Yet another National Broadband Plan announced by the government of India raises the question of whether vendors will and should compete for FTTH in India's currently limited market.
Despite a billion-strong population, slow growth in wireline broadband subscribers (just over 10 million) remains a disincentive, particularly in comparison with the 120 million in China.
The number of FTTH subscribers remains around 50,000, compared with several million in China. Wireless broadband is considered to be a better opportunity than wireline broadband in India.
FTTH opportunities to this point have been unprofitable for western vendors due to the demand for rock-bottom equipment prices. The broader question is if there will be profitable opportunities for western vendors in India. Specific opportunities will exist but the incumbents BSNL and MTNL will not make it easy.
Low ARPUs have been cited as a primary cause for the lack of interest in rolling out FTTH. India, like many developing countries, has growing levels of income inequality. Not a good thing in itself, but a growing wealthy elite provides a small group of early adopters of new technologies with spending power.
MTNL is the wireline incumbent of two of the wealthiest Indian cities – Mumbai and Delhi. Both cities may have plenty of low-income residents in slums, but they also have a sizable population, possibly up to a few million, who live in houses whose market value now ranges up to a half-million dollars.
Monthly rentals are $1,000 and above and many upwardly mobile professional residents will spend $40-$50 per month and upwards on a combination of wireline broadband and telephony, mobile broadband and telephony, and movies in premium theaters, all of which are services that can be delivered by FTTH.
MTNL should be able to cherry-pick its customers to justify a business plan. Indeed, low ARPU may be less of a reason for the low FTTH rollout than mismanagement of targets and disorganization within BSNL and MTNL.
Between the two, they own the majority of fixed lines in India and are protected by regulation from unbundling those lines.
Being fully (BSNL) or partially (MTNL) government owned, BSNL and MTNL hardly face any negative shareholder feedback on missing broadband rollout targets. It’s close to impossible to fire government employees.
In India, what is clear is that unlike China, there is no magic formula of government-funding support and influential vendors. Without any political backing for unbundling, FTTH rollouts in India have the government as a hurdle, not a source of support.
Banking on BSNL or MTNL should not be the only option. BSNL’s initial rollout is completed but subscriber growth remains substantially low. Despite the bluster about a second round of FTTH equipment procurement, when BSNL will embark upon that round remains anyone’s guess.
Some vendors are citing high-end residential housing developers and property managers as customers. Alphion has been working with a group of developers of such housing. Ericsson recently announced a win with Radius Corporation, a systems integrator for real-estate companies. Comparable to the BSNL rollout so far, the contract includes GPON FTTH connections to 600,000 households.
Other opportunities center on high-profile events. The Radius win included new housing for athletes participating in the Commonwealth Games, the largest sporting event to be held in India in many years.
A similar spending binge was noticed just before the Olympics were held in China (although not so much fiber, but it was early days for PON in 2008).
No doubt there was an infrastructure spending bump in South Africa for the World Cup 2010, which will be repeated in Brazil for the World Cup 2014, Russia in 2018, and Qatar in 2022. For many developing countries, such events are an opportunity to showcase the economic rise of their country.
As with high-end residential builds, there will be demand for higher-quality telecom infrastructure, which will increasingly involve some combination of fiber. Such specific opportunities will exist and should grow into more mass-market opportunities as incomes rise.
Partnership with local vendors is an option. UTStarcom in partnership with local vendor Aksh Optifibre rolled out EPON FTTH a couple of years ago. Local partners have several advantages here in growing their infrastructure business. Knowing a minister or two can help win a wireless spectrum auction. Alphion has developed specific FTTH passive infrastructure due to knowledge of local conditions.
Tracking regional variations can be difficult when dealing with local high-end projects. From the latest statistical figures, it appears a change in the economic fortunes of the various Indian states may be under way.
Richer, economically developed states are stagnating where there is unexpected economic and infrastructure growth among the poorest states. Having a base only in Bangalore or Hyderabad without having a system of tracking growth elsewhere in the country may not be helpful beyond picking low-hanging fruit.
