Increasing broadband and smartphone penetration, in particular as a result of the launch of 4G networks, is affecting data growth across the BRIC markets. With a focus on India and Russia, DT looks at the impact this is having and the trends that are expected to emerge in this arena over the next few years.
There were very high hopes for 3G in India, but until now data traffic has not been growing at the pace that was broadly anticipated. This is according to Nitin Arora of broadband solutions specialist Tekelec. However, while 3G didn’t take off as quickly as anticipated, it is slowly being embraced more widely. As a result we are only now seeing growth of data traffic, he adds.
In terms of enterprises, large and medium-sized businesses are registering strong data growth. However, growth in data services has been more moderate among smaller organisations, which have usage habits more in line with those of an individual consumer.
To kick-start the data market, the largest operators such as Bharti, Idea and Vodafone have started offering data at dramatically reduced prices. This has been reflected by a spike in growth.
The question now is whether networks can cope with the newly created data demand. Currently this is not such an issue as the existing 3G networks have until this point been under-utilised. However, it could soon become an issue if the data market really takes off.
When this happens some operators will face major challenges. Offering 4G services on the 2300MHz spectrum that was allocated in India’s recent 4G auctions requires a lot of network equipment. If lower bandwidths such as 700-900MHz had been used, the requirement for equipment would be reduced by around a third.
While this is a concern for operators, some are taking it in their stride. Bharti for example has already launched services in four Indian cities while Reliance and Aircel are both set to launch services within the next six to nine months.
The availability of new networks will not, however, automatically lead to increased use of data services in India. The availability of devices and the readiness of the ecosystem - not to mention the affordability of both devices and data plans - may yet be a while off, according to Arora. However, he believes that the market is definitely now showing signs of moving in the right direction.
There is a further issue which is likely to have an effect on the uptake of data services in India over the next 12 months. This is the 2G licence cancellation which has caused a stir in India’s telecom sector. TRAI (the Telecom Regulatory Authority of India) is set to impose restrictions on operators on areas such as interconnectivity, RAN sharing and spectrum sharing.
Similarly, major new policies covering security and certification are set to be introduced. Many foreign operators that invested in 2G between 2005 and 2007 – including Telenor, which entered into a joint venture with Unitech to create Uninor - are now unsure of how to react to the market. Some – including Etisalat and MTS – have indicated that they could withdraw from the market altogether.
The next six months, asserts Arora, are likely to reveal who will stay and who will go. It will also reveal how the expected operator consolidation will play out – and consequently how many players will ultimately remain in the market.
The regulator will also have to finalise its policies on RAN sharing, spectrum sharing and refarming, while the re-auctioning of 2G spectrum, the renewal of incumbents’ licences and the delay of the national telecom policy due to be unveiled this year will further complicate matters.
Arora believes that despite the somewhat turbulent market, there is no indication that data traffic will not continue to grow. In fact it is likely that the unsettled arena will cause operators to lower their prices, driving the adoption of data-using devices at an affordable price. This will in turn fuel data traffic and signalling requirements.
Data growth is also expected in fellow BRIC market Russia as the increasing penetration of broadband drives ARPU up, according to Peter Newcombe of network specialist Ciena. According to Newcombe, demand for bandwidth is continually on the rise in Russia. As a result keeping the transport infrastructure economically viable is increasingly becoming a top priority for providers.
One method of doing this is adopting 100G fibre technology rather than the widely-used 40G. VimpelCom for example has adopted 100G for its recent deployment of a high-capacity network connecting Russia to East Asia, carrying transit traffic into markets such as China.
In terms of cost per bit, adopting 100G makes economic sense, says Newcombe. “If there is enough demand for capacity, the economics of 100 Gigabits are better than those for 40G or 10G”, he notes.
Russia’s first broadband deployments focussed almost exclusively on Moscow and St Petersburg. However, penetration has expanded to the point that around sixty cities now form the major part of Russia’s broadband market.
A reasonable level of fibre connectivity is emerging in these cities, and they are increasingly viewed as a ‘foundation’ that providers take as a starting point. According to Newcombe, the networks that grow from this basis will likely resemble those prevalent in Western Europe, where there is a mix of fibre and mobility access served by a strong fibre core.
“When people roll out networks, transmission tends to look like a black line on a diagram”, says Newcombe. “The reality is that all of the services we use, whether mobility or data centre services, rely on that underlying transmission infrastructure being both economic and robust.”
As a result of the establishment of the core fibre network it is now more likely that mobility solutions will gain traction outside of these cities. Given the demographics and indeed the geography of Russia, smaller towns and cities are likely to be the main focus of data development in Russia in the next year, with wireless connectivity bringing them on to the core networks. Both smaller local operators and larger national operators are following this route, for economic and practical reasons.
As we can see, while the overall trend is expected to be similar in both India and Russia, the issues driving the market and the exact course of data growth are likely to be quite different.