Structured Cabling The Year of Drought?

While growth remained subdued at large, the worst seemed to be over for an industry that accommodated more players than it could feed

The Structured Cabling market in India has been facing a few challenges in the recent years. Enterprises have been going slow on their expansion and related investment plans on account of weak market sentiment that continued to prevail. The currency fluctuations in the past and depreciation of the rupee only perpetuated the sentiments, even though the long-term potential of the economy continued to be promising.

Also, an increased preference for Wi-Fi over LAN in select sectors, driven by cost optimization and mobility needs, impacted the scale of cabling installations.

Towards the end of year 2013, things started to improve in certain sectors though. For example, the regulatory environment became more conducive for telecom. Meanwhile, trends like Bring Your Own Device (BYOD) prompted CIOs to improve both wired and wireless networks in the premises. This helped the structured cabling market, which has a key enabling role for both the networks.

The growing preference for FTTX/ FTTH in pockets was another key driver for the structured cabling businesses in the country.

Overall, around 20 vendors were competing for a share of the market. These included TE Connectivity, D Link, Commscope, Molex, Schneider, R&M, Sterlite, Levitan, Belden, Belkin, Panduit and Dax Networks, among few others.

Key Technologies

Though Cat6a is considered as a major upgrade over the Cat6 standard and offers capabilities to support 10G speeds in the 100-meter configurations, the uptake was limited, partly due to RoI considerations and partly due to lack of awareness.

The deployment of more advanced standards like Cat7, which offer even more improved efficiency but for a cost, remained in early stages. On the other hand, majority of the datacenters are expected to use Cat 6a.

Cat 6a is the evolution of UTP cabling to support 10G needs over longer lengths when compared to Cat 6. However, experts see no major advantages between Cat 6a and Cat7, which also has its own set of installation related challenges and physical specifications that have led to its deployment being limited to niches. Customers are more likely to move directly to Cat 8 later instead of testing the potential of Cat 7.

Major Players

TE Connectivity invested an estimated Rs 300 crore to build its ninth manufacturing facility in India to tap local market and contribute to global exports. This new facility is being brought up near the Bangalore International Airport and it expected to be operational in 2014. At present, TE has over eight manufacturing facilities in India – five in Bengaluru, two in Pune and one in Kochi.

At the new plant in Bangalore, TE had said it would be designing and manufacturing next-generation connectivity solutions. These solutions would cater to needs of various industry verticals, with focus on automotive, aerospace, and defense.

TE Connectivity had, globally, acquired Deutsch last year, which is a provider of connectivity solutions for harsh environment applications. TE had also acquired ADC in 2010, which had strengthened its product portfolio.

Commscope has been consistently exploring global markets to grow its revenues. In India, the company has some key client in the IT/ITeS, healthcare and hospitality sectors. It is offering its solution under two enterprise brands—Systimax and Uniprise. In India, the company is expecting a significant uptake to meet the needs for higher speeds.

Another major player D-Link, which has its major business coming from the copper solutions, has also launched new fiber-based solutions like OM4. Some of its major customers working with the company included NTPC, BARC, Western Railways, Jaipur National University, Kiran Jewels, Persistent Systems, Goa Airport, Reliance Infrastructure and Symbiosis Institute, among others.

D-Link is offered wall mount enclosures designed for small networking, domestic application, audio-video, telecom, and lab applications, and are available from 4U to 15U variants with 400 mm, 4450 mm, 500 mm, and 600 mm configurations.

Another major, R&M, was understood to have planned large projects in tier-2 and tier-3 cities.

The industry saw a continued gradual shift from deploying regular cabling to intelligent cabling systems, as it gives complete visibility of the physical layer of the network to the enterprises.

Challenges

While the market is expected to perform better in 2014, the industry is also battling with some challenges that require immediate attention.

The volatility in copper prices, increased pricing pressures due to competition, and the presence of too many players are the key challenges that the industry is facing today. The industry is also finding it tough to meet fixed contract obligations due to currency fluctuations. The challenge is further compounded by the fact that a majority of the OEMs have their offices outside India and hence rise in import costs results in a vast increase in the cost of material, thus leading to higher cost of ownership. However, the situation on the currency front has stabilized in the recent months. Another dilemma being pointed out by experts is the lack of clarity on the role of cop

per in times to come. While copper will continue to be a preferred choice for some time as it offers better RoI but when data centers migrate to beyond 40G, fiber will take center stage.

The requirements set by customers are becoming more stringent. In particular, vendors are expected to align better to meet the RoI requirements.

Outlook

Even though copper cabling has a dominant role in Indian Structured Cabling market, the long-term future is expected to be driven by fiber. In the fiber market segment, vendors would be majorly focusing on the last mile fiber to homes. This is principally because of a growing demand from the digital homes at residential complexes where a single service provider is expected to meet the demands of voice, data and video.

In data centers, fiber is considered as an appropriate medium for supporting mission-critical applications. While installing optical fiber cables might be on an expensive side in the beginning, as compared to traditional solutions, it has its own future benefits, especially given the rapidly rising enterprise mobility needs and the consequent benefits of having fiber in the backbone. Fiber is also beneficial since it can be laid out for longer distances and is immune to electromagnetic interferences. This makes it useful in campus installations as well. The 4G rollouts are also likely to drive FTTH and FTTP adoptions, given the need to support Wi-Fi offloading in the enterprises. Fiber would be a preferred choice since it is better suited to meet the exponential

data growth associated with wireless broadband networks like 3G and 4G.

The next 24 months are likely to see the flow of new investments, largely from tier2 and tier3 cities. Most of the demand is expected to be generated by increased government spending, real estate expansions and infrastructure developments. The industry is also likely to see another round of consolidation as the current market does not offer enough growth potential for more than eight to ten players.

Overall, IT, telecom, IT-ITeS and Government are expected to be the major contributors to growth during the next 12 months.

The underlying IT of the enterprises are also changing and so are the IT delivery models. There has been a growing focus on concepts like cloud computing, IP-based networks, virtualization and software defined networking. All this is driving the need to have more intelligent and responsive network infrastructures and structured cabling solutions would be expected to keep pace.

The Government’s National Optical Fiber Network (NOFN) initiative, for which Bharat Broadband Nigam Limited (BBNL), has been assigned to connect 2,50,000 village panchayats with highspeed broadband could lead a range of direct as well as indirect businesses for the structured cabling players. The upcoming rollouts of new 4G networks will also contribute to growth, as will the commissioning of new data center projects.

Telcos are expected to go aggressive with their plans to launch 4G LTE services around 2015. Greenfield majors like Reliance Jio Infocomm, which also has a pan-India license for 4G, plans to use fiber-to-the-home (FTTH) as well for providing rich indoor connectivity in 40 million homes.

As floodgates of data are expected to open on various fronts, new set of challenges and opportunities are bound to emerge. 2014 may be the year for the structured cabling industry to strategize for the growth ahead.