New Demand Drivers Come Up

Digitization projects, both by the enterprises and the government, are opening up new business streams and offsetting the impact of Wi-Fi in the LAN

An increasing preference for Wi-Fi in the access; exponential rise in traffic on the backbone; and adoption of next-generation enterprise communication applications are among the key factors that are shaping the structured cabling market in India. Trends like bring your own device (BYOD) are prompting companies to augment their enterprise networks for improved security and better mobile device management, among other things. The structured cabling players are tasked with preparing future-proof cabling solutions that could meet the rising data, voice and video requirements in near future.

A growing demand-side preference for FTTX/FTTH is also aiding the industry, though enterprises are going slow on expansion considering uncertainties in certain markets.

New growth catalysts

Though Wi-Fi is gaining ground as the preferred access technology, other growth drivers are already on the horizon. A new level of convergence in the data center, fueled by a pick-up in the cloud-based ICT delivery models; as also a growing adoption of IP-based video surveillance systems, are only some of the new demand-side examples.

Take for instance, the government’s National Optical Fiber Network (BhartNet) initiative that aims at connecting 2.5 lakh village panchayats with high-speed broadband. The project

has direct and indirect business benefits for the cabling companies. The ongoing rollouts of 4G networks and the growing potential of in-building systems for improving signal quality inside buildings is also a positive. Enterprises, as well as operators, are getting serious about creating offloading mechanisms for mobile data in their respective goals of improving throughputs, enhancing productivity and saving costs.

Then, there is the commissioning of new data center projects and adding capacities to existing facilities, which anyways has been a regular revenue stream. The growing adoption of internet in general and of cloud-based applications particularly in the enterprises has spurred demand for bandwidth in data centers. Cabling solutions must be upgraded to ensure that they don’t become the new bottlenecks, particularly when it comes to delivering bandwidth-intensive applications.

The market, which is expected to grow steadily for the next few years, may broadly be classified into hardware, software and services. Hardware is further segmented into copper cables, racks and patches, fiber cables, patch panels and cross connects, among other components. Enterprises are looking for solutions that are cost-effective and ensure reliable transmission. This is also driving a shift from regular cabling to intelligent cabling systems, which is essentially about increasing the role of software in the overall cabling play.

Nevertheless, the hardware components comprise the biggest chunk of cabling costs, accounting for nearly 90 percent of the total. Within hardware, copper still accounts for over 60 percent, due to its long lifecycle, ease of installation, low maintenance costs, and hence low total cost of ownership. A key challenge for copper cabling lies in the volatility of copper prices, which is further complicated by currency fluctuations, since most of the OEMs have their head offices outside India and don’t necessarily manufacture or source everything locally.

On the other hand, fiber cables are seen as the fastest growing segment, given that the medium offers greater immunity to electromagnetic interference, facilitates error-free data transmission over long distances, reduces the weight, size and complexity of cable routing. However, a lack of support at the level of end-user devices means that fiber will continue to rule more on the backbone than in the access part of the network.

Apart from the backbone in the premises, the use of fiber is also growing in the data centers, to future-proof cabling infrastructure in the wake of nextgeneration WAN technologies like LTE and LTE-Advanced, which are capable of achieving theoretical download speeds of up to 450 Mbps. Operators are also working to deploy FTTH and FTTx technologies, principally because of an exponential rise in demand for voice, data and video streams, from both digital homes and digital enterprises.

The competitive landscape

Apart from CommScope, Schneider Electric and D-Link, which emerged as the top three structured cabling vendors, there are many other global and local vendors in the fray. These include Avaya, Molex, R&M, Sterlite, Levitan, Belden, Belkin, and Dax Networks, which are competing for a share of the revenue pie that grew modestly by a healthy 10 percent annually in the fiscal 2016. This leaves enough scope for consolidation.

In August 2015, CommScope completed the acquisition of TE Connectivity’s telecom, enterprise and wireless business, as part of a $3 billion acquisition that was announced in January 2015. The buyout brought TE’s structured cabling business into the CommScope fold. Also, shortly thereafter, CommScope also announced the acquisition of small-cell vendor Airvana for an undisclosed amount, and completed the process by October 2015. Interestingly, Airvana, which makes 3G and LTE small cells, uses Ethernet instead of fiber for the front-haul.

Besides expanding market presence through buyouts, CommScope is also expanding its own line of fiber products and services. Its Rapid Fiber system is aimed at reducing fiber cable congestion and offering easy installation. It also features the FDH4000, a sealed closure designed for use in underground locations and scalable up to 144 distribution and 12-72 feeder ports, which allows service providers to quickly increase capacity with minimal investment. In India, the company continues to cements its strength through two key enterprise solution lines, Systimax and Uniprise.

Another key player is D-Link, which has its major business coming from the copper solutions, but also increasingly offers new fiber-based solutions, particularly using the OM4 technology. It counts customers like NTPC and BARC in its credentials. The company also offers wall-mount enclosures designed for small networking, domestic application, audio-video, telecom and lab applications available from 4U to 15U variants with 400 mm, 4450mm, 500 mm, and 600 mm configurations.

With specific focus on governmentled programs like Digital india and Smart Cities, D-Link has introduced a complete range of solutions to address the requirements of smart cities. The company says its FFTH range of solutions offer a good fitment to the requirements.

Among other players, Avaya, which acquired Hyderabad-based KnoahSoft last year, increased its India workforce to over 2,000 including R&D. The company, which offers consultation services to telcos like Airtel and Reliance Communications, also forged a strategic partnership with Israel-based wireless broadband company Radwin to grow its focus on the Smart Cities segment. The two would jointly work towards offering Wi-Fi connectivity through a telecom service provider.