Active infra sharing still to take off

Ever-increasing competition in the Indian telecom industry has made it difficult for operators to survive unless they bring down tariffs, and offer innovative plans and services.
Moreover, with an increasing demand for data services due to the advent of 3G and mobile number portability round the corner, telecom operators will be required to invest heavily in network upgradation to improve quality of service to retain customers. This has already started putting pressure on operators' capital and operational expenditures (CAPEX, OPEX).
Sharing infrastructure is a way for operators to cut costs. Since active and passive infrastructure forms a major part of their expenditure, sharing these resources has begun, with rival operators becoming partners. This not only helps both existing and new operators to cut costs but also enables them to expand their networks quickly.
Telecom infrastructure in India can be divided under two heads -- active and passive. Active infrastructure includes all electronic components such as base terminal station (BTS), antennas, feeder cables, nodes, radio access network (RAN) and transmission systems.
Passive infrastructure includes towers, shelters, cooling systems, AC and DC power supply, diesel generators, air conditioning, site leases and other electrical and civil works that then enable network operators to install the active infrastructure.
In India, the passive component is around 40 per cent and the active component comprises around 60 percent of the total capital cost. Of late, however, the cost of passive infrastructure is going up, while that of active infrastructure is coming down, with declining prices of electronic components.
Active infrastructure sharing in IndiaThe Department of Telecommunications approved Trai's recommendations to allow service providers to share active infrastructure in February 2008. Since then, not much has happened on this front, unlike passive infrastructure sharing, which operators have already started undertaking.
Active infrastructure sharing can be extremely important for sustained telecom growth, as well as for better profit margins for operators.
"There are two reasons why active infrastructure is not being shared in India. Firstly, the technology required for this is not there, and is now being developed. It is expected to be rolled out shortly. Secondly, there are a lot of legal implications and there is no process to decide on the revenue sharing aspect," said Rajan S Mathews, director general, Cellular Operator's Association of India.
As per industry experts, sharing active infrastructure will help operators to lower tariff and reduce expenditure by over 50 per cent. Operators can share infrastructure depending on the availability of funds and the suitability of the service within the circle.
According to SC Khanna, secretary general, Association of Unified Service Providers of India, "Any kind of sharing, whether active or passive, is good for the industry. Due to such low tariffs and ARPUs, it has become important for operators to share infrastructure."
Some of the telcom experts say that there is still no mechanism in place for the commercial and business aspects of active infrastructure sharing, and that this is what is stopping it from gaining traction.
Sanjay Bhasin, president and chief executive officer, telecom services and solutions, Intarvo, says, "Since 3G will be rolled out shortly, nobody is going to do anything about active infrastructure sharing in the next six months. Moreover, commercial agreement mechanism on sharing is not very clear right now. No one knows what will happen when growth happens. The commercial aspects need to be worked out first."
Even at a time when active infrastructure sharing has not been taken up by any operator, some experts feel that sharing should not only be among private operators, but that public telcos should also share their assets.At an industry conference, Rajiv Bawa, executive vice president, corporate affairs, Uninor, said, "Operators need to reduce their costs even if the means is sharing of infrastructure. In fact, assets of the public sector units should be allowed for private use."
Countering the industry perspective about public service providers RN Padukone, principal general manager, corporate planning and monitoring of public sector unit BSNL, says, "Active infrastructure sharing is very important in India. There is no question for not sharing. Everyone wants to cut down on costs. This especially makes sense for BSNL, which is already making losses. It will help us to improve our bottom line. We have already got both active and passive infrastructure in plenty, and we can make use of it and earn profits."
Spectrum sharing in IndiaSpectrum sharing is expected to be a blessing for operators that haven't won 3G spectrum in the bidding process. It will also help the winners create a national footprint.Bharti Airtel and Reliance Communications (RCom) each won 3G airwaves in 13 of the 22 telecom zones in India; while other major operators - Aircel, Vodafone Essar, Idea Cellular and Tata Teleservices won 3G spectrum in 13, 9, 11 and 9 circles, respectively.
Way forwardThe next logical step in the direction to reduce expenditure incurred by operators would be sharing of spectrum or spectrum trading but currently, this is not allowed.
On its part TRAI has recommended spectrum sharing between operators on commercial terms. If these recommendations are accepted, it will help in optimum utilisation of spectrum in India. It will also be of immense help as the recently auctioned spectrum has been purchased at very high prices by telcos, and under-utilisation of spectrum will mean higher cost of 3G services.
Mahesh Uppal, director, Comfirst, says, "It is important that everyone should benefit from sharing. Infrastructure policy should allow sharing of every bit of physical infrastructure and operators should be allowed to do this voluntarily. It should not be mandatory. Enabling environment is what is needed."
According to Mathews, there are two types of spectrum sharing. One is where an operator shares its unutilised spectrum, and the other is where an operator enters into a legal agreement to rent out its existing spectrum on a dedicated basis.
Harish Kapoor, chief regulatory officer, Loop Mobile, says, "We are interested in spectrum sharing since spectrum is a scare resource. I don't think anything is stopping it. We are already looking at this option."
A Tata Teleservices spokesperson says, "Since no operator has pan India spectrum, they will have to look at partnership and what will be the terms of partnership. That is something which needs to be worked out, but partnership is inevitable."