Connecting the last mile

The government has a vision for connecting 2,50,000 panchayats in the next three years. The 3G networks are already in operation and 4G is now set to be spread across the country. NOFN is about to be fully rolled out. With these initiatives the vision of connecting India will soon be realised

By Pupul Dutta

The Digital India programme has nine pillars. The first of these nine pillars is ‘development of broadband highways’, while the second one focuses on ‘universal access to mobile connectivity’.  The first two pillars of the Digital India programme are indicative of the importance that present government is awarding to mobility and broadband.

The success of the other seven pillars of Digital India programme will to a large extent depend to a large extent on the success of the first two.

The latest telecom subscription data released by Telecom Regulatory Authority of India (TRAI) says, “The number of telephone subscribers in India increased from 964.20 million at the end of November, 2014 to 970.97 million at the end of December, 2014, thereby showing a monthly growth rate of 0.70%. The urban subscription increased from 568.72 million at the end of November, 2014 to 572.29 million at the end of December, 2014 and the rural subscription increased from 395.48 million to 398.68 million during the same period.”

However, a vast majority of the connections in the country are in the urban areas. The TRAI report, “The urban tele- density increased from 147.38 to 148.06 and rural tele-density increased from 45.76 to 46.09 in the month of December 2014. The shares of urban subscribers and rural subscribers at the end of December, 2014 were 58.94% and 41.06% respectively.” Delhi has maximum tele-density, while Bihar has lowest.

While the country is doing well, especially in the urban areas on the aspect of mobility, when it comes to broadband, there is a cause for concern. According to TRAI, “The number of broadband subscribers increased from 82.22 million at the end of November, 2014 to 85.74 million at the end of December, 2014 with monthly growth rate of 4.28%.”
The data clearly indicates that there is a lot of work that the nation needs to do for complete Internet penetration in the country.

National Optical Fibre Network (NOFN)
With the aim of connecting all parts of the country with high speed broadband, the government has launched the NOFN (National Optical Fibre Network) programme. The programme seeks to connect all the 2,50,000 gram panchayats in the country through high-speed optical fibre network. In this task the existing fibres of PSUs (BSNL, Railtel and Power Grid) will be used for laying incremental fibre to connect the gram panchayats .

Once NOFN is fully rolled out in the country, it will lead to major improvements in governance, quality of healthcare, skills and education delivery and e-commerce. It will also open up multiple business opportunities, improving the life of millions of people across the country. “NOFN will give an impetus to the government’s Jan Dhan Yojana. Banks, telecom service providers, and other financial institutions will be able to leverage the broadband highway to provide mobile financial services to deliver basic to advanced financial services to millions of unbanked and under-banked people, especially in rural areas,” says Anshoo Gaur, President and Head of Amdocs India.

“The government’s decision to leverage the experience of several private sector players will help accelerate the deployment of Wi-Fi in rural areas to achieve the goal of connecting 600 million rural citizens of India across 250,000 gram panchayats. The private sector can bring in their expertise and innovation in technology, applications, and services to implement the project faster and in a cost effective manner,” adds Gaur.

However, the NOFN initiative is likely to miss its first target of linking 100,000 gram panchayats by March of this year. The work of laying the fibre network is behind the schedule due to a variety of reasons.“While the success of NOFN depends on many factors, some of the areas that need immediate attention to fasten the deployment are building of stronger cooperation among government agencies (for example the right of way permission from local civic authorities has been cause of slow progress), formation of strategic partnerships with private sector companies, including telecom operators and technology suppliers with proven experience and expertise in deploying broadband infrastructure,” explains Neha Gupta, Senior Research Analyst at Gartner.

Challenges in providing online services
As of now the government is struggling to ensure that all parts of the country get connected through a high speed network. But connectivity is not the only challenge. Another major challenge is to provide services over the Internet.

“Building networks is not the only thing that is needed for providing seamless customer experience. If it was so, we would not have customers lining to sign-up for only few of the operators rather than all. The interest of a customer in any particular network is directly proportional to kind of service delivery and content that is being offered,” says Pankaj Kitchlu, Service Provider Systems Engineering Leader, India and SAARC at Juniper Networks.

As per Ericsson’s Consumer lab report, network reliability, coverage, call quality and data speed are key drivers of consumer satisfaction. Achieving the government’s broadband vision will require significant attention to factors both on the supply and demand side. On the supply side regulators and operators need to tackle the issue of limited spectrum availability, device availability and network performance gaps. On the demand side, the industry needs to ensure that it can meet the pent-up demand for mobile broadband, while stimulating interest and uptake of services in new markets with innovative revenue models.
“Operators will need to pay close attention to customer experience, network quality and services while facilitating innovation in local apps and content,” says Nishant Batra, Vice-President-Engagement Practices, Ericsson India.

Smartphones replacing PCs?
According to Ericsson, across all technologies, the total number of active mobile connections (measured by active SIMs) in India are expected to increase by around 1.2 billion (about 85% penetration) by 2020. This will be driven primarily by rural penetration. Among these, the number of mobile broadband subscribers is expected to increase to 600 million by 2020. Given these trends, mobile broadband will be the key to achieving last mile connectivity.

“Mobile is now the preferred device for consumers when they want connect to the Internet. With the creation of the broadband highway, Gartner expects that the overall Internet market (mobile and fixed) will grow. The growth in traffic generated on fixed networks will be more than that on mobile networks,” says Gupta of Gartner.

Gupta further adds that the possibility of  any kind of competition between the two types of networks (mobile and fixed) is very low. “It has been observed that in developed economies, where both (mobile and fixed) infrastructure are available at equal levels, there are very few people who depend solely on the mobile networks for their internet connections. Only about 10% to 15% of the population are mobile only users,” she adds.

While the quality of experience is going to be more predictable and programmable per user, wireless will continue to be the first choice of users in India due to the coverage. This is primarily due to the fact that wireless connectivity is more easily available. “Once smartphones become viable for a number of users in an access area the fibre will start making in-roads,” notes Kitchlu.

4G a game changer
The huge expansion in the number of mobile consumers during the last few years has led to a massive expansion on the industry that provides data of voice based services. The thirst for services that the mobile subscribers in the country have, simply can’t be quenched. The mobile services in the industry continues to be on an expansion spree. The entire telecom industry is now seeing a massive shift from the traditional mobile services such as voice and SMS to value-added and data services.
While 3G adoption is still picking up three years after its launch, the focus has now shifted to 4G technologies, especially LTE (Long-Term Evolution). The extension and upgrade of networks to 4G in India will lead to a larger total addressable market.

It will also lead to greater revenue, especially data revenue, as more consumers get access to mobile data networks and affordable data-capable mobile devices and/or USB modems, data cards and mobile phone tethering services. This will help increase data ARPU and the number of mobile broadband connections.

“4G will be a game changer in both B2B and B2C. It offers higher potential for faster download or video experience and it is also going to push the envelope inside the operator community for transforming the legacy networks,” says Kitchlu of Juniper Networks.

It is noteworthy that in order to provide a seamless experience to customers, the operators have to upgrade both packet handling connectivity networks such as mobile backhaul, circle aggregation and core networks. They also need to upgrade their service terminating networks like packet cores, policy deployment engines and operational support systems, all of which are necessary for making 4G a real revenue generator for the service providers.

“4G will certainly play a key role in enhancing consumer’s experience and addressing their needs for seamless connectivity. As per our study, around 20% of mobile broadband subscriptions will be on 4G by 2020,” notes Batra of Ericsson.

“In future, as operators improve their 3G network coverage and launch 4G services, subscribers’ usage patterns are likely to move towards consumption of high-bandwidth content and video. Average data usage of a 3G subscriber is expected to increase from around 600MB (including3G dongles) in 2013 to around 1GB (conservative scenario) and around 1.6GB (aggressive scenario) in 2020. This effect will primarily be seen on high-end smartphones and large-screen devices (laptops and tablets),” he adds.

Challenges in internet penetration
In a country like India, the major deterrent to Internet penetration is the lack of availability of appropriate infrastructure and low awareness level for Internet usage among the masses.

Milind Kamat, EVP & CEO, Atos India, further explains the point saying, “Poor last mile connectivity, coupled with assumption that better work deals can be materialised only through personal connects are the biggest hurdles for Internet to reach the grassroots. Also, the lack of knowledge about the potential of collaboration that Internet provides, further dampens the growth.”

There is also a problem in executing only infrastructure plans and nothing else. “This infrastructure take decades to build and there has to be commitment from policy makers and private players for participating and start making exciting business cases to drive these projects continuously,” asserts Kitchlu.

Delays in obtaining RoW (Right of Way) permission is another area that the country needs to get in order. Getting the RoW permission in India is a costly and time-consuming process. “As per industry estimates, network providers spend almost 50% of the overall CapEx on RoW fees,” says Gupta of Gartner.

The high cost of PCs is a hurdle that the industry and the government must try to deal with. PC penetration is quite low in India. For majority of the people, it is unaffordable. Even modems and splitters are priced beyond the reach of the average Indian. The picture is slightly better in the smartphone front. The prices are coming down and the penetration is increasing. However, quality devices, which can access Internet at high speed, cost as much as any average PC.

Trends for 2015
The existing trends make it clear that most Indians are going to access Internet through their mobile devices. The release of additional spectrum in the relevant bands will contribute to affordability of services and harmonisation of spectrum will allow a lower-cost of device ecosystem to evolve.

“The year 2015 will see significant growth of mobile broadband in India—both in terms of active SIMs and revenue generation. Between now and 2020, the mobility in the country will be driven primarily by 3G and 4G based data services. Perhaps the ultimate vision of ‘Digital India’ will become a reality through networks riding on 3G and 4G,” says Batra.
“In 2015 we will have a more clear visual of the ‘Networked Society’, where everything that can benefit from the connection will be connected, becoming mainstream in near future. It has started to happen in pockets already and will pick up, considerably, in the coming year.”

According to Gartner, the amount of time consumers spend on the Internet, whether via mobile phone, tablet or PC, will continue to increase. CSPs will focus on creating new pricing with a focus on data access, such as shared plans. They will also need to refine the services they already provide, with a focus on creating richer, more immersive and more personalised experience, to increase their customer numbers.

“Newer and faster networks, a rise in the number of users of these networks, and more affordable 3G handsets will lead to a significant change in the way people communicate. There will be an increase in the use of social media platforms, IM platforms, video calls etc. This is because these provide richer communication experience, are easy to use and sometimes provide other features like gaming etc,” says Gupta.

It is still early to say whether 4G will be a game changer for the telecom market in the country. The success of 4G will depend the quality and price of the services, and also on the price at which the 4G smartphones are available.

“Today the 3G services are still struggling to provide seamless connectivity across the nation. So we can only imagine how much time the 4G penetration will take. Those who have used 4G services in the past are often complaining about not getting 4G speed on their devices, even though they are paying a premium price for the 4G services,” says Asif Gani, Senior Consultant at AMI-Partner.

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