Increasing telecom penetration over the past few years has been a major growth driver for the Indian telecom cable market. In addition, the expansion of the broadband market, advances in cable technologies, introduction of high speed services and upgradation of wireless backhaul technologies have together given an impetus to the industry. There has been a significant demand for telecom cables owing to the growing uptake of high bandwidth applications. That said, India’s fibre consumption is relatively modest and stands at approximately 15 million fibre km as compared to China’s 80 million fibre km.
There are many challenges impeding the growth of the cable industry like issues related to right-of-way, reduced lifetime of cables on account of mishandling, long deployment time and complex tendering modalities. Fibre cuts, resulting in call drops and slower network speeds, as well as power fluctuations are other areas of concern for telecom cable providers.
According to cable vendors, use of underground cabling and multiple links from multiple providers are some of the ways to avoid fibre cuts. While there are several global standards for cable installation, the same cannot be replicated in India as climatic conditions play a significant role in cable network performance.
Keeping pace with technological innovations in the cable space is another challenge for players in the segment. At present, digital subscriber line (DSL) is the preferred technology choice for providing broadband services in India. As on December 31, 2011, 85.12 per cent of the country’s total broadband subscribers were using DSL to access broadband services. It was followed by cable modem and Ethernet local area network technologies, which were used by 5.75 per cent and 5.09 per cent of subscribers respectively. However, due to the limitations of copper infrastructure or air interface, these technologies are not efficient for meeting the growing demand for high-bandwidth applications such as high definition TV, 3D TV, high speed access to the internet, video-on-demand services, IPTV, online gaming applications, and distance learning.
At present, fibre-to-the-home (FTTH) is considered the most suitable technology for catering to the increasing convergence of voice, video and data applications (triple play) worldwide. Several players across the world have started deploying the technology and over the next decade, all existing copper access networks will give way to fibre access networks. Though FTTH has achieved commercial success globally, there is still time before it attains a wider presence across the enterprise and home segments in India.
Segment-wise, the demand for jelly-filled telephone cables (JFTCs) has declined over the years, mainly on account of the revolution in wireless technology and the launch of 3G and broadband wireless access (BWA) services. Some JFTC manufacturers have shut down their companies due to the drop in demand.
The optic fibre cable (OFC) segment, on the other hand, has witnessed a surge in demand with the launch of 3G and broadband wireless access services. OFC has some major advantages over other competing cables, such as high bandwidth, light weight, and better quality of voice and data transfer. However, OFC and its associated optics (active components) are more expensive as compared to their copper counterparts. Each core of OFC generally needs to be spliced in order to complete the connection to the network/ optical switch. Fibre splicing is a complicated procedure and requires skilled manpower to achieve the required precision. It is, moreover, an expensive process as the cost of the splicing equipment and its installation per core is very high.
Nevertheless, the cost of building OFC networks is decreasing gradually. Other significant improvements in this area include bendable fibre and new fibre termination technologies along with the increased availability of skilled fibre-trained technicians.
For the radio frequency (RF) feeder segment, a key issue is the shift in vendor preference from a centralised RF to a distributed RF architecture, using remote radio heads to build networks for broadband services. This has impacted the demand for RF cables as the new architecture has reduced the need for feeder cables. Some of the key challenges faced by the submarine cable segment include time and cost considerations both on account of disruptions in the networks and building a multi-terabit transoceanic submarine cable network.
Poor financial performance over the years is another area of concern for players in the cable industry. Large currency fluctuations (in the US dollar) and unstable commodity pricing make long-term contracts unfeasible and the price of products irregular. Price volatility of metals such as aluminium, steel and nickel – the major input materials for cables – has an adverse impact on companies. Passing on the costs to customers is not always a feasible option as this directly impacts companies’ profits.
Moreover, operations in the telecom cable industry continue to be highly capital intensive, burdening company balance sheets further. The high cost of metals, besides making a dent in manufacturers’ profits, exacerbates the problems related to metal thefts, which have increased following the rise in metal prices worldwide.
The industry is also witnessing increasing instances of cable thefts, which not only impose a cost burden but also affect the industry’s strategic decisions. For instance, Bharat Sanchar Nigam Limited attributed the loss of fixed line customers in some cities to disruptions in services caused by copper cable theft. There have been instances of OFC theft as well, but these have been negligible as the scrap value of fibre cables is insignificant.
The influx of cheaper cable variants, imported from companies based in China and Taiwan, has also impacted local manufacturers’ market share. Further, the high cost associated with cable deployment and network maintenance continues to be a major issue. Stiff competition and shrinking bottom lines build up the case for investments in research and development of new products in the industry.
The road ahead
While the OFC and submarine cable industries are witnessing a growth in demand, traditional cable segments like copper and JFTCs have suffered a setback due to the dwindling wireline subscriber base. As of April 2012, the wireline subscriber base stood at a mere 31.89 million as against 921.02 million wireless subscribers. Faced with several challenges, the demand for wireline networks, which is the mainstay of the cable business, has reduced and wireless has evolved as the preferred medium for voice and data services.
However, fibre connectivity has emerged as a key focus area for the telecom sector. It will play a crucial role as the sector heads towards the next level of growth with 3G and BWA services. The launch of next-generation services has resulted in an increased demand for bandwidth backhaul.
Most telecom operators have also started rolling out FTTH networks across the country to provide high speed broadband and triple-play services, which, in turn, has boosted the demand for OFC. 3G and BWA services, while providing voice, broadband connectivity and high speed data downloading, have paved the way for deployment of optical transmission platforms and infrastructure to support the roll-out of networks. The demand for high speed and bandwidth-intensive applications in next-generation networks has in fact made optic fibre-based transmission a necessity.
Moreover, the government has proposed aggressive targets in the Twelfth Plan to improve broadband and mobile penetration as well as increase rural teledensity. The National Telecom Policy, 2012 has set a target of 175 million broadband connections and achieving a rural penetration of over 60 per cent by 2017. The government’s National Optic Fibre Network project, currently under implementation, will connect over 800 million people residing in India’s 250,000 villages through a fibre network.
While some of the new connections will require point-to-point fibre connections from a point of presence to a gram panchayat, most will be connected using gigabit passive optical network technology. Fibre cables will run from optical line terminals housed at the points of presence to local splitting points, from where dedicated fibre lines will deliver up to 100 Mbps of downstream capacity to each gram panchayat.
Going forward, despite the aforementioned challenges, the demand for telecom cables will continue to be driven largely by the development of backbone and access networks. Newer technologies like 3G and 4G would require the installation of transmission towers and there would be a demand for fibre backhaul. There also exists substantial potential in the FTTH segment as users today are increasingly looking for quadruple-play services comprising high speed broadband, high-definition video, unlimited ubiquitous telephony and real-time surveillance