Riding on the growth in mobile subscribers, the broadband segment witnessed an appreciable increase in subscribers, from 55.22 million at the end of December 2013 to 82.22 million at end-November 2014, recording a growth of 48.89 per cent. Given the government’s new sense of urgency to develop the country’s digital infrastructure, this growth is likely to increase at a rapid pace in the coming years.

During the past year, the government announced several plans and initiatives for digitising the country. The key among these were the launch of the Digital India programme, fast-tracking of the National Optical Fibre Network (NOFN) project and decisions related to spectrum auctions. As the government appears to be working towards finalising these plans, industry players are gearing up to meet the growing demand for data services by increasing investments in their broadband networks.

An overview of the key developments across the wired and wireless broadband segments…

Wireless broadband

The wireless broadband segment witnessed significant activity during the past one year, with the state and central governments taking various initiatives to promote these services and industry players making efforts to increase their footprint in this space.

The year started with the Karnataka government launching free Wi-Fi hotspots across Bengaluru. Taking a cue from this initiative, other state governments, including those of Delhi, Andhra Pradesh and Tamil Nadu, initiated their plans to provide Wi-Fi services at key locations. The Digital India initiative, which was launched in August 2014, aims at creating Wi-Fi hotspots across the top 25 cities in the country by June 2015, among other things. Recognising the increase in demand for these services, Wi-Fi services company O-zone entered into a partnership with Ericsson for setting up 30,000 Wi-Fi hotspots in the country. Tata Teleservices Limited (TTSL) announced its plans to set up 4,000 Wi-Fi hotspots in nine cities. One of its key installations, undertaken by the Delhi Municipal Council, was at Connaught Place. Recently, another mega project has been announced, under which Indian Railways has proposed to introduce Wi-Fi services at 400 railway stations across the country and on select trains.

The increasing demand for Wi-Fi has also facilitated the successful launch of 3G Wi-Fi dongles in the country. Both Bharti Airtel and Vodafone India launched their HSPA+ technology-enabled 3G Wi-Fi dongles, which are capable of offering download speeds of 21.1-21.3 Mbps.

3G gains traction

In a major breakthrough, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) passed a judgment in May 2014 stating that 3G intra-circle roaming (ICR) agreements do not violate licence conditions. Thereafter, Idea Cellular, Vodafone India and Bharti Airtel resumed their 3G services in circles in which they did not hold spectrum, but were providing services through ICR agreements. Moreover, other operators such as Reliance Communications (RCOM), signed 3G ICR agreements with Aircel and TTSL to provide services in areas in which it did not hold spectrum. These developments spurred the demand for 3G services across the country. Further, the increasing smartphone penetration, coupled with various initiatives taken by operators to improve 3G infrastructure, boosted 3G uptake, despite an overall rise in data tariffs.

Consequently, the major domestic operators, Bharti Airtel, Vodafone India, Idea Cellular and RCOM, witnessed steady growth in their 3G subscriber bases in the country. Between October 2013 and December 2014, Bharti Airtel’s 3G subscriber base grew at the highest compound annual growth rate of 12.9 per cent to 15.44 million. While Airtel had the highest growth rate in terms of 3G subscribers, the most notable growth was recorded by Idea Cellular, with the company’s 3G subscriber base growing from 8.7 million in end-December 2013 to 13.3 million in end-September 2014. This growth was on account of several factors, including the fact that the company was able to secure spectrum in the 900 MHz band in the February 2014 auctions. This supported the company in rolling out its own 3G network in the premier metro circle. In addition, the company signed network upgrading and modernisation deals with Nokia Networks and Ericsson for improving the quality of service provided to customers. Similarly, RCOM extended its network management contract with Ericsson to support its growing 3G subscriber base, which stood at 15.1 million as of end-September 2014.

The increase in the subscriber base translated into an increase in the volume of data usage for the major telecom operators. For instance, Vodafone India recorded a 68.6 per cent growth in its data usage for Indian operations, from 26.43 billion MB in the quarter ended December 2013 to 44.58 billion MB in the quarter ended September 2014. The increase in data volumes, in turn, led to an improvement in margins for the major telecom operators.

Another key development in the 3G data space over the past year has been the provision of these services in remote areas. For instance, Vodafone India launched 3G services in Sikkim and Aircel did so in the north-eastern region.

4G yet to pick up

The 4G broadband segment experienced slow progress, as the key operators holding spectrum in the 2300 MHz broadband wireless access (BWA) band were unable to commercially launch their services. In 2014, Reliance Jio Infocomm Limited, which holds a pan-Indian 4G licence, signed several infrastructure sharing agreements with companies such as Bharti Infratel, Viom Networks, ATC India and Indus Towers, to facilitate the launch of their 4G services. Later, in November 2014, the company approached the Department of Telecommunications (DoT) to conduct network testing along with security agencies. The launch of services, however, has been pushed to 2015. The first phase of implementation is likely to cover around 5,000 towns and cities, and account for over 90 per cent of urban India.

On a positive note, a major development has been the launch of 4G services by Aircel across the Andhra Pradesh, Assam, Bihar, Tamil Nadu, Jammu & Kashmir, and Odisha circles.  Aircel is the second operator in the country after Bharti Airtel to launch 4G long term evolution (LTE) services. The company collaborated with ZTE Corporation for deploying its 4G LTE network in the country. Meanwhile, Airtel expanded its 4G consumer base by launching services in the Kolkata circle as well as in several cities in the Punjab circle. The company also launched 4G mobile services, since it previously offered 4G services only through dongles. To popularise these services, the company partnered with Apple and Xiaomi to provide bundled offerings along with the sale of the latter’s 4G smartphones.

Meanwhile, Tikona Digital Networks and Augere, both of which hold BWA spectrum, have raised or are in the process of raising capital. While Tikona secured a loan of $45 million from the International Finance Corporation, Augere is seeking Foreign Investment Promotion Board  approval to increase the foreign stake in the company. Both companies have, however, not yet disclosed any plans for launching 4G services in the near future.

Fixed line broadband

The wired broadband segment has seen steady growth during the past year. The number of wired broadband subscribers grew from 14.54 million in December 2013 to 14.86 million in March 2014, and to 14.97 million in June 2014. As of June 2014, the market was dominated by Bharat Sanchar Nigam Limited (BSNL), which held a market share of 66.68 per cent with 9.98 million subscribers. The other dominant players were Bharti Airtel with 1.39 million subscribers and Mahanagar Telephone Nigam Limited with 1.13 million.

On the policy front, the execution of the NOFN project made slow progress. By August 2014, Bharat Broadband Network Limited, the implementing agency of the NOFN project, completed survey work in over 230,000 gram panchayats. It also issued technical sanctions to 181,000 of the gram panchayats surveyed. In November 2014, the government asked DoT to invite private telecom companies to help increase the pace of project execution. Under this regime, an independent project management consultant is likely to be appointed, who will invite bids from private players to handle cable laying, trenching and ducting operations across gram panchayats during the second and third phases. Further, the deadline for the completion of the third and last phase of the NOFN project has been moved forward by three months. As a result, the entire project is now slated to be completed by December 2016, instead of the previously set deadline of March 2017.

Another key wired broadband project, the Network for Spectrum (NFS) project for the defence forces also witnessed slow progress. Over the course of the year, the implementing agency, BSNL, awarded contracts valued at Rs 81.02 billion to ITI Limited, Larsen & Toubro, Sterlite Technologies and Aksh Optifibre Limited for the supply and deployment of optic fibre cable for the NFS project.

Looking ahead

As the telecom industry gets ready for the next level of growth, there are some serious concerns that are holding it back. These relate to the lack of policy clarity on matters related to spectrum trading and allocation, mergers and acquisitions, right of way, fee structure, etc. In order to fulfil the government’s vision for broadband-inspired growth, operators will need access to more spectrum. There is also an urgent need to speed up the execution of the NOFN project and encourage private participation in the same.