Introduction
The rise of the internet and low cost global communication have revolutionized businesses and societies across the world. From increasing agricultural efficiency to making buyers and sellers more informed about market situations- there is much to gain from increased connectivity. Recently, the areas in which internet access has grown the most have been in emerging markets, China and India in particular. The focus of this article is to analyze the feasibility of investment in expanding internet infrastructure in India in the near future, mainly through the use of WiFi towers.
The Big Perspective
As of right now, the Indian government is investing heavily into internet infrastructure, particularly into expanding access into rural areas. In 2018-2019 government aims to bring internet access to 250 000 rural Indian communities by March 2019, at a total expected cost of RS 3.7*1010 (about GBP 407 million) (The Times of India, “Government plans Wi-Fi for all panchayats by March 2019 for Rs 3700 crore”, 2017). The Indian government has undertaken similar projects before, and it is likely that there will be continued investment into internet infrastructure till most Indians have access to the internet. Decreasing capital costs for installation and upkeep of internet centres have also to a higher degree allowed private businesses to increase their network availability throughout the urban areas of India. The great American internet giants: Facebook, Google and SpaceX also have plans on expanding internet access throughout India, implying that it is an attractive market. Its relative attractiveness is further supported by the consistently above 10 % yearly increase in consumers, adding 50 million people between 2016 and 2017 alone (Surhabi Agarwal, “Internet users in India expected to reach 500 million by June: IAMAI”, 2018). The general outlook of the market seems to be good, but does it really make for a good investment opportunity if you look closer at the costs and benefits of setting up the operation? To answer this question, it seems reasonable to divide it into two horizons. Firstly the costs and profits made using current technology and business practices, and secondly how those variables will change in the coming years.
Internet Today
One of the private telecom infrastructure providers in India is Vihaan Networks Ltd. Having recently acquired a 180 million pound contract from the government to provide connectivity to 4000 villages, they make up an interesting example of how the industry works in practise (Vihaan Networks Ltd, “Vihaan Networks Limited bagged North East connectivity project of BSNL”, 2017). Using their existing technology, they claim that they can erect and support a WiFi tower with a range of 500 meters at a cost (selling price) of around 880 pounds without any operational costs (Leslie D’Monte, “Evolving Internet in India”, 2017). This as electricity is generated using solar power. The connection however is quite slow, using mainly the 2.5G standard (in difference to the 4G standard found in most developed countries), but the company argues that it is a good step in the right direction that allows for basic internet usage which previously would have been impossible. The median population of a village in India tends to be roughly 1500-2500 with a radius (size) of around 200 meters (Office of the Registrar General & Census Commissioner, India, “Area and population”, 2011), . Assuming that a tower can fully cover at least 2 villages each, the cost per capita of installing a tower is 0.176 to 0.293 pounds over its lifetime. A normal household income for an Indian household is roughly 60-70 pounds, so this represents a small fraction of their monthly income (Statista, “Distribution of average monthly income in households across rural India in 2015 (in Indian rupees)”, 2015). Or in other words, the company has to earn at least 0.3 pounds from everyone in the villages to finance the construction of of a tower. There also has to be at least two long distance wifi towers, sending and receiving internet signals from the bigger cities to the villages which is then distributed to the smaller regional WiFi towers. This adds approximately 1800 more pounds, given that long distance towers cost roughly the same as the short distance ones. If there are more than one small tower using the masts however, the costs become smaller. Either way the capital costs per head remain quite low.
Internet Tomorrow
In the near future, it however seems likely the costs are going to be further lowered by the development of new cheaper technology. Intel for example has developed a long distance WiFi mast that can transmit WiFi signals in a radius of 60 ,miles, which is triple what many masts are capable today and with a much higher download speed of around 6.5 Mb/s . They are also cheaper to manufacture and are to be sold for under 500 US dollars a piece, which is about 390 pounds (Kate Green, “Long-Distance Wi-Fi”, 2018). The lower prices will make it profitable to reach even more rural areas, which will further increase countrywide connectivity in India. The rapidly increasing population and a strong internet service industry will make sure that the demand for internet infrastructure stays strong in many years to come.
Conclusion
The Indian infrastructure market is expanding rapidly as a result of both public and private investment. Relatively low installation prices and upkeep costs combined with the prospect of even lower costs should make the market attractive for EM-investors. Most of the current expansion has been taking place in the urban areas of India, but with new generation technology, it might prove possible for a new wave of investors to connect rural India to the reset of the world.
References:
Steve Economides, “Head of Lettuce – What is the Best Price, Weight & Nutrition”, Moneysmart Family, https://moneysmartfamily.com/blog/head-lettuce/ (22-10-18)
(Leslie D’Monte, “Evolving Internet in India”, Live Mint, https://www.livemint.com/Opinion/gzWbpGZVD83W3iq3uOLD7O/Evolving-Internet-in-India.html (29-10-18)
(Financial Times, “India internet: Laying the foundations”, Financial times)
https://www.ft.com/content/d9456e08-ba23-11e5-bf7e-8a339b6f2164 (29-10-18)
Surabhi Agarwal, “Internet users in India expected to reach 500 million by June: IAMAI”, Economic Times,
https://economictimes.indiatimes.com/tech/internet/internet-users-in-india-expected-to-reach-500-million-by-june-iamai/articleshow/63000198.cms (29-10-18)
Kate Green, “Long-Distance Wi-Fi”, Technology Review,
https://www.technologyreview.com/s/409760/long-distance-wi-fi/ (29-10-18)
The Times of India, “Government plans Wi-Fi for all panchayats by March 2019 for Rs 3700 crore”, The Times of India
https://timesofindia.indiatimes.com/business/india-business/government-plans-wifi-for-all-panchayats-by-march-2019-for-rs-3700-crore/articleshow/60410422.cms (29-10-18)
Vihaan Networks Ltd, “Vihaan Networks Limited bagged North East connectivity project of BSNL”, Vihaan Networks Ltd,
http://www.vnl.in/pressrelease/vihaan-networks-limited-bagged-north-east-connectivity-project-of-bsnl (29-10-18)
Office of the Registrar General & Census Commissioner, India, “Area and populatio”, Office of the Registrar General & Census Commissioner, India, http://censusindia.gov.in/Census_And_You/area_and_population.aspx (29-10-18)
Statista, “Distribution of average monthly income in households across rural India in 2015 (in Indian rupees)”, Statista
https://www.statista.com/statistics/653918/average-monthly-rural-household-income-india/ (29-10-18)
