The importance of backbone

The importance of backboneRohan Samarajiva and Harsha Vardhana Singh (at time

of data collection: Secretary, TRAI; since September 2005: Deputy Director General, WTO

Usable knowledge for growing the sector: ICT policy and regulation research from LIRNEasia, New Delhi, 6 March 2006

www.lirneasia.netwww.lirneasia.net

Importance of backbone Original decisions re open access based

on recognition of the significance of backbone

Backbone networks = essential facilities Essential facilities, as commonly defined

Controlled by one/more operators Competitors must have access to them Not feasible to substitute

economically/technically


Limitations of the claim Backbone network does not have to be

owned by one entity Though this may make sense in micro or

city states

It is especially important in early stages of market opening when Entrants are much smaller than

incumbent


India, demand Massive growth, not only across the country,

but also in circles Only 4 out of 23 circles have less than a

million fixed+mobile customers But unless infrastructure sharing is the

practice (commercial arrangements or regulatory mandates), total subscribers not relevant However, shows the significant effects that can

be achieved if sharing occurs


India, demand Decisions are taken by individual operators

based on their current/projected demand In 18 circles, BSNL and MTNL (govt-owned

incumbents) have >1 million fixed customers in each circle; also in mobile Incumbents have incentives to build backbone

In contrast, fixed entrants have >0.5 m only in 8 (1 m in 3); and mobile entrants have >0.5 m only in 9 (1 m in 3)


Fixed (unified) entrants with > 0.5 million customers per circle (8/23)

RelianceInfocom(‘000)

Bharati(‘000)

TataTelesvcsLtd (‘000)

Delhi 1,119 1,554 195

Mumbai 926 647 147

Kolkata 449 501

ServiceCommencedafter Dec ‘04

Maharashtra 729 597 55

Gujarat 665 410 61

Andhra Pradesh 800 871 165

Karnataka 614 1,137 85

Punjab 491 1,251

ServiceCommencedafter Dec ‘04


Mobile operators with > 0.5 million customers per circle (10/23)

BSNL MTNL Hutch Idea RelianceTelecom

Delhi 273 1,407 603

Kolkata 239 617

Maharashtra 690 1,213

Gujarat 521 1,152 583


Karnataka 640 501

Tamil Nadu 765

Kerala 670 545

U. P. (W) 548 561

U.P. (E) 716 744


Supply, India Data reported in terms of route

kilometers, not capacity (in Gbps) Not all fiber may be lit Route km is a reasonable proxy for

capacity at this level of abstraction Dark fiber can be lit easily if fiber has been

laid Capacity can be upgraded easily


Backbone supply by operators (route

km; March 2005, incl. leased capacity)

Fiber Microwave

BSNL 462,527 66,932

Reliance 58,607 644

Bharati 28,210

Tata 27,777

Other private 18,200 23


Backbone supply by infrastructure operators (route km, Q1 2005)

RailTel 26,668

Power Grid 15,204

Gail India 8,000

Others 600 +

Total 50,472 +


Backbone status of incumbent Exchanges Connected by

fiberConnected by

digital microwave

Chennai 210 210 0

Kolkata 518 518 0

Maharashtra 4941 4687 226

Gujarat 3289 3289 0


Karnataka 2708 2647 61

Tamil Nadu 2147 2043 62

Kerala 1209 1202 0

Punjab 1536 1533 0

Haryana 1115 1109 4

U. P. (W) 955 891 0

U.P. (E)# 2760 2385 292

Rajasthan 2341 2254 31


Backbone status of incumbent (2)

Exchanges Connected by fiber

Connected by digital

microwave

Madhya Pradesh&Chattisgarh

3437 3085 19

West Bengal A&N1416 1367 35

Himachal Pradesh934 714 132

Bihar &Jharkhand1591 1534 3

Orissa 1136 1129 4

Assam 594 475 115

North East 485 234 79

Jammu &Kashmir

363 257 55

Total 37,026 34,528 1,356


Connecting supply and demand Estimated that 1 route km will cost USD 4500-

5500 (INR 200,000-250,000) TRAI calculation for India, based on consultation

Long-distance ARPUs in India = USD 14/yr (INR 600) Based on TRAI data on incoming & outgoing LD

minutes and current prices Possibly better if ARPUs estimated for circles,

not India as a whole Conclusion: revenues from 140 subscribers

needed to make fiber viable


Viability analysis for Reliance (viable if ratio <1; not viable if ratio >1)License Area Subscribers Notional Subs if

140 subs per RKm.Notional subs/subs

Delhi 1,285,388 228,900 0.18

Mumbai 1,068,606 262,640 0.25

Chennai 479,020 182,140 0.38

Kolkata 535,193 102,060 0.19

Maharashtra 818,944 1,253,280 1.53

Gujarat 771,463 887,040 1.15

Andhra Pradesh 857,238 1,335,460 1.56

Karnataka 663,433 825,300 1.24

Tamil Nadu 515,095 894,460 1.74

Kerala 532,565 545,720 1.02

Punjab 582,277 498,120 0.86

Haryana 225,063 360,920 1.6


Viability analysis for Reliance (viable if ratio <1; not viable if ratio >1)License Area Subs Notional Subs if

140 subs/RKm.Notional subs/subs

U. P. (W) 347,786 567,560 1.63

U.P. (E) 469,139 512,960 1.09

Rajasthan 361,730 584,780 1.62

Madhya Pradesh 342,986 682,220 2.71

West Bengal and A&N 114,634 407,820 3.56

Himachal Pradesh 3,721 14,420 3.88

Bihar & Jharkhand 202,132 677,320 3.35

Orissa 122,795 263,620 2.15

Total 10,299,208 11,334,680 1.1


Analysis India as a whole is unviable for Reliance

according to the analysis However, 10% growth/yr (very realistic)

will move India as a whole into viable range for Reliance Various methods of estimating growth

Fiber has been built in areas that are “unviable” Because traffic comes from “viable”

areas


Analysis USO funds (supply), government programs

to increase broadband (demand) can change the viability frontier

Interconnection and access revenues Better access regime can shift frontier

Infrastructure sharing can change the frontier Likely to be highly significant in small

markets

The importance of backbone

Documents

Transcript of The importance of backbone