indian and broadband data in every panchayat in order to enable not just cash transfers but also e-governance, e-health and e-education. The government needs to work with telecom infrastructure providers to connect towers to the National optical fibre network (NOFN) so as to provide the critical last mile wireless broadband link to rural households. Moreover, the backhaul charges at the rural level must be low so that operators can deliver broadband packages to rural households at affordable prices.

Kunal Walia

One of the challenges has been the drop in rentals from new technology roll-outs. Typically, operators in India roll out overlay networks that provide minimal rental income. However, as networks expand, rentals start increasing. Given the lack of penetration of wired infrastructure in rural areas, mobile broadband needs to provide the much-needed impetus for broadband in these areas. There are several use cases for broadband in rural areas such as m-education, m-commerce, m-health, which will prompt private players to develop sustainable business models to tap these markets. The lack of coverage of high speed technologies in these areas is a challenge at present.

What are the various measures being taken by tower companies to manage their energy requirements?

Pankaj Agrawal

There are different ways in which the energy requirements can be met, if the infrastructure provider does not shift to non-conventional sources of energy and uses the grid-based electricity model. The first way is to reduce the overall energy consumption by reducing the overall requirement. For instance, instead of an indoor base station, one can deploy outdoor base stations so that the requirement for cooling goes down, which in turn reduces energy needs. Further, overall consumption can be reduced by finding more efficient ways to serve the requirement. For this, shelters that provide better cooling can be constructed. Instead of diesel generator sets, batteries that have a longer lifetime can be deployed for this purpose.

Energy management can also be carried out by using non-conventional energy sources such as solar energy. These are still at a pilot stage and have not become mainstream because of multiple reasons, including operational challenges in the use of solar panels, which are prone to theft and dust accumulation, and require regular cleaning and maintenance. In addition, commercial issues pertaining to the use of non-conventional energy sources include a higher cost per MW as compared to grid electricity. Further, there are some policy and regulatory requirements for the deployment of non-conventional energy sources, which define the specific sites from where these sources can be tapped, especially wind energy.

Sharat Chandra

The ongoing transformation of indoor sites to outdoor sites has to be accelerated and increased in size, scope and geography. The inclusion of lithium-ion battery solutions can effectively reduce DG run- hours at grid-deficient sites. It must, however, be coupled with IT-enabled site infrastructure that allows for automation, and effective and intelligent usage of multiple sources of energy. This requires a selection among grid, solar, battery, etc. as well as analytics to identify, anticipate and eliminate downtime and risks. In addition, selective introduction of solar deployment at sites where it is technically and financially feasible is an effective measure. There are solution providers who are preparing themselves to partner with the telecom industry to offer better financial terms than the pure capex deals prevalent in the past.

Amit Sharma

The American Tower Company (ATC) has undertaken various pilot projects to explore the opportunities offered by green energy solutions to reduce diesel consumption. The company is looking at biogas, fuel cells, wind and solar energy-based projects as sources of clean fuel. Currently, ATC is using biogas, solar energy and a combination of solar and wind power for its pilot projects. It is looking to gradually increase the number of towers covered under these projects. The key learnings from these projects indicate that biogas is the cheapest energy alternative. However, it cannot be used across the country due to logistical issues. In some areas, solar power is the most viable form of energy but it entails higher costs and requires sizeable south-facing sites. However, even then it is not usable throughout the year.

Based on the available results of our pilots, we are increasing efforts to reduce diesel consumption as well as the carbon footprint of our operations.

Kunal Walia

The initiatives of tower companies can be broadly classified into three categories: demand management, new technology and operational efficiency. Demand management would include indoor/outdoor conservation and modern base transceiver stations; new technology would include alternative energy and advanced batteries; and operational efficiency would include monitoring of diesel consumption, AC temperature, battery usage, etc. As tower companies move to the fixed energy model, these initiatives will be necessary.

Bharti Infratel spokesperson

The starting point for our work is to develop an effective energy management strategy and deliver a real solution to clients looking to reduce their energy costs and carbon footprint. This includes a comprehensive range of energy management services such as energy procurement, carbon reduction, energy solution development, project implementation, and operations and maintenance. Power efficiency thus plays an integral role in developing an energy management strategy.

What is the tower industry’s regulatory/policy wish list?

Pankaj Agrawal

The tower industry has been granted infrastructure status. The industry’s problems are not only centred on policy and regulation but also on how to best capture the opportunity presented by the data explosion. The industry now requires the right kind of licensing and regulation to target some of the upcoming growth models such as the shared access model.

Sharat Chandra

While the earlier mandate from the Department of Telecommunications that stipulated a percentage of urban and rural sites to be transformed through renewable energy technology installations has gone through further refinement, what could immediately make a huge difference is if the extent of site greening is linked to the percentage reduction in diesel consumption. This can enable tower companies to derive benefits from all means of technology that are at their disposal.

Amit Sharma

The government must implement its stated goals of getting voice coverage to every Indian and broadband data to every panchayat. In this context, the government should consider a series of concrete steps that are urgently required to recreate the positive sentiment in the market and to attract foreign direct investment. These include:

• Efficiently implementing ubiquitous wireless broadband as contemplated in the Broadband for All policy.
• Ensuring that all telecom policy proposals include a cost-benefit analysis from the perspective of consumers, service providers and the government.
• Drawing up a five-year roadmap for future spectrum availability and timing as well as conducting transparent auctions for these well before the deadline.
• Providing clarity regarding the current M&A policy.
• Including telecom tower infrastructure service in the definition of infrastructure facility in Section 80IA of the Income Tax Act.
• Increasing the tax depreciation rate on batteries for industrial/commercial purposes from 15 per cent to 65 per cent. This will ensure cost recovery within three years of the battery life.
• Reviving Universal Service Obligation Fund funding for getting telecom infrastructure built in 20 per cent of rural India and making this a public-private partnership with the government’s NOFN backbone in order to get broadband down to the village level.

Bharti Infratel spokesperson

Our policy and regulatory wish list includes switching from a fixed licence fee to revenue sharing as well as changes in the access deficit charges. Further, the introduction of 3G, 4G and universal access licences will prove to be beneficial for the telecom infrastructure industry. The issuance of licences to new operators and a transparent 3G spectrum auction policy are also required.

What is your outlook for the industry in 2015?

Pankaj Agrawal

For the tower industry, 2015 should be better than the previous year owing to opportunities arising out of spectrum refarming. There will be some upside due to networks moving to higher frequency bands and the increasing deployment of LTE by new entrants such as RJIL.

Sharat Chandra

It is evident that an en masse transformation cannot happen at the hands of tower companies. The outsourcing of tower infrastructure operations and maintenance, technology upgrade, IT enablement and energy management is undertaken by companies that have the will, financial muscle, technical prowess and business acumen to take over from the tower companies. The tower companies will have to understand that there are those who can manage the energy infrastructure better while leaving them to arrange and manage tenancies, which is their core competency. We are aware that Bharat Sanchar Nigam Limited has announced such intent.

Kunal Walia

Things will start looking up for infrastructure providers in 2015. Some of the positives during the year will be LTE roll-outs by new players, increase in 3G tenancies as operators look to deploy pure 3G sites, and continuous expansion of 2G networks to increase rural coverage.

Bharti Infratel Spokesperson

The telecom industry has experienced exponential growth over the past few years and has been an important contributor to economic growth; however, the cut-throat competition and intense tariff wars have had a negative impact on the revenue of players. Despite these challenges, the telecom industry will thrive owing to the immense potential in terms of new users. India is one of the most attractive telecom markets because it is still one of the lowest penetrated markets. The government is keen on developing rural telecom infrastructure and is also set to roll out next-generation or 3G services in the country. Operators are in expansion mode and are investing heavily in telecom infrastructure. Foreign telecom companies are acquiring considerable stakes in Indian companies. The government’s thrust on increasing rural telecom coverage, creating a favourable investment climate and bringing in positive reforms will ensure that the growth potential of the telecom infrastructure industry is realised.