There is an increasing need for 24x7, high-speed connectivity. This has resulted in increased traffic generation from voice, messaging, emails, games, downloads, mobile internet access, video streaming and other services as well as a surge in demand for telecom cables, which form the backbone of the core network.

There are two broad categories of cables in the telecom sector – optic fibre cable (OFC) and copper cable. Over the past few years, the use of copper has declined and fibre cables have emerged as the preferred medium for data transfer. By virtue of offering greater bandwidth, and the ability to transmit voice and data reliably, optic fibre technology has gained popularity in the country.

Since its invention in the early 1970s, the use of and demand for OFC has grown rapidly. OFC networks can provide solutions for telecom segments like enterprise connectivity and internet protocol TV. The focus on internet and broadband services has also contributed to the increasing demand for OFC. Due to its high data transmission rates and low latency, OFC has emerged as the preferred medium for these services.

The launch of 3G and broadband wireless access (BWA) services would fuel the need for high-speed and high bandwidth backhaul, which would be met through OFC networks that provide a stable and upgradable backhaul system. India’s predominant microwave-centric backhaul network is also likely to be transformed into an OFC-based one, leading to a huge demand for fibre.

Size and growth 

Currently, India has a 1,000,000 route km long operational OFC network for information transmission. In terms of value, the Indian optic fibre market grew at a compound annual growth rate (CAGR) of 11.32 per cent from $78.43 million in 2002 to $205.88 million as of April 2011. The intercity OFC network is dominated by players like Bharat Sanchar Nigam Limited (BSNL), Reliance Communications (RCOM), Bharti airtel, RailTel, GailTel and Powertel. Most foreign companies that provide global connectivity through submarine cable networks rely on these players to provide last mile intercity connectivity.

State-owned BSNL currently has the largest OFC network in the country, comprising at least 600,000 route km, covering all state capitals and district headquarters. It is followed by RCOM, which has a network spanning 200,000 route km. RCOM’s subsidiary  Reliance Globalcom owns the world’s largest private undersea cable system spanning 65,000 route km. Reliance Globalcom’s global virtual private LAN service-enabled Ethernet network serves India, the US, Europe, Middle East and the Asia-Pacific region. Bharti airtel, the leading operator in terms of subscriber share, has over 120,000 route km of intercity OFC network.

Idea Cellular has expanded its OFC network from 38,000 km in 2009 to 45,000 km at present. The operator has done this with the aim of leasing out broadband capacity on its enhanced optical infrastructure to foreign telecom operators, in addition to supporting its own communication needs.

According to a recent report by Global Industry Analysts, the Asia-Pacific region accounts for a major share of the global fibre optic component market. OFC manufacturing and deployment in emerging economies such as China, India and Brazil will continue to increase as the demand for higher connectivity and better quality of service (QoS) increases. Revenues from the Indian optic fibre transmitter and receiver market are expected to grow at a CAGR of more than 7 per cent by 2015.

Trends and developments 

The most noteworthy development on the OFC front has been the announcement of the national optic fibre network (NOFN) project. Given the poor internet penetration in the country, which is less than 1 per cent, the union government has decided to roll out an OFC network to increase internet usage in suburban and rural areas. The OFC network, estimated to cost Rs 200 billion, would provide backhaul connectivity and will be accessible to all operators in the country. The Universal Service Obligation (USO) Fund would cater to the funding requirements of the project.

A committee led by Sam Pitroda, chairman of the National Knowledge Commission, and consisting of Nandan Nilekani, chairman of Unique Identification Authority of India as well as representatives from the education, rural development and health ministries, members of the Planning Commission, etc. has been formed to roll out the 2,500,000 km network.

The government plans to set up a special purpose vehicle (SPV) for rolling out the NOFN. Though the financial structure of the SPV is yet to be decided, it appears that the telecom ministry is keen to limit BSNL and Mahanagar Telephone Nigam Limited’s (MTNL) share to 49 per cent. The remaining would be held by private operators, with a 26 per cent cap on the maximum ownership by a single firm. The Department of Telecommunications (DoT) hopes that this structure will provide a level playing field for  stakeholders in the project.

Another key OFC project in the pipeline is the OFC network for defence forces. The Ministry of Communications and IT has decided to provide a dedicated OFC network to the defence forces in lieu of the spectrum released by them for civilian usage. The network includes 60,000 km of exclusive and dedicated OFC, for which the Cabinet Committee on Infrastructure had approved a budget of Rs 91.75 billion in December 2009. BSNL, which is responsible for the project rollout, is yet to finalise vendors for the project. While the armed forces have already freed 15 MHz 3G spectrum and 15 MHz 2G spectrum, they will vacate 10 MHz 3G spectrum (for two operators) and 5 MHz 2G spectrum after the alternative OFC network is built by BSNL.

Both state-owned operators (BSNL and MTNL) have taken major initiatives to roll out a countrywide fibre-to-the-home (FTTH) network. The move is aimed at providing high speed broadband, and an improved QoS for next-generation and triple-play services. This will also contribute to future demand for OFC.

Another stream of OFC demand would come from the railways’ planned OFC rollout of 15,000 route km through the public-private partnership route. RailTel, which also offers leased line capacity to private players, will be rolling out the network. This cable infrastructure will be used to offer broadband services across the country. The railways plans to cover its entire network through OFC.

Some notable trends have emerged in the OFC industry over the past few years. A key trend has been that of operators outsourcing this part of their infrastructure. Bharti airtel and BSNL, which have a vast OFC network, have outsourced network management activities to telecom vendors. Initiating this trend, Bharti airtel invited bids in January 2011 from telecom vendors to manage its OFC network of over 120,000 km. The contract is estimated to be worth up to $1 billion over a five-year period.

BSNL, which has the largest fibre network, has also invited bids from players to outsource the management of its network. The deal has not been finalised yet. BSNL’s contract is also expected to be worth over $1 billion over a five-year period.

Another emerging trend is that of hiving off the cable part of infrastructure. RCOM, a key player in the OFC segment, has hived off this business to its tower subsidiary, Reliance Infratel. As of August 31, 2009, RCOM’s OFC network included about 196,000 km of OFC comprising 130,000 km of intercity cables and 66,000 km of metropolitan cables. Its metropolitan network covers 24,000 cities and 600,000 villages.

In terms of backhaul too, OFC has not witnessed large-scale adoption so far. As per data provided by telecom operators, 75-80 per cent of their rural base transceiver stations (BTSs) have microwave as backhaul. A major reason for the high percentage of microwave links is that they are cheaper to install and do not involve incremental annual charges. Spectrum for access and backhaul is charged on an adjusted gross revenue basis, and, therefore, there is no incremental cost involved in using microwave for rural areas.

However, microwave can provide short-term solutions and the bandwidth provided by it in the long term will not be sufficient to cater to applications such as entertainment and tele-education. OFC has a key advantage of unlimited capacity, which helps it score over microwave cables. In addition, OFC provides tenants a more economical and high quality medium, besides a more secure connection between towers as compared to microwave.

Microwave backhaul needs spectrum availability, which is not a problem in the case of OFC. As spectrum is available in limited quantities in India and additional airwaves are expensive, OFC presents a better backhaul option. Moreover, unified access service licensees face substantial delays, ranging from three to nine months, in the allocation of spectrum both for backhaul and BTS access. With the increase in rural penetration, this scarcity of spectrum is likely to increase further. OFC offers an option for connecting these BTSs. Also, fibre cables are more resistant to climatic changes and, therefore, offer a better QoS as compared to microwave backhaul.

Growth drivers 

With wireless markets nearing saturation, especially in urban areas, telecom operators have shifted their focus to the internet and broadband segment for the next phase of growth. This is expected to act as a key demand driver for the OFC industry.

Inadequate infrastructure, especially for last mile connectivity, is one of the major reasons for the low broadband penetration. According to the Telecom Regulatory Authority of India (TRAI), of the 40 million copper loops used for last  mile access across the country, only half are  usable for broadband connections. This most widely used medium, twister copper wires, is owned mostly by BSNL and MTNL, comprising a largely old and inadequate network for carrying data. The next best option, coaxial fibre cables, which  take cable TV to 80 million households, carry mostly low bandwidth analog signals and are managed by thousands of small entrepreneurs that have neither the capital nor the knowledge to use them for data.

While wireless broadband is being viewed as the best way forward, one cannot discount the limited capacity offered by this medium. As per TRAI estimates, an operator providing BWA services on new technologies like long term evolution or Wi-Max would require 280 MHz of spectrum to match Delhi’s broadband requirements by 2012. In the May 2010 auctions, operators were allotted only 20 MHz of spectrum. Therefore, operators would continue to rely on wired broadband for which OFC is the best available option.

The advent of 3G and BWA services would also act as a key growth driver for the optic fibre industry. Operators providing these next-generation services need to focus on backhaul as it can become a choking point for data services. The demand for data services is expected to grow rapidly with wireless internet services. At present, the majority of backhaul is on microwave, which needs to be upgraded to a high-end OFC, resulting in huge investments for operators. Also, the networks for these technologies would require the installation of transmission towers and 3-4 km of OFC networks, with each OFC having an average fibre count of 20-30.

OFC has some major advantages over its rivals. It offers enormous potential bandwidth that is way higher than that provided by copper cables or microwave links. This enables fibres to carry voice, data, images and video signals simultaneously. The cable itself, even after applying protective layers, is smaller and lighter than copper cables. This helps in easing duct congestion in cities. Its structure helps form a dielectric, thereby making the cable free from electromagnetic interference and resulting in better quality of voice and data transfer.

Optically transmitted signals cannot be obtained non-invasively as they do not radiate significantly, thereby ensuring a high degree of signal security. Also, the signal transmission loss for OFCs is as low as 0.2 dB per km, and a major advantage of OFC is the extremely wide repeater spacing (70-100 km), which makes it a very economical long-haul communication link. These factors reduce both the system costs and complexity. Due to the low loss property of OFC, system reliability is enhanced in comparison to conventional electrical conductor systems. Also, optic components have predicted lifetimes of 20-30 years. Together, these factors tend to reduce maintenance time and costs.

The way forward 

As per industry estimates, the demand for fibre networks is expected to grow by 12 per cent in 2011-12. At present, the country’s OFC network is the fourth largest in the world. However, as per industry estimates, the per capita length of OFC is only 39 metres. This is way below the per capita lengths in China (197 metres) and the US (907 metres). India needs to build at least another 180 million km and 1,020 million km of OFC cables in order to match the per capita volumes of China and the US respectively.