In FY 2003–04, the Indian national long distance (NLD) market was estimated to be about Rs 5,141 crore vis-à-vis the Rs 5,988 crore of FY 2002–03. In other words, the NLD market dropped by around Rs 1,000 crore (–14 percent) in the last fiscal. Though the number of minutes have increased there has been a drop in total NLD revenues due to aggressive competition between all the integrated operators—BSNL, Bharti, Reliance Infocomm, and VSNL.

The drop in STD prices has not been able to evoke a complementary response from end customers who are not making that much more calls so as to compensate the NLD operators for the reduced tariff rates. This is the primary reason for the negative growth in the NLD market. But the move towards B and C class circles and new geographies have resulted in a good part of the growth coming from new areas, particularly in terms of leased capacities. A lot of deployment is happening in B and C Class cities and IP-I and IP-II players can be expected to play a major role.

The year started with the launch of Reliance Infocomm´s much awaited WLL (M) services in all service areas, using its fixed services licenses. The company has now also launched fixed services in the country and it is expected that a good amount of revenue will be generated in FY 2004–05 from NLD services. BSNL still commands the major portion of NLD revenues—to the tune of 91 percent—followed by Bharti Infotel and VSNL. Bharti Infotel is in a more comfortable position in comparison to the other private sector competitors—VSNL and Reliance Infocomm. VSNL is presently building its backbone. Reliance Infocomm will take some more time to stabilize its network. Moreover, Reliance is still in the expansion mode.

In terms of ‘public vs private players´, the market is heavily weighed towards public operators as they contribute around 92 percent of the revenues whereas private operators contribute only around eight percent. In real figures, operators like BSNL, PGCIL, Railtel, and Gailtel contributed around Rs 4,572 crore in the FY 2003–04.

The NLD Players
In NLD space, BSNL is the undisputed leader with a long distance transmission backbone of around 437,475 Rkm as on 31 March 2004. In the last fiscal, the company has added around 35,392 Rkm as against a target of around 35,000 Rkm. BSNL also has around 167,583 Rkm of microwave (including digital plus UHF). In the last fiscal, the company has added 3,270 Rkm of digital microwave. BSNL´s superiority comes from the fact that the company has added more Rkm on its long distance network in the last fiscal than the combined OFC deployment by all the private operators.

V&D estimates CyberMedia Research

BSNL contributes a sizable portion of the NLD market. VOICE&DATA estimates that BSNL has a share of 88 percent (Rs 4,510 crore) of the total NLD pie, that is, Rs 5,141 crore.

Reliance Infocomm started its operations in the last fiscal and had a backbone network of 60,000 Rkm as of 31 March 2004. The company is moving ahead at a fast pace. This network directly covers around 673 towns and 1,100 towns in total (including satellite towns). In the second phase of expansion, the company is looking at direct coverage of another 3,500 towns and cities and 6,000 towns (including satellite towns) by the end of this year or by the first quarter of the next year. To meet this requirement, the company is planning for an OFC network of around 90,000 Rkm.

The Reliance network is divided into express rings for main traffic, collector rings for every town, and sub-tended rings for smaller towns. There are around 12 express rings, and the network has more than 84 rings in total. The network has two types of protections—ring-level protection and mesh-level protection. All express rings have DWDM equipments, while collector rings and sub-tended rings have SDH. In collector rings, Reliance has opted for STM-16 while in sub-tended rings, it has opted for STM-4.

In order to provide quality of service (QoS), Reliance has gone for an integrated network management for troubleshooting and fault management.

On the other hand, Bharti Infotel has around 23,000 Rkm of OFC network covering 200 cities. Bharti recently tied-up with VSNL for infrastructure sharing. In order to cater to VSNL´s needs, Bharti Infotel is planning to add another 2,000 Rkm in FY 2004–05. On the NLD front, the company has 14 NLD switches and has around 200 interconnect points. In the last fiscal, the total network on DWDM was about 4,000 Rkm. Plans are now on to increase it to 15,000 Rkm in this fiscal.

V&D estimates CyberMedia Research

In terms of revenues, Bharti Infotel contributed around Rs 341 crore in FY 2003–04. This means a negative growth of around 21 percent.

Meanwhile, VSNL has been a late entrant in the NLD market and started its NLD operations only in September 2002. In FY 2002–03, the company established a network of around 3,500 Rkm covering Delhi, Mumbai, Hyderabad, and Bangalore. The company has also opted for additional bandwidth from GAIL and BSNL to ensure QoS. In the last fiscal, the company added around 2,500 km of DWDM network covering Amritsar to Delhi and Mysore to Ernakulam. In order to expand at a faster pace, the company has leveraged on Bharti´s infrastructure. Recently, the company signed an infrastructure-sharing deal with Bharti Infotel worth Rs 500 crore for 15 years, which comes to around Rs 33.33 crore per year. This is a first of its kind deal in India where there is both co-operation and competition between two leading integrated private players.

The national long distance will further enhance VSNL´s leadership position in the corporate business segment and Internet services. VSNL´s wholesale business segment, primarily catering to voice solutions, will also benefit from the augmented NLD backbone. The domestic backbone will offer cost optimization for all the three segments—wholesale, corporate, and retail. With the augmented capacity, VSNL will possess a robust and highly-redundant nationwide backbone of over 25,000 Rkm thereby helping VSNL to cover over 200 long distance charging areas (LDCAs). Recently, the company launched a new innovative solution called bandwidth on demand, designed to meet the short-term urgent additional bandwidth requirement for Internet leased-line customers.

The Utility Players
On the utility front all the service providers have opted for IP-II license. VOICE&DATA estimates that IP-II players contribute around Rs 65 crore. Companies under the public utility head are: Gailtel, a division of GAIL; Indian Railways, which is represented through Railtel that has been formed as a separate company; and PGCIL´s telecom division. In terms of revenue, Railtel leads the table with Rs 26 crore revenues followed by Gailtel and PGCIL.

Infrastructure by large integrated players will affect revenues of IP-II players but with all the three utility companies focusing on different geographies things should stabilize after a year or so. IP-II players are not dependent only on the carrier market but are also looking at the enterprise market through their IP-VPN and MPLS based networks. These services will help in nullifying infrastructure sharing and moving to a new market, which is very big and will accommodate integrated players as well as IP-II and ISP players.

V&D estimates CyberMedia Research

For all the utility companies except Railtel, telecom contributes a very small portion of revenues and its primary raison d´être is for the companies´ own operations. As network sizes increase, companies will start focusing more on how to get additional revenue from their extra capacities. For example, Gailtel contributes only 0.2 percent to GAIL and the telecom division of PGCIL contributes only 0.3 percent to PGCIL. Once the revenues build up, PGCIL and Gailtel can be divested from their parent companies. But that will take some more time to happen.

Railtel has right of way (RoW) on the 62,800 km from Indian Railways. By the end of the last fiscal, the company had a total OFC network of around 24,000 Rkm of which 5,000 Rkm was deployed in FY 2003–04. So far, Railtel has gone for STM-1 and STM-4 capacities. Plans are on to deploy STM-16 for around 24,000 Rkm in FY 2004–05. In the last fiscal, investment was to the tune of Rs 26 crore but this year plans are for investing around Rs 100 crore, of which majority will go for creating an IP backbone and upgrading the network for STM-16. Railtel is also providing collocation space at 600 locations.

Being the top IP-II player, the company has done pretty well. Bharti, Tata Teleservices, and Hutch contribute a sizable portion of Railtel´s revenues.

The public sector central transmission utility PGCIL owns, operates, and maintains one of the largest transmission (40,000 ckt km) networks in the world and is planning for an OFC network of around 20,000 Rkm. In the last fiscal, around 13,000 Rkm of OFC was operational. It is expected that the company will make the rest OFC operational in FY 2004–05. Most of PGCIL´s OFC network is laid overhead, on the extra high voltage transmission lines and therefore it offers distinct advantages over underground OFC.

V&D estimates CyberMedia Research

Gailtel was set up primarily to drive Gail´s own data and telecom business to its own backbone, laid through its gas pipelines across the country. The company has focused more on northern and western parts of India and had a network of around 8,200 Rkm as of 31 March 2004. In the last fiscal, the company added around 3,700 Rkm. The network covers states like Madhya Pradesh, Andhra Pradesh, Gujarat, UP, Haryana, Delhi, Maharashtra, and Gujarat. GAIL´s OFC network covers cities like Chandigarh, Vishakapatnam, Delhi, Mumbai, Jaipur, Ahmedabad, Bhopal, and Lucknow. Plans are to lay OFC from Bangalore to Chennai and additional routes in Maharashtra and Andhra Pradesh. In the last fiscal, Gailtel contributed a small revenue of Rs 20 crore, which was around 0.2 percent of GAIL´s overall revenue. Due to its high network availability of around 99.97 percent, the company has a good base of customers. Some of its larger customers include VSNL, Tata Teleservices, Escotel, Hutch, and Data Access. In terms of revenue, domestic bandwidth leasing contributes around 95 percent of its total revenue and IP-VPN and Internet leased line contribute around five percent. In FY 2002–03, Gailtel launched its Internet leased lines.

In order to give a big push to infrastructure, the government has recently reduced revenue share from 15 percent of adjusted gross revenue (AGR) to six percent of AGR. This measure will help in accelerating the growth of bandwidth at national level and will enable the category-II infrastructure providers to effectively utilize their existing infrastructure and reduce prices for their services.

Trends
In FY 2003–04, the industry witnessed a drop of about 20 percent in domestic leased line circuits. It is expected that with deployment in new geographies (both in terms of new circles and new cities), there will be a further drop in prices in FY 2004–05. The drop in prices has also resulted in increase of bandwidth requirement for both carriers as well as enterprises. In the last fiscal, carriers opted for 2 Mbps over STM-1 whereas enterprises opted for domestic bandwidth in the range of 2 Mbps to 10 Mbps.

All the operators are presently in the process or are looking for expansion on the MPLS front. The operators are looking at large domestic networks and are also tying up with foreign carriers for international MPLS connectivity. This provides a perfect mix of providing MPLS both in the domestic as well as international circuits.

With telecom industry moving on the broadband (in terms of triple play) front, things are looking rosy for NLD providers. Many service providers are augmenting their capacity and moving from an SDH backbone to DWDM backbone and some operators are also looking at Metro Ethernet in selected cities to meet the increase in traffic.

Pravin Prashant