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Indian operators must rethink investments in 3G: Ovum

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VoicenData Bureau
New Update

At a time when bidding for the

3G auction is heating up, and the bid price for the pan-India spectrum towering over $3 bn; on day-26 of the auction process, here is a word of caution from the industry experts.

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According to consultancy firm, Ovum, Indian mobile operators should look to bid aggressively for the

BWA spectrum envisaging long term strategy. Uncertainty around future allocations of 3G spectrum means that MNOs must adopt forward looking strategies and look at investing in broadband wireless access (BWA) spectrum as well. Subsequent to the 3G auction, there will be a BWA auction for two slots of 20 MHz TDD spectrum in the 2.3 GHz band.

Already there are indications from the industry that the bidders may not opt for pan-India 3G, and there is a higher probability of a fractured 3G footprint and the companies may have to hasten to consolidate.

“The prevailing view is that 3G will offset the rapid erosion of voice revenues with increased data revenues. However, we believe that the primary benefit to Indian operators from the paltry 5 MHz FDD of 2.1 GHz 3G spectrum available via auction will be to offload traffic from high-end subscribers for capacity relief. Any incremental data revenues will represent an upside,” says Shiv Putcha, principal analyst with

Ovum's emerging markets practice.

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The bigger issue in the Indian context is that whether operators here can execute on a data driven approach. Indeed, Indian MNOs should think twice before introducing the latest 3G devices such as iPhone, NexusOne, and newer form factors such as iPad.

Evidence from the US and Europe points to the astonishing-even crippling-impact on mobile networks of network overloads due to the surge in data traffic from 3G smartphone users. Indian MNOs already do a lot with very limited spectral resources, and now face an unenviable dilemma.

To hold back from launching the newest gadgets will hand over the initiative to rivals in an unforgiving and ultra competitive environment. Launching these devices aggressively will have the opposite effect of bringing their fragile networks to a standstill, as Indian MNOs have not made their networks in way that can carry data traffic. The only short-term option would be to introduce tiered data plans and also adopt usage caps to protect the network.

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They must adopt a long term strategy which will allow subscribers to access high speed mobile broadband services over multi-mode, multi-band devices that are backward-compatible with existing 2G/3G networks and incorporate Wi-Fi. As an option, multi-mode 3G-WiMax devices do exist today in limited volumes, and will likely enjoy a cost advantage for some time.

However, given the strong industry momentum behind LTE, it would not be a stretch to say that device ASPs in the long term will

favor a 3G-LTE combination device over a 3G-WiMax device. The ability of a 3G device to offload data traffic to LTE and Wi-Fi will preserve network integrity.

“The growing maturity of LTE as a viable air interface standard that is backward compatible and supports both TDD and FDD modes means that the 20 MHz TDD blocks of BWA

spectrum are no longer an exclusive zone for WiMax, but are also available as 3G expansion bands,”

says Shiv Putcha.

“In short, we expect and encourage aggressive bidding for the available BWA spectrum, which could present a scenario of an incumbent 2G operator winning 5 MHz of 3G spectrum and also 20 MHz of BWA spectrum. Regardless of the technology chosen for the deployment, this is a worthwhile investment as the alternative is a race to the bottom and eventual exit from the market,” he adds.

heenaj@cybermedia.co.in

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