The coming together of competitors’ isn’t always bad for customers. The announcement of a comprehensive telecom infrastructure sharing agreement by Bharti Airtel and Mukesh Ambani’s Reliance Jio Infocomm is a win-win for them as well as consumers. The two groups, not known to enjoy the most amicable of business relations, have signed a deal to use each other’s cellular base station towers, optic fibre cable networks and other infrastructure. For Reliance Jio, access to Bharti’s nationwide network of nearly 1.5 lakh towers (including that of its joint venture, Indus Towers) and over 1.75 lakh route-km of optic fibre will expedite the launch of its high-speed internet and telecom services. Faster rollout apart, sharing saves on the cost of building the entire infrastructure oneself. For Bharti, the main benefit is the extra income earned from leasing out its telecom assets.
Consumer interest is well served if relying on existing infrastructure reduces the lead time for Reliance Jio to start offering services. Also, the cost savings from not having to lay fresh cables or setting up mobile towers can be passed on to consumers. Finally, a lot of energy of telecom operators is now consumed in negotiating rights-of-way with public authorities or roof rents with landlords, which detracts from spending more time to attend to the need of consumers. This would be possible if all shareable telecom infrastructure were owned by a separate company or companies. Pooling of resources by operators for infrastructure is good, but only the second best solution. As the experience with Indus Towers shows, such sharing of assets doesn’t discourage competition or affect consumer interest. This company, the world’s largest mobile tower owner with 1.12 lakh sites, is jointly owned by Bharti, Vodafone and Idea Cellular. All three compete strongly in the marketplace.
Given the high capex costs, the sharing of towers and other infrastructure has been very much a part of the telecom business model in the U.S. and Europe for many years now. The agreement between Bharti Airtel and Reliance Jio – similar to that inked by the latter with Anil Ambani’s Reliance Communications – underlines the importance of saving costs in a highly capital intensive sector. But it also has lessons for the Government. The companies with real shareable infrastructure today are Bharat Sanchar Nigam Ltd (BSNL), RailTel and Power Grid Corporation, which together have almost 7 lakh route-km of fibre on the ground – much more than what any private operator has or intends to lay. The time has come for the Government to think in terms of getting its own companies to share infrastructure, with private operators as well. This will not only avoid the waste of parallel networks, but also ensure that the likes of BSNL have a bigger and more useful role than competing with private players in the delivery of services.