The burgeoning Indian telecom sector is an internationally-acclaimed success story. Fifteen operators currently serve 806 million subscribers.
“Rural India is the key target market likely to drive the next round of growth” states Anil Kumar Reddy, Carrier Sales Expert, India and APAC, at RAD Data Communications. “3G and BWA are expected to reinvigorate the maturing urban markets and help the telcos to achieve margin enhancement,” Anil explains. “The BWA and 3G launch will enhance the wireless broadband penetration across the country and help connect the most remote locations,” he continues. “One should appreciate the importance of broadband for India and how this technology can help the rural population leverage the advantages of modern education, healthcare, commerce and banking.”
India is one of the world’s fastest growing economies, but 70 percent of the population lives in 590,000 rural villages. Rural India is predominantly dependent on agriculture for survival, but it still contributes close to 45 percent of the country’s total GDP.
“In terms of telecom connectivity, urban teledensity across all metros has crossed 100 percent and the market for voice services is fast moving towards the saturation point,” Anil adds. “Rural teledensity is still below 30 percent and the rural market is expected to drive the next round of aggressive growth,“ he states. “The government has set a target for 40% teledensity by May 2014.“
A number of initiatives have been undertaken by the government to improve the telecom penetration in rural India. The government’s Bharat Nirman programme is aimed at intensifying rural infrastructure development. The subsidy support for mobile towers in the rural areas through the Universal Service Obligation Fund (USOF) is another example of the Indian government’s commitment to rural telecom.
According to the Telecom Regulatory Authority of India (TRAI), 91 percent of the country’s villages are covered by at least one operator. Overall, 51 percent of the villages in India are covered by three operators and 31 percent of the villages are covered by four operators.
The rural telecom market has shown tremendous growth over the past decade with rural teledensity going up from 1.21 percent in March 2002 to 27.78 percent as of August 31, 2010. Despite this exponential growth, the rural market still remains largely under-penetrated. There are a number of challenges that need to be addressed.
Rural vs Urban teledensity
There is no doubt that Indian metro locations have adequate telecom infrastructure. The rural regions of the country, in contrast, need to cope with a lack of telecom infrastructure. For their part, operators have to incur higher costs to set up infrastructure in rural areas, which tends to decrease the financial attractiveness of this segment.
India’s huge diversity in terms of culture and language creates a need for regional content in order to ensure penetration of telecom services among the masses. Hence, service providers must continuously develop content that is regional in nature and customized to the specific needs of an end user segment.
India is the seventh largest nation in the world, and the second most populous. Considering that 70 percent of Indians live in rural areas that may not be well connected as the metros and tier-1 cities, there is a critical requirement for a well-designed distribution network to penetrate into the market segment that holds the maximum potential for the future.
The population density across India is extremely speckled, making it less viable for telcos to set up infrastructure across sparsely populated areas. The return on infrastructure might not be feasible in terms of APRU alone.
Most importantly, there is a big challenge posed by the availability of power in rural areas. A large part of the country’s rural areas is power-starved. India has only a 56 percent electrification rate. With increasing coverage of mobile services in off-grid areas, the cost of network operations through alternate energy (diesel and battery) is very high.
“India has hundreds of thousands of telecom towers with an average power consumption of 5-6 KW and an average of 88 hours of diesel generation running to provide back-up during power outages,” Anil notes. “Each tower currently consumes an average of 4,000 litres of diesel every year, implying that the telecom industry consumes 1.8 billion litres of diesel every year,” he calculates. “With each liter of diesel used 2.488 kg of CO2 is emitted, and for every KWH of electricity consumed 0.848 kg of CO2 is emitted,“ Anil says. “This leads to emissions of around 5 million tons of CO2 due to diesel consumption and around 8 million tons of CO2 due to grid power per annum.”
Operators spend around 25 percent of their network operating costs on energy. The high transportation cost of diesel in remote areas, where physical infrastructure like roads is underdeveloped, adds to the overall operational expenditure. Also, there is significant pilferage of fuel in these remote areas. The economic viability of employing renewable sources of energy is low, especially in remote areas where the ARPU is less than 90 rupees.
Mobile operators and players across the value chain are working on a number of initiatives to develop energy efficient networks and energy-efficient handsets. Examples of these activities include:
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Designing low energy base station sites
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Deploying base-stations powered by renewable energy
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Implementing infrastructure sharing
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Reducing mobile device life cycle emissions through recycling
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Other initiatives, such as community power and low-power handsets
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Low energy base station sites
Considerable improvements in the energy efficiency of base stations have been realized in recent years.
Sharing of infrastructure provides an excellent opportunity for mobile operators to reduce their costs and their emissions. There are two levels of infrastructure sharing: passive and active.
“Passive sharing is becoming increasingly common and reduces the environmental footprint of mobile networks by cutting the number of tower sites required by each company,” Anil states. “In India, the average tenancy for the tower has currently increased to 1.5 tenants per tower from about 1.2 two years back, leading to cost saving including the energy cost.”
Any product solution that is going to be specifically designed for the Indian market is going to have to be centrally managed. It should access scalability over E1 or STM-1 lines and extended service coverage in order to yield better competitiveness and increased revenue with a broader customer base. Rural WiMAX backhauling, in particular, is guaranteed to be popular because it allows carriers to rapidly and efficiently deploy broadband services, while reducing OpEx by using simple Layer 2 transport technology.
Backhauling 2G/3G over a fiber ring will significantly reduce OpEx and CapEx for service providers because Ethernet OAM capabilities enable performance monitoring. A built-in synchronization solution over PSNs will yield savings. A cost effective solution should also provide dual homing with enhanced redundancy.
Existing SDH/PDH infrastructure can be leveraged by providing higher bandwidth managed Ethernet services. An end-to-end managed Ethernet-over-PDH solution would be ideal for Indian conditions, which demand more features at a favorable price.
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The target of 80 million rural connections by 2010 was achieved in 2008
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As on August 31, 2010, rural India accounted for 230.3 million fixed and WLL connections
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570,000 uncovered VPTs (village public telephones) were set up by June 2010 connecting 96 percent of the country’s villages
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More than 300,000 public call offices (PCOs) have also been installed in rural areas
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40,694 out of 40,705 villages having more than 2,000 residents have been provided rural community phones
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The Mobile Gramin Sanchar Sewak scheme (GSS), a mobile PCO service, is also being provided at the doorstep for villagers. As of March 31, 2010, there were 2,772 GSSs covering 12,043 villages across the country.
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Sanchar Dhabas (Internet kiosks) have been provided in more than 3,500 block headquarters out of the total 6,337 existing blocks in the country
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Under the Bharat Nirman program, 61,186 out of the remaining 62,302 villages have been covered as of December 31, 2009.
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An infrastructure sharing scheme is required to set up 7,436 towers spread over 500 district across 27 states in India
Statistics in this survey come from Indian Telecom Report 2010 – Broadband for All, jointly released by the Department of Telecommunications, KPMG and FICCI.
