CARRIER SWITCHES & WIRELESS EQUIPMENT: All About Pure Growth

For last few years, one thing V&D 100 had to deal with was whether IP was
posing any threat to TDM, when it came to carrier switching. That debate is
still alive and will hopefully be kicking for a long time to come. Yet, what has
stolen the limelight from IP is the spectacular growth in wireless. Wireless on
IP still being a nascent idea, yet to be deployed on a large scale, TDM's
future does not seem to be under any threat in the immediate future.

However, that is a big problem for a market study like ours. While all the
major switching vendors in India-Alcatel, Siemens, Lucent, and Ericsson-have
their wireless solutions, GSM or CDMA, the purchases by operators are always
bundled in wireless and hence, finding out the exact value of switching
component is not just difficult but irrelevant as well.

The wireline switching deployment coming largely from BSNL, MTNL, and Bharti-with
some addition by Tata Teleservices (Maharashtra), the erstwhile Hughes Telecom-remained
a small fraction of the total, with wireless deployments taking the lion's
share.

BSNL deployed close to seven lakh lines, a sharp drop from 41.4 lakh lines
added in the previous year (FY 2002—03) and the more than 67 lakh lines added
in FY 2001—02. On the TAX front also, the addition was small. However, BSNL
placed orders for close to 6.85 lakh local lines after a gap of more than a
year.

Bharti added more than four lakh local lines. It also added 60,000 NLD and
20,000 ILD lines.

The per line rate of local lines continued to drop, with the figure touching
Rs 2100—2200 mark, a drop from Rs 2400—2500 a year-and-half back. There was
hardly any difference between the procurement rates of Bharti and BSNL. The NLD
and ILD (TAX) rates were roughly about Rs 2800 per line, with ILD per line rate
touching Rs 5,500 with echo cancellation equipment and the like.

All of these were standalone purchases.

While for wireline, BSNL and MTNL continued to buy switching on a standalone
basis, for GSM and CDMA they followed the private operators' strategies and
went for bundled solutions.

Bharti for its fixed-line network followed a BSNL-like procurement policy and
bought switching separately for its wireline network, benchmarked against the
prices of procurement by BSNL. Bharti's fixed business did not deploy any CDMA
lines. Bharti also followed a BSNL-like, RLU-based network approach.

Both Tata Teleservices and Reliance Infocomm followed similar procurement
policies and went for CDMA equipment for wireless. Both the operators chose
Lucent. For wireline, instead of an RLU/RSU approach, both the companies went
for multi-access aggregators. Lucent supplied to Tata Teleservices.

VOICE&DATA estimates the total size of market for fixed line switching to
be Rs 290 crore in FY 2003—04.

The switching market was still entirely dominated by the traditional TDMA
switch. IP was deployed at only a few ports in the ILD space. Currently all
operators in the ILD space-Bharti, Reliance, VSNL, Data Access-have placed
small IP orders. The imperative for operators to adopt IP in the ILD space is
because all international traffic is imported on IP.

The IP uptake is expected to filter down from the ILD segment to the domestic
long-distance segment and then at the metro level and finally at the last mile.
This is expected to take another couple of years although IP deployment in the
long distance is expected to see some light during the current fiscal.

As the demand for data increases and as operators fight to win customers on
the basis on value-added services, they will have no choice but to opt for IP
networks in the near future.

Among vendors, Lucent continues to do well, with a hold over the CDMA market.
While Siemens, with its Bharti account did well, Ericsson also did well on the
GSM front. Alcatel, though still holds a major market share in the wireline
segment but it badly needed to penetrate the wireless segment. V&D 100 2003
raised the question whether Alcatel would be able to do it alone or in
partnership. Alcatel chose the latter model. It won an order from ITI, for the
supply and installation of GSM lines to BSNL. This contract, valued at about 65
million Euros, covers the expansion of BSNL network in western India including
Gujarat, Maharashtra, MP, and Chattisgarh.

Ericsson bounced back in switching with an estimated market share of 40
percent in the GSM segment. Bharti being its major client, the company benefited
mostly from its aggressive expansion. Bharti had planned a capacity of over 66
lakh subscribers during the last fiscal adding 1,500 new cell sites. The total
switching deployment was expected to be 28 MSCs. 

Recently, Ericsson signed a three-year contract with Bharti valued at $400
million to manage, maintain, and provide quality assurance in 10 existing and
three new AirTel networks. This deal will ensure continued business for Ericsson
for the next three years in switching. In fixed line also, Ericsson supplied
switches to BSNL worth Rs 2 crore.

With BSNL's deployment on fixed line dropping, C-Dot technology has lost
out almost completely. The technology that ushered in the telecom revolution in
India is likely to die a painful death. Other two TEC-approved vendors, NEC and
Fujitsu, are also out of the market. With wireless growing and the clear lines
between CDMA (Lucent) and GSM (Alcatel/Ericsson/Siemens) drawn, the growth of
any vendor would be directly dependent on the growth of one of the alternate
technologies. While Lucent, with Reliance as the client will grow on CDMA,
Ericsson is better poised in the GSM front, compared to the other two-thanks
to its strength in the RF equipment.

While numbers will continue to grow, the advent of IP in a big way is not
expected even in FY 2004—05 in local switching.

Balaka Baruah Aggarwal