The race for 5G’s global market debut has begun, with South Korea’s KT Telecom setting the stage for the first-ever official demonstration of 5G technology during the 2018 Pyeong Chang Olympics, Apple obtaining the Federal Communications Commission (FCC) approval to test 5G communications, and Verizon testing 5G networks across 11 cities in the U.S. In India, Nokia has recently signed an MoU with BSNL and Airtel to work on 5G technology solutions, and Reliance Jio has tied up with Samsung to explore various technologies and equipment for 5G.

In the wake of growing awareness around Internet of Things (IoT) and the use cases it presents to Indian businesses and consumers, 5G will open a new era of opportunities for telecom operators and ecosystem partners in the country. Though it’s difficult to get an accurate estimate of the market size right now, IoT is expected to provide a $15 billion market opportunity for Indian businesses by 2020, according to officials at Department of Telecom (DoT). Combine this with the unprecedented growth in the number of smartphone users in India, which is expected to overtake the U.S. in terms of smartphone shipment by 2019. Analysts are optimistic that India will hold around 15% of the world’s smartphone market share by that period – Indian consumers are ready for 5G.

Roadblocks for Indian Operators

Indian operators, however, need to address the issues surrounding 5G infrastructure and deployment. Challenges involving regulatory policies, investments and infrastructure readiness need to be addressed on priority.

Challenges ahead for telecom operators in India are multi-fold compared to their peers in the rest of the world. Diverse geography, disparate population and disparity in economic distribution among the rich and the poor pose serious challenges to operators, preventing uniform investments across different telecom circles. Also, issues such as Right of Way (RoW) have created uncertainty in fibre investments across different states. These apart, the rising cost of air waves and the challenges involved in migrating to new technologies bring additional challenges.

Moreover, the industry’s performance on key indicators such as network speed, coverage and customer service is not satisfactory. For example, average Internet speed in India stands at 3.5 Mbps compared to 29 Mbps in South Korea, 15 Mbps in the U.S., and 4.3 in China (graph below).

In this context, it is worth analysing where telecom investments should be directed to make commercial 5G a reality in India by 2020.

Fibre to Drive 5G Rollouts

With a promise of 10Gbps speed, less than 1 ms latency and 90% reduction in network energy utilisation, 5G will spur the next round of telecom infrastructure investments across the globe, say experts. The growth of 5G will be fuelled by the sharp hike in consumer data and the proliferation of IoT devices. ITU estimates the market for IoT devices will result in over USD 1.7 trillion in value added to the global economy by 2019. In view of these developments, ITU expects that investments on fibre infrastructure will surpass $ 144.2 billion during 2014 – 2019. The fact that 5G network will have to support bursty data from emerging applications like Video on Demand (VoD), IoT, Smart Cities, and the like also makes backhaul a critical concern. In several markets, operators are turning to fibre backhaul as an alternative to costly microwave technologies. Since fibre is essential for both wireline and wireless networks, investors show greater levels of confidence in fibre investment.

Fibre Investment: Where does India stand?

A comparison of optical fibre cable (OFC) rollout among the top performing telecom markets shows that the fibre kilometre (fkm) per capita is much less in India compared to several other key markets. For example, fkm per capita for China with 1.3 billion people is 0.87 whereas that of India with 1.2 billion people is just 0.09 (i.e. one-tenth of China consumption). In developed markets such as the US and Japan, the score is 1.3 and higher (See graph below).

Preparing 5G Networks in India

The latest Cisco VNI report estimates that global IP traffic will grow at a compound annual growth rate (CAGR) of 23% from 2014 to 2019, and reach 2 zettabyte per year by 2019. Given this, operators across the world are upgrading their backhaul networks with fibre technology. The fact that fibre-based networks are capable of delivering unlimited bandwidth makes them a winning formula for telecom investments.

Leading operators are now mulling ways to reduce the capex associated with fibre deployments. Infrastructure sharing and leasing are gaining popularity among mobile and cable operators in developing markets. In India, the DoT’s amendment of unified license scheme for active infrastructure sharing and the revised public private partnership (PPP) model for BharatNet project adopted last year are two timely steps to boost the infrastructure sharing efforts by operators. Combined with this, a consensus on RoW is also expected soon across all Indian states. A unified RoW policy will pave way for smooth fibre rollout, resulting in faster service rendering.

To rise to the global standards and solidify their stand in the country, Indian operators need to pump in more funds in optical fibre and related technologies. With fibre playing a pivotal role in improving broadband connectivity and building robust 4G/5G backhaul capabilities, operators will find the investment worth of a grab. As penetration improves, they will be in a position to lower tariffs and identify new monetisation opportunities. ARPU will improve, and the market will stabilise gradually.

As the second largest telecom market in the world, India promises great potential for investors. Industry watchdogs believe India and China combined are capable of transforming world’s telecom landscape in the next decade. Recent developments reveal that Chinese operators and technology vendors have come a long way in 5G tests and trials. Now, it’s the turn of Indian operators to prove their readiness to 5G.

This is an exciting time for India, and the impact of 5G and its associated enablement of M2M, IoT, Autonomous driving and AR/VR can be anticipated. Given the 5G requirement for latency reduction (from 50ms to 1 ms) and speed from 100 Mbps to 10Gbps, the fibre deployment in the country will need to increase from current market of 16-18 million fkm per year to at least 2-3x per year. 5G will also require a multi-fold increase in small cells deployment, with each small cell having backhaul on fibre. The percentage of tower backhaul on fibre for the operators will need to increase significantly from 20% to 70-80% levels.

The current main drivers for the increase in deployment lie in the increased 4G deployments in Tier 1 and Tier 2 cities, increased Fibre-to-the-Home (FTTH) deployments by telecom operators, ISP’s and MSO providers. For example, ACT has recently launched 1Gbps broadband service in Hyderabad, which 20x faster than the market average of 50 Mbps. The other drivers for increase in fibre demand include the rural broadband project - BharatNet and large connectivity projects by the Defence. Lastly, optical fibre is a critical component to make the Smart Cities project a success.

Enabling early adoption of 5G, Sterlite Tech is working closely with key stakeholders - DOT, TRAI, telecom operators, equipment vendors and start-ups to enable 5G deployments in the country. Sterlite Tech is actively involved in 5G readiness solutions, and, is a key member of the Telecom Infra Project (TIP) led by Facebook, to completely transform telecom networks using SDN/NFV and make them 5G ready.

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