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Fiberisation necessary to keep mobile data costs low

India's lack of fiberisation has also been a significant market failure, and perhaps an unintended byproduct of our leap from limited wireline network to one of the world's largest mobile markets

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Globally as well as in India, the telecom service industry would be experiencing a trisanku situation- on one hand, the rise of digitisation and a connected world is opening up new growth opportunities; but simultaneously the industry is grappling with rapidly shrinking returns.

India, if anything, has been at the absolute bleeding edge of this change. The scale and speed of transition, from voice-dominated to becoming the largest consumer of mobile data, has been not just speedy but brutal as well, even as consumers have enjoyed unprecedented benefits in terms of coverage and rates.

The past 24 months has seen the industry shrink from 7 service providers to 3, and the reshuffling of the pecking order of the industry.

So, what is the way forward for industry and consumers?

Assuming the current situation persists, industry players need to address the twin challenges of improving their viability even while improving the user experience on both voice and data.

For data, this would require investing in increasing both the capacity and throughput of the network (i.e. the amount of data one can download and the speed at which it does).

Increasing capacity and throughput involves the kind and amount of spectrum, technology deployed on this spectrum (i.e. 2G/ 3G/ 4G/ 5G), as well as the capacity of the pipes linking the various network nodes (base stations- which are hosted on top of the telecom towers we see spread all across). Assuming that the players may not spend more money in buying spectrum, then it leaves as immediate levers changing their technology as well as increasing throughput.

A single technology network (e.g., which has only say 4G) has a lower cost of delivery compared to a network which has multiple technologies (2G/ 3G/ 4G). However, given that a considerable portion of the population continue to be able to afford only basic feature phones for their connectivity needs (i.e. basic 2G voice calls), the decision to phase out these technologies is not an easy one.

The other option is to increase the throughput, which involves linking the base stations hosted on the telecom towers to the main network switch (called "backhaul"), by fibre instead of microwave as is mostly the case. India's lack of fiberisation has also been a significant market failure, and perhaps an unintended byproduct of our leap from limited wireline network to one of the world's largest mobile markets. But without fiberisation, we cannot hope to lower our costs of mobile data, and also ensure a decent consumer experience, leave along transition to an "always connected"/digital/ 5G world. While high bandwidth may not always an ubiquitous requirement in the future, fast connectivity will certainly be - a self-driving car faced with a rapidly approaching obstacle but faced with a "downloading" icon for even a second is not a happy situation!

This also impacts the user experience on voice calls, as the increase in data has choked out the backhaul capacity for voice as well, which has resulted in the significant loss in quality around even basic voice calls The good part is that the recently approved National Digital Communications Policy 2018 explicitly recognises the need for fiberisation. However, policy intent is welcome but not sufficient, given that the most significant obstacle for increased fiberisation, in particularly urban areas, has been Right of Way (RoW- permission to lay fibre cables along streets and to homes and establishments), which lies squarely in the domain of states and urban local bodies. Perhaps, initiatives like the recent GMDA (Gurugram Metropolitan Development Authority) one need to be widely and speedily replicated across all urban areas, not just for a better consumer experience and healthy and viable industry but also for India to make the transition to the future connected world.

The author is the telecom industry leader for PwC

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