CELLULAR SERVICE: Edge It's Got A Long Way To Go

New technologies are making quick inroads into India, thanks to aggressive
competition in the unified space. Even technology deployment is, today,
happening at a faster pace. Earlier, technologies were deployed in India after a
gap of two or three years but now this has been reduced to about 6—12 months.
A great achievement for a country that has been long considered a laggard in the
technology space.

EDGE (enhanced data rates for global evolution), the buzzword for the Indian
GSM service providers for quite some time, is now a reality. All the three large
private operators in the GSM space-Idea, Hutch, and Bharti have commercially
launched the service. Idea Cellular is India's first mobile operator to
commercially launch EDGE services. The company launched this service on 28 July
2004 in Delhi, and is the twentieth operator in the world to do so. In terms of
EDGE deployment, Idea Cellular is only 13 months behind Cingular Wireless, which
commercially launched its services in June 2003.

Meanwhile, Hutch and Bharti were also in the race to be the 'first EDGE
operator in India.' Hutch was late by a few hours while Bharti was late by two
days with the company launching EDGE in Chandigarh only on 30 July.

Idea is planning to provide live television, video streaming, and mobile Web
browsing and Internet surfing at speeds of 80 to 160 kbps. Though Hutch has
announced the launch of its service, the company has not launched any
EDGE-specific services in the market and is presently providing higher speeds to
existing GPRS users. It shows that Hutch was under a lot of pressure, once Idea
launched its services. So the company went ahead and issued a press release
about its EDGE rollout, without a proper launch or even a press conference.

On the other hand, Bharti, the number one operator in GSM space, was not
planning to be left behind in the war of the EDGE. The company commercially
launched its EDGE services in Chandigarh and plans to launch services in 13
cities in phase I, which to be completed by Q3 2004. Apart from Chandigarh, the
company plans to launch services in Delhi, Mumbai, Pune, Chennai, Kolkatta,
Hyderabad, Ahmedabad, and Bangalore in the second quarter of FY 2004—05, and
plans are for launching services in Cochin, Coimabatore, Jaipur, and Lucknow in
the third quarter of FY 2004—05.

To be fair, it is for the first time that the Indian GSM industry has shown
such speed in going for a new technology. However, due to stiff competition, the
service providers launched their offerings without doing their homework properly
and have only partially launched their services. It will take some time before
all the EDGE pieces are in place. These services will become complete when all
the loose ends are tied up-both services as well as pricing. For EDGE to
succeed in India, service providers should focus on-handsets, content,
business models, billing, spectrum and QoS (quality of service), and
inter-carrier issues. The earlier the operators do it, the better it would be
for them in terms of a higher subscriber base and increased ARPUs.

Shortage of Handsets

The non-availability of enough EDGE-enabled handsets is a major stumbling
block for service providers. Presently, there are not too many vendors, or too
many models, even worldwide. Apart from Nokia, there is only a small presence by
Motorola and Sony Ericsson. While, LG and Samsung have virtually no presence in
EDGE so far, they are expected to launch their EDGE phones in the market soon.

According to the Global Suppliers Association (GSA) update of 20 July 2004,
there are around eight EDGE-enabled handsets available in the worldwide market.
Of these, around seven models come from Nokia and one from Motorola. Companies
like Samsung and LG are yet to launch an EDGE-enabled phone. Meanwhile, Motorola
and Sony Ericsson are yet to launch an EDGE model for the Asian/European
markets.

In India, GSM operators use the 900 MHz and 1,800 MHz frequencies. In these
categories, there are around six handsets and all of them come from Nokia. Nokia
has launched three models for the Indian market whereas all other vendors are
yet to launch their EDGE phones.

One can expect competing models on the EDGE front only in 2005 when Sony
Ericsson, LG, Samsung, and Motorola launch two to three models worldwide as well
as in India.

The lack of handsets will deter people from opting for EDGE now. Sony
Ericsson is planning to launch Z500i, an EDGE phone, in the Indian market by the
first quarter of 2005, says Sudhin Mathur, general manager, Sony Ericsson,
India.

The high prices of handsets also act as a hurdle for EDGE deployment in the
country. Due to a monopoly situation, Nokia's EDGE handsets' prices are on
the higher side, which are available from Rs 9,669 to Rs 18,479. The company has
launched three EDGE models-Nokia 3200 priced at Rs 9,669, Nokia 6220 priced at
Rs 14,219, and Nokia 6820 priced at 18,479.

On the other hand, GPRS handsets cost around Rs 6,000 to Rs 9,000. So, one
has to pay a premium of around 50 percent if one opts for EDGE. Until and unless
prices fall to around the Rs 5,000 to Rs 6,000 level, India will not witness any
significant numbers of EDGE subscribers. But this will only happen when more
handsets are launched in the Indian market by the handset vendors.

Content in Doldrums

Today, there is a strong mismatch between the numbers of GPRS handsets sold
versus the subscribers of GPRS services. The reason is simple-lack of
compelling and attractive content. EDGE service providers-Idea, Hutch, and
Bharti-should take a cue from GPRS' failure and provide enough localized
content which is easy to use, rich in experience, attractive in nature, catch
the users' moods, and provides instant gratification. If service providers can
design content that can fulfill a mix of the above criteria, EDGE is bound to
make inroads into the heart of the country.

All service providers should educate customers and encourage them to use EDGE
services, says Don Price, CTO, mobility, Bharti Tele-ventures.

Content applications can be clubbed under heads like chat, playtime, games,
news and information, mobile marketing, and business applications. All these can
be segmented as per customers' usage and customers' age, but the focus
should be on multimedia services. On the chat front, service providers can look
at the entire suite of services like forum and group chat, personal chat, and
dating chat. In playtime, one can avail of services like quizzes, polls, jokes,
and cartoons. On the game front, users can play monochrome to full-color games,
single player to multiplayer games, and embedded to interactive real-time games.
On the news front, one can get video clips like interviews, movie highlights,
movie previews, music video, live TV, mobile dramas, animation movies, and even
mobile movie and novels. On the mobile marketing front, the focus can be on
mobile advertisement, direct marketing, special promotions, viral marketing, and
on-pack promotions. On the business front, applications can vary from mobile
office, location tracking, and field services to telematics services.

Technology platforms such as EDGE are best suited for high-end users who
actively browse the Internet and require high data speeds for
bandwidth-intensive applications, says Umang Das, managing director, Spice
Communications. Service providers have to create a large pool of localized
content either through their own resources or in tie ups with other content
providers.

No Successful Business Models

EDGE, as a technology, is quiet new. Worldwide, majority of service
providers have deployed EDGE services only in 2004. All the service providers
are deploying these services in order to cash in on data services and increase
their overall ARPU. So, there is no successful business model worldwide and
Indian service providers have to formulate their own models.

Worldwide, non-voice services contribute more than 25—30 percent of the
overall revenues of service providers. And this increases with the launch of new
technologies. In India, presently, non-voice services contribute only 5—6
percent of the overall revenue, so there is lot of scope for upward movement.
Service providers should focus on low-price-strategy business models and have
services which provide value for the customer.

Since all the new base stations delivered after 2001 are EDGE-ready, service
providers have to incur only an additional 5—10 percent capital expenditure on
their existing GSM network. If service providers launch services in selected
cities, as Bharti is planning to, then the investment will be minimal. But, if
service providers are planning for complete coverage in all cities and circles,
the business model does not look attractive. There will simply not be enough
users of these services to recover the investments made.

Service providers should deploy EDGE selectively in circles in areas where
there are high data users and one need not deploy EDGE network completely, says
Wolfgang Roessle, VP-sales (South Asia), information and communication mobile
networks, Siemens.

Billing Issues

Billing is a critical parameter for any telecom service. With new telecom
services being launched every few hours, it throws up new challenges for billing
vendors. Services should not be restricted to one set of users only, but all
services should be implemented for all users (prepaid and postpaid). For EDGE
services, Idea has moved a step ahead by launching live television services for
both postpaid and prepaid customers.

Billing is becoming complex with the deployment of new technologies. The new
services that are launched focus on real-time, on-demand services, which cross
physical and logical boundaries of the service providers and rely on both old
and new technologies in all the three dimensions of ICE-computer, telecom, and
entertainment. The value of future services will depend always on anytime,
anywhere, and anyplace thereby implying ubiquitous connectivity and therefore
the ability to bill on the basis of data usage. The existing methodology of
billing, which uses call data records and after-the-event processing, is not
sufficient. What is needed is online billing. Along with that, even the billing
systems will need to be transitioned from today's transaction-based system to
usage-based billing systems. They will also need to account for differing
quality, with the billing being based on the actual quality of service as per
the contract price. If service providers can provide such billing flexibility,
the non-voice revenue is bound to move up.

QoS Issues

EDGE services focus on premium segments, so service providers should also
take extra precautions to provide excellent quality of service. Otherwise, the
service providers might lose their premium customers. One has to also ensure
that if the customers pay for the service they also get timely delivery of
services, in its entirety and not in parts. Service providers should ensure
that, before services are launched, all things are put in place.

In India, service providers have been launching new technologies, but they do
not have enough spectrum to support all those services. Presently, even for
voice services, the quality of service is not up to the mark. So, in order to
launch EDGE services fully, service providers should also ask for more spectrum
so as to have a proper balance between their voice and data services. Even
though EDGE provides efficiencies of scale both in terms of voice capacity and
data capacity, service providers still need more spectrum as they have
aggressive plans in terms of increasing the subscriber base. The increased
spectrum will help in doing the balancing act between voice and data more
efficiently, along with excellent quality of service.

EDGE helps in adding value to the network as one can deploy data services
without decreasing quality of voice services, thereby adding value to the
network says Wolfgang Roessle.

Inter-carrier Issues

It is good that most of the carriers, which have launched services in India,
are focusing on an all-India reach and are not limiting themselves to a few
circles. Even the incumbent operator, BSNL, is planning to launch EDGE services
once its new GSM orders are implemented. In the current scenario, service
providers should sign EDGE-roaming agreements with all the operators within
India as well outside so that their subscribers can utilize the service
seamlessly, across India as well as outside India.

All the above issues have to be sorted out at the earliest, so that EDGE can
stay till the 3G services are launched in the country. For India, 3G is still a
long way off, as the policy makers are yet to finalize on the 3G spectrum. Even
though it is being finalized, policy makers have to float the license conditions
and iron out other details. And then, service providers have to install the
equipment and test the service. Only then can they launch it. All this would
take say around two years. So, commercial 3G deployment will happen only in
2006-07. Till that time, service providers should use EDGE as a stepping stone
to 3G services.

Pravin Prashant

EDGE Content Strategy

Target - Services

Corporates - Mobile office and location tracking

30+ years - Internet surfing, entertainment, and live TV

23—30 years - MMS and entertainment

Less than 22 years - Entertainment, group chatting, gaming