How smart city infrastructure is being implemented by towercos

Bimal Dayal is the Chief Executive Officer of Indus Towers. He joined Indus as the Chief Operating Officer in February 2010 and since then has led the company to achieve many milestones. In the past, Bimal has worked with Tata Telecom which gave him exposure of Business Enterprise across geographies. He then joined Ericsson in Sweden & Sri Lanka overseeing the entire range of functions, including planning, O&M, Rollout/ Deployment and Network Assurance. In Sri Lanka, as Country Manager and Managing Director of Ericsson Telecommunications Lanka (Pvt) Ltd, he successfully steered the company to become the country’s number one player in telecom infrastructure. Prior to his current assignment, Bimal was with Qualcomm India & South Asia as Country Manager and Vice President - Business Development.

The Future Network: Could you please explain both the Digital India vision and Indus Towers’ complementary vision for smart cities in India? In case our readers aren’t familiar, perhaps you could remind them which cities you are involved in projects in?

The Digital India story began in July 2015 with the initiative being announced by the Prime Minister. Digital India initiative has three large ambitions: firstly, it is about securing digital infrastructure for India, secondly, and very importantly, it is about delivering all the central and state government services through digital media, and thirdly it is about digital inclusion which is getting more people onto digital platforms with the help of internet access.

The announcement on Digital India has triggered many subsequent initiatives which are helping the cause. Digital payment applications have increased data consumption, and many emerging applications are a result of the success of the Digital India programme. It is reassuring that there is constant evolution and improvement in the pace of adoption, despite occasional concerns from the government about the success of the programme in some areas.

As far as we are concerned, the provision of infrastructure has accelerated in the last year. The smart city initiative is gaining traction, which is very exciting, and having taken a year to get going, we are now gaining ground. We have two very progressive smart city contracts on the table, of which phase one is already launched. Though the smart city drive is being taken up by multiple cities, until we have one or two robust rollouts, phase two will remain in the planning phase.

The Future Network: Are you able to tell us any more about these projects? 

There have been initial smart city rollouts in Gujarat and Delhi. So far there have been different approaches to smart city rollouts, with many cities looking at engineering, procurement and construction (EPC) model contracts, but these have not progressed very far. Then there are instances which use the public-private partnership (PPP) model in which the state governments seek to monetise the locations and revenue can be generated by towercos. Such business models have struck a chord with the municipalities because there is not enough money for EPC contracts. Under the PPP model the towerco can install the infrastructure, and the street furniture, they can also provide Wi-Fi, smart lighting, and in some cases, city surveillance too–the towercos are even running the surveillance centre at the backend if the city requires it.

The towercos get the locations, which is our core business, and this enables shared cost savings from smart lighting and revenue shares from billboards (which is now allowed). We are also able to lay fibre at discounted rates and for a limited period, we can rollout free Wi-Fi. These business models offer opportunities for future revenue sources and we are considering them all from the towerco perspective.

For us the model that is working more effectively is the PPP model between the city and the infrastructure provider. It is important to understand how the Digital India initiative is being handled by the local authorities. Most of the state governments do not have adequate funds to implement the smart city programme, so there is a capital gap which needs to be filled. This is most likely to come from a combination of different approaches and business models, and the debate is around which comes first, the digital infrastructure, or the use case for it. I think there is an opportunity for the state government to allow a third party to monetise the locations by providing the required digital infrastructure. This would begin the process of running the initiatives and provide a revenue generating opportunity, rather than attempting to recover capital from the third parties after it has been deployed by the government. When Indus Towers started to consider the smart city initiative, we always knew that a towerco is the best suited enterprise to work with the municipalities and solve the problem of how to begin the process.

The Future Network: Beyond mobile connectivity, which services are at the heart of the smart city proposition?

Not every smart city is the same, and every municipality has its own priorities, but if you go back to the original Digital India initiative, one of the primary objectives was to deliver the government services digitally. While we monetise our capex through the provision of 3G, 4G and 5G services, which our operator partners roll out on our towers, the government’s push is to provide Wi-Fi as well. So that it becomes an additional service that needs to be rolled out through the infrastructure. So, in addition to the traditional cellular services, we are now providing Wi-Fi, initially for free, but it will become chargeable in the future. Then comes smart lighting, which comprises of a multi-purpose pole and LED lights with sensors to control the luminosity, but in many cases, the lights being used are not yet LED, which needs to be changed. When you change the lights to LEDs, there is a significant cost and power saving, and in some contracts the model is such that the infraco invests the initial capex to change the lights and once those costs are recouped, the remaining saving is then shared between the government and the infraco.

Then you have the issue of surveillance cameras, which can be mounted on the infrastructure, but the cameras need to be connected to the fibre network. There are three aspects to be considered in surveillance, firstly, there is the camera itself, then there is the back end, and finally the connectivity element. The camera is the easy part, but the capex is not monetizable because it is solely being used by the security agencies, so the towercos have no role to play. In some cases, the state government has stipulated that the towercos need to run the surveillance aspect end-to-end, but more reasonably, and in most cases, the towercos provide just the camera.

In most cities, purchasing right of way (ROW) is expensive, and one of the new, creative approaches to revenue generation and service level for the towercos is to roll out fibre along the street infrastructure, and the ROW for this fibre is almost free of charge. The main opportunity in this model is to provide connected sites and consider future applications, for example, all the sites could be linked and connected to a common control centre which could then be connected to any operator. This would then become a captive network and could be altered by all operators from the common control centre. Some state governments are asking for fibre to be provided for surveillance on a trial basis and the same fibre is being used for the Wi-Fi roll out too. The next possibility is to connect the fibre to sensors, for example, parking sensors and environmental sensors - there are a wide variety of use cases which will offer another aspect to services which we are considering, but there is a very different business model regarding sensors, something which is beyond the scope of this discussion.

One of the most interesting use cases is the monetisation of digital billboards. Every pole has the capability to be a digital pole, and as a general trend, street advertising is changing from static to digital billboards with primetime and off-peak timeslots. It causes a positive disruption, and the kind of capex that is required to roll this out and monetise, is an opportunity for towercos. Ultimately in the future, we will need to understand the digital advertising monetisation business model because the laying of fibre will allow the control of the content on the billboards, some of which could be allocated to the municipalities for public messages or emergency announcements, which would fit with their agendas. As the value of a prime slot begins to be understood by the wider business community, the municipalities will also recognise the benefits and will be happy for the monetisation of this opportunity to be driven by the towercos. Ultimately, we need to understand this ecosystem, irrespective of whether we try and enter the market alone, or whether we look to partner with someone else. Advertising is all about location, and so is our business, so there is likely to be a positive conflict which will either result in collaboration or competition.

The Future Network: How do site topologies need to change for the smart city era? What are the implications for skillsets for towercos?

Infra roll out and maintenance until now and how it will be done in the future will differ greatly. When we talk about smart city street furniture, we are talking about 9 to 12 metre poles with minimum footprint and you can literally put them on the footpath. This new smart city topology will be based around aesthetics, safety, and how innovation can handle the loading of multiple tenants on these new, super light structures. If we give up the multi-tenancy model, then we give up our future revenues. Our focus should be more on how we can put safe, multi-tenant, aesthetic, remotely controlled equipment onto poles. We also need to figure out how to install these poles on streets and highways without disrupting the city and be aware that no one will allow us to park a vehicle to access the site for maintenance, so this must be done remotely.

The Future Network: You’ve touched on a critical issue from an equipment provision point of view - how would you characterise the status of multi-tenant solutions for street furniture deployments?

I believe that we will have to design the solutions ourselves. We could collaborate, but we don’t have enough attention from the people who look at form factors, so we will have to involve ourselves in the innovation in this area. We must impress upon the equipment manufacturers that they cannot design a pole and monopolise the outcome. Just because a towerco buys your poles, does not mean that they will buy your equipment as well.

The Future Network: When you roll out these poles and small cell / other equipment solutions, are you anticipating that you are going to own the antenna or just the passive equipment?

We intend to own the cables and antennas, but this is currently not allowed. We can really change the game if we are allowed to own this active equipment because not only this would allow us to change the way we work, we’d also be able to change the way the operators work, by taking a lot of the inefficient load on a single tower which most of the operators do, for example, there are multiple lengths of cable and multiple antennas which could be consolidated to bring the loading of the towers / poles down, and a good portion of the active equipment maintenance could then be taken on by us. There is tremendous potential in this and I firmly believe that the towercos will do much more in the future than they have ever done previously.

This would not only create a bigger role for the towercos but would also generate a new revenue source by being able to provide the active equipment to the operators. When we talk about small cells, this is a very different animal. In terms of how small cells are connected, they are mostly done in cities and along fibre routes, but they are still being tried out in India. The market is currently not big enough for a company like ours. So far, we don’t own anything which radiates nor, will we consider that business where there is competition with our operators nor will we look to change the existing business model. Our intention is to maintain a traditional infraco-like approach whereby we focus on site acquisition and hosting services, but the operator would retain ownership of the small cell.

The Future Network: Aside from the enhanced rights of way that you can achieve in partnership with local government, what has been your experience of partnering with municipal authorities to provide access to prospective sites, including street furniture? Do we still need to evangelise and promote the efficiencies that an IP1 can play in the deployment of infrastructure?

For the most part, it’s still a mixed a bag. I’d certainly say that the municipalities are familiar with the capabilities of the towercos, however, there are some that truly see the potential of partnership opportunities. I am confident that we are not far away from getting our message across to them. We welcome collaboration from local authorities and government bodies to build on the Union Government’s Vision of Digital India.

The Future Network: What have been the critical success factors of the successful municipality partnerships that you have experienced? What are the key value-adds you’ve been able to offer and achieve? 

If I were the Commissioner in one of the cities, I’d be asking “what are my ambitions for Digital India and other services and what revenue do I have?” I’d be asking how I can fill the capital gap between what I have and what I need to spend. I don’t see that there are any companies, other than towercos, that can come in and fulfil a portion of that ambition, at either no charge, or offering a revenue share which will enable the delivery of the necessary additional services. This is needed to kick start all the political ambitions from waste management to e-government, e-education, and e-health. If you start to increase Wi-Fi penetration in a city, you kickstart a very different economy: the digital economy.

The Future Network: Who are you partnering with to deliver this vision? Beyond the IP1 and municipal government, are there any other critical partners that we should talk about? 

As a towerco we don’t believe we have all the competencies to deliver the expectations of smart cities. There are companies that are running the Wi-Fi networks, for example router companies who can design the IP network infrastructure, there are system integrators, and the surveillance companies that we need to work with. Smart city initiatives must be fronted by one company, and back ended by multiple companies. If we front end it and foot the bill, we are then the spiders in a web of partners needed to deliver diverse solutions. This must be the model. No one company can be vertically aligned and do everything. Such projects and models can only materialise if multiple partners collaborate.

The Future Network: How do you see smart cities contributing to the future of cellular networks in India?

If you look at how networks were rolled out in India, we started with 2G macro coverage, then we peppered it with 3G, and now we are in the process of rolling out 4G. Most of these current 2G, 3G and 4G are co-located sites, and it was the first endeavour of the MNOs to have co-located sites because new site costs were prohibitively expensive. One of the lessons learned from the roll out of 3G in Europe was that standalone 3G sites don’t make commercial sense. Will that be the case in the future? I don’t think so. This is where the smart cities can create value in providing a street layer of the next generation technologies and provide the last layer of 4G technology, and even 5G when it comes. In the context of 5G, street furniture becomes one of the most valuable assets because it gets you close to the point of consumption, and latency is taken care of. When we look at where we are going with rollouts, it will be necessary to have street furniture carrying base stations for us to be able to deliver the use cases of the future.

The Future Network: Leaving the topic of smart cities for a moment, can you please share your thoughts with regards to the impact of the planned mergers among MNOs on the health and profitability of the Indian tower sector?

I can’t comment on other towercos, so I will restrict my answer to Indus experience.  I’m a strong believer that M&As for the right reasons bring the right results. In this case the right result from a towerco perspective - with data consumption going through the roof, the radiating points that will be needed by India, will be far higher than we’ve ever seen. Initially with Vodafone and Idea coming together there will be tenancy loss, but this is covered by exit charges which will mitigate revenue loss, and by the time we come out of this, we’ll see uptake from a newly competitive market. As far as I’m concerned, there could be a near term blip, but this really won’t affect anything. On a technology consumption side and on the operator requirement side I don’t see any problems.

The Future Network: Do you think we’ll see large, acquisitive towercos playing a role in consolidating the tower sector and acquiring smaller firms in the near future?

When this consolidation takes place, a lot of focus is placed onto towercos, particularly Indus. While there are a lot of revenue comparisons that happen at times like these, fundamentally, in good times we grow, and in bad times we grow faster, and people understand this and look at towercos favourably. The way the towercos are being run, and the models they use is very efficient. I think this is the first time that the true value of towercos is being understood and this will positively affect capital market valuations.

I don’t know what will happen, but the fact that there are people looking at consolidating and investing in this area, can only be good news.