Powering Telecom

Highlights

• Anatel, a national agency, created to co-ordinate the privatization process.
• The entire country was divided into three areas for creating competition.
• “Mirror companies” established in each of these areas through a tendering process. 

Revenues for any business come from homes and businessestablishments. These consume a variety of services–water, electricity,cooking gas, telephony, entertainment, education, banking, socializing, healthcare, ticketing, etc. Traditionally, all these services have been provided byseparate service providers, with separate agreements with the user and separatepaying mechanisms. And they have been regulated by separate regulations.

This is now changing. With most services partially or fullyshifting to a form that involves carrying of information in some form or theother, it is now possible to provide them through a single, integrated physicalnetwork.

One model becoming popular of late, is the involvement ofnon-telecom utilities like the Railways, electricity companies, and gascompanies. They all have one great asset, the Right of Way (RoW). Some, like theelectricity companies, also have structures such as transmission towers, pylons,and posts on their RoW. Radio systems, especially the satellite-based ones, donot depend upon RoW. But any cable system can become feasible only if theentrepreneur has a ROW so that on that way he can bury the optical fibre cable.

This is where the incentive for them to get intotelecommunications transport lies. How valuable is this depends upon what thealternative cost is. It is seen that laying cables by getting the RoW involvesdelay and costs, whereas RoW costs are already sunk and available for theutilities. For them to become the providers of electronic/photonic informationmeans additional revenue without any additional investments. They cansell/lease/capitalize their RoW. How much to charge will depend upon number ofcompetitors and whether time-bound rollout is insisted upon them.

In a competitive regime, time-to-market the facility orservice is the most important. The early bird gets the worm.

The electricity companies can provide a number ofalternatives for the emergence of cable-based photonic transport forinformation. They could consider some options.

• For instance, if these companies plan on selling or leasing their towers and posts, cables can be hung from towers. This would eventually fulfill the criterion of minimizing the time-to-market.

• Form a JV with companies engaged in telecom transport and service by placing a certain value on RoW and use of towers. In this model, their capital participation gets frozen once for all.

• Form a JV wherein, besides their capitalized RoW and use of towers, they also invest money in order to create the photonic transport, i.e., bandwidth which can be priced to realize revenues.

The last one is the best proposition if electricity companiescan also bring in certain capital initially and periodically to the JV. It willhave ownership rights in considerable measure and since telecom and informationservices have the potential for tremendous growth and, therefore, huge revenuesthese companies stand to gain more revenue.

The most successful participation of electricity companieshas been in UK, Finland, and European Economic Community. This is because theywere early-movers. If these companies take too long to decide, then thealternatives will be in position. Take a state like Andhra Pradesh. RoW is givenalmost on demand and at no expense. Optical cables buried along highways iscertainly more attractive a proposition. Highways and roads go through everytown whereas the high-tension electricity power lines usually avoid habitations.Therefore, there will have to be tail cables on the ground to make photonictransport available to population centres.

The Internet Service Policy (ISP) of 1998 and the NTP ’99allow utilities to create electronic/photonic transport infrastructure.Service-providing companies can, with least investment, go into business byleasing the transport capacity from infrastructure providers.

Today people differentiate between pure infrastructureproviders, pure service providers and those who own infrastructure and providethe services. Regulation is different for these three types of telecom players.

It is generally known that almost all the state electricityboards are financially anemic if not sick. The most sick will then have optionno. 1, i.e., simply lease or sell RoW and be done with it. The little betterones can capitalize on their RoW, structures, accommodation and go into a JV,either to become carriers’ carrier or to become a service provider.

This concept is most evolved in Japan where there are Type 1and Type 2 carriers. Type 1 are those who own infrastructure and provideservices. They are regulated very tightly and heavily and Type 2 are those whodo not possess infrastructure but lease it and provide services. These are leastregulated.

Once a cable is laid, limitless amount of bandwidth can beobtained by use of ultra wave division multiplexing. Increments of opticalelectronic equipment will have to be added for insertion and extraction of thebandwidth required. The costs for bandwidth are declining as the installationsgo up.

Enterprises interested only in providing bandwidth are comingup. Bandwidth is being traded like commodity and electrical power. Prices arenot for connection between fixed cities but from anywhere to anywhere at anytime. One company, BANDX, is facilitating global trade in bandwidth. In India, anumber of companies are laying optical fibre cables, where

they can give any amount of bandwidth with highest reliability (because of SDHrings).

It is not yet clear how, if the price for bandwidth goesdown, the enterprise will make money. My guess is that the first mover will beable to make all the money in the first few years and then he can go on cuttingprices in order to keep the highest market share. Perhaps state ownershipimposes the delays. The agility of the Railways and even the Gas Authority ofIndia is not very incomparable to that of the electricity companies.

If these Government-owned utilities are not able to transform themselves intocompetitive enterprises, my perception is that the private telecom companies,which have started burying optical fibre cable along highways, may pre-empt theelectricity utilities.

Dr. TH Chowdary is chief adviser, Information Technology to the AndhraPradesh government and is Chairman of Centre for Telecom Management Studies. Hecan be reached at thc@satyam.com