Bandwidth: Creating an Alternate  Backbone

I ndia’s tele-density has improved and so has the telecom backbone in the
last couple of years. Operators like BSNL, Bharti, Reliance, and Tata have
created a large optical fiber cable (OFC) backbone, and are still increasing
their OFC network by a few kilometers everyday to meet untapped demand.

Every year, BSNL increases its OFC by 75,000 route kilometers (Rkm) in spite
of having a large backbone network. Amazingly, the cable laid by the private
operators (Bharti, Reliance and Tata) collectively is far lower than what BSNL
lays every year. Presently, the incumbent operators (BSNL as well as MTNL) have
a cumulative capacity of around 410,891 Rkm. On the other hand, Reliance
Infocomm is planning for a 60,000 km backbone (to be further expanded to 116,000
km) and Bharti Telesonic has around 23,500 km of OFC.

	OFC Network of RailTel
	OFC Network of GAIL
	OFC Backbone of PGCIL

The expansion of OFC has resulted in an increase in demand for telecom
services in the country. There is a demand, not only in terms of voice but also
for data and video services. And surprisingly, the demand is not just from the
urban populace but also from rural areas. It is a demand that is swelling
everyday.

In order to fulfill this unmet demand, utility companies like Gas Authority
of India Limited (GAIL), Power Grid Corporation of India (PGCIL), and Indian
Railways have also joined hands with the telecom bigwigs–Bharti, Reliance and
Tata—— to help them wire-up India. Since, these companies have OFC and
microwave for their own internal communications, they lease capacity to service
providers to avert network duplication.

Even if there is duplication it helps in providing increased network uptime
and higher level of network redundancies that help people to communicate
irrespective of contingencies and exigencies.

The Utility Players

The role of public utility companies for building the telecom backbone
cannot be overlooked, as their network, along with service providers’
networks, is central in achieving the objectives of NTP ’99. With OFC cable
reaching every nook and corner of the country, we can expect demand to pick up
once service providers shift from class A to class B and C cities as well as
rural areas. The access providers have to incur an incremental cost to provide
voice and data services to start with, and later offer video services through
the same cable. Presently, Gail and PGCIL are very active whereas Railtel has
started work though it is still at the cable deployment stage.

GAIL was the first carrier’s carrier to commence operations and started
leasing capacity from June 2001. It has an installed capacity of 10 Gbps, of
which, 2.5 Gbps is active. The network can be further expanded to 160 Gbps. A
major chunk of its OFC network has a high-quality ring structure, which provides
network availability even when a cable gets cut. The company has a full-fledged
network operations center (NOC) in Noida with back-ups in Vadodara, Mumbai, and
Hyderabad.

Presently, GAIL has footprints in Rajasthan, Gujarat, Maharashtra, Uttar
Pradesh, Haryana, Madhya Pradesh and Andhra Pradesh. Operational in 70 cities,
GAIL plans to fully commission its network in 73 cities by March 2004. This will
take GAIL’s presence in 11 out of 21 level 1 TAX and 70 long distance charging
areas(LDCAs). Plans are on to lay around 8,000 km of OFC, of which around 5,000
plus km will be non-pipelined while the rest will be pipelined (Vizag-Secunderabad,
Jamnagar-Loni, Vijaipur-Dadri, and others). Presently, the OFC network covers
northwestern and central India but there are plans to cover the southern
and eastern parts of the country too.

Phase III plans to cover southern India and it is expected to finish by the
middle of 2004. Phase IV will cover eastern India, which is expected to be
completed by December 2005. For Phase III and Phase IV, the company is planning
to go on its own but with a national gas grid project coming up, there will be
some overlap. This will help in creating a mesh network and provide higher
redundancies.

PGCIL started its operations in September 2002 and owns around 7,000 km of
OFC. The company has plans to further lay around 20,000 km of optic fiber. This
is expected to be completed by June 2004. Presently, PGCIL covers Delhi, Uttar
Pradesh, Rajasthan, Punjab, Haryana, Madhya Pradesh, and Maharashtra, and is in
direct competition with GAIL. On completion of its OFC expansion, the network is
expected to cover over 60 cities. The links that are already operational are–Delhi-Chandigarh-Shimla,
Delhi-Jaipur, Delhi-Meerut, and Delhi-Lucknow-Mumbai. By June 2004, plans are to
commission–Delhi-Bangalore, Delhi-Chennai, Delhi-Hyderabad, Delhi-Trivandrum,
Hyderabad-Bangalore-Chennai, Delhi-Kolkata, and the north-east region (NER)
states. Though GAIL intends to be in the East only by December 2005, PGCIL is
planning to connect the eastern states as early as March 2004.

Established in September 2000, Railtel Corporation of India Limited (RCIL)
was set up to exploit Railway’s communications assets, used for meeting their
own communications requirement for train operation and safety. The company is
planning to cover 40,000 Rkm, which will provide coverage in 4,500 railway
stations out of the total 7,000 railway stations. Presently, RailTel has laid
21,880 Rkm of OFC spread across the country. Out of this, 15,670 Rkm has been
commissioned with minimum STM-1 electronics. Apart from this, RailTel has built
a STM-4 based edge-layer network of about 10,000 Rkm. By the end of this fiscal
year, RailTel will complete laying fiber in 28,000 Rkm. The company will further
commission 22,000 Rkm of backbone network, which will initially be based on
STM-16, by middle of FY2004—05.

The Business Model

According to VOICE&DATA estimates, the Indian NLD market in FY 2002-—03
was around Rs 5,970 crore, which was 20.7 percent lower than the FY 2001—02
figures of Rs 7,532 crore. The NLD market has been shrinking because of lowering
of prices due to increaseing competition from private operators. But for utility
and private companies, there has been an increase in revenue as they have
started only recently. It is expected that the overall market will increase from
Rs 40 crore in FY 2003—03 to Rs 70 crore in FY 2003—04. The surge in revenue
is due to the launch of services in newer cities by access service providers
where they are leasing capacities from utility companies. Even with corporates
opting for lot of redundancies, there are lots of opportunities coming utility
companies’ way.

Speaking about the business model, RK Vohra, executive director (telecom),
PGCIL said "All the three utility players have more or less a similar
business model, that is, to provide end-to-end bandwidth to telecom service
provider and offering value added services under ISP license." But Railtel
has an edge in remote and backward areas, according to RC Sharma, additional
member (telecom) Railway Board. In these areas, Indian Railways have a better
infrastructure in comparison to existing DLD service providers, he added.

Though the model remains same for all the service providers, it is
value-added services that differentiates one from the other.

GAIL and PGCIL are focusing on point-to-point bandwidth and Internet leased
line but GAIL also offers value-added services like co-location facilities in
all the cities where it has a PoP (point of presence) and IP-VPN services. Plans
are also on to offer MPLS-VPN service for corporates. Railtel has an entire
suite of services focusing right from leasing of point-to-point bandwidth,
Internet leased line, dark fibers, microwave tower space, and co-location
facilities. The company is also planning to offer IP-VPN services as offered by
GAIL.

In terms of customer base, GAIL leads the table with 13 customers, of which
VSNL, Tata Teleservices, Data Access, Escotel, and Hutch contributing a
significant portion of its revenue. The company has plans to connect southern
and eastern India and is planning to invest around Rs 300 crore. Presently, 98
percent of Gailtel’s revenue comes from bandwidth leasing but in future it is
expected that bandwidth leasing will contribute around 80 percent only. In terms
of revenue, GAIL is expected to net a revenue of Rs 35 crore in FY 2003—04, up
from the Rs 12 crore earned in FY 2002—03. With the complete network getting
commissioned by March 2004, the company expects a revenue of Rs 50 crore in FY
2004—05. On the other hand, Railtel plans to lease capacity and is focusing at
telecom service providers, FM radio operators and cable TV operators. The
company also plans to open cybercafes at many stations. It is looking at a
franchisee model for this. Plans are also on to appoint virtual network
operators for bandwidth resale. The company has aggressive plans and is looking
at a revenue of Rs 500 crore in 2005.

All the utility companies have a similar business model, but the similarity
ends with point-to-point bandwidth marketing. For example, for IP-VPN services,
GAIL has appointed Spectranet and Tata Power as channel partners and is also
planning to expand its channels in the integrator as well as access provider
space.

On the other hand, Railtel is looking at virtual network operators for
bandwidth resale. For cyber cafe operations, the company has floated an
expression of interest and is looking at revenue sharing–where Railtel
provides bandwidth and space and they will provide services.

The Road Ahead

With more and more companies creating telecom backbone, the bandwidth cost
has been on a downhill thereby putting more pressure on companies to increase
their leased capacity. Initially, a 2 Mbps link used to cost Rs 22 lakh and now
it is hovering around Rs 11—13 lakh and it is forecasted that prices will go
down to Rs 7—8 lakh, once Reliance Infocomm starts leasing bandwidth to
corporate customers.

Moreover, the increase in number of players in the bandwidth leasing space
would induce an increase in demand for bandwidth and customers, both service
providers as well as corporates, will opt for neutral players like utility
companies. This is an advantage for utility companies but they have to improve
on the marketing front and be more aggressive as Gailtel. The companies also
have to provide redundant paths and provide a network uptime of 99.99 percent
followed by excellent customer care which will help them compete with DLD
providers like Bharti, Tata, and Reliance.

With government floating unified licensing, all the utility companies are
interested in NLD as well as ILD license and are presently looking at how
unified licensing will shape up before they go ahead with those licenses.

Pravin Prashant