Network Services: Exponential Data Boom for Tata Communications

Tata Communications’ Network Services include dedicated point-to-point connectivity (IPL or NPL), IP-based internet connectivity and multi-location connectivity through Virtual Private Networks (VPN). The network service business derived significant benefits from exponential growth in internet traffic. However, due to significant fall in delivery price, the overall network business managed to report mere 12% CAGR over FY10-14. VPN business (less sensitive to pricing pressure) reaped the benefit of higher penetration of remote infrastructure management and cloud computing and reported 30% CAGR during FY10-14. Its contribution to overall network services jumped to 38% in 9mFY15 against 27% in FY12.

According to CISCO estimates, global IP traffic surged more than 5x between CY08 and CY13 and over the next 5 years it will continue to post exponential growth, both in fixed and mobile segments. By CY18, global IP traffic is estimated at 132EB per month against 51EB per month consumed in CY13. This strong growth will be driven by:

  • Increasing availability of new services with high bandwidth requirements, including IPTV, music & movies online, application & content download services and more video & audio content on social networking sites
  • Increasing acceptance of cloud computing for business services delivery.
  • Higher penetration of multimedia devices such as smart phones and internet connected TVs & gaming consoles.
  • Changing usage pattern that encourages users to spend a greater portion of their day using the internet (Always on, Always Reachable) to access richer content.

Future of Internet – Bandwidth Hungry Apps
With higher penetration, more bandwidth hungry internet usage will gain popularity among users. In the residential internet usage, digital TV and online video will be the 2 most highly penetrated services by CY18 at 86% and 78%, respectively. Fastest growth will come from online video (10% CAGR). Online music and video are both driven by cloud-based personal storage and sharing sites. Among mobile users, mobile video, social networking and online payment will be the 3 most penetrated services. All these require high bandwidth and higher data security. Among business users, video conferencing will be the most popular service on internet, which not only requires high bandwidth, but managed services will be the preferable route.