LIMITED MOBILITY: The Need of the Hour

The
tremendous response for fixed service licenses in India shows that companies are
more interested in providing basic telephony to the country than providing
cellular services. With Fixed Service Providers (FSPs) being allowed to provide
limited mobility within Short Distance Charging Areas (SDCA), the FSP license
looks more lucrative. An indication of this is the overwhelming response of 147
applications for the 21 circles received by DoT. This overwhelming response has
put a question mark on the allotment of the frequency spectrum to service
providers as DoT has only 20 MHz of frequency for WLL. This frequency band could
be given to only four operators by offering 5 MHz to each player.

In circles where there are more than four operators it would be difficult for
the DoT to select the players. According to Shyamal Ghosh, chairman, Telecom
Commission, "Nobody will be allowed to sit over the frequency band."
"It is not that you put in an application and you get the spectrum,"
he added. It appears that the service provider who has a better roll out plan
will get a preference over the other, and frequency would be alloted on setting
up PoPs in the respective cities. To start with, the operators will get 2.5 MHz
band to operate limited mobility services and will get 1.25 MHz each in the
second and third round.

The existing operators are upbeat about limited mobility as everybody is in a
hurry to start the service. Shyam Telelink and Tata Teleservices have taken the
lead by launching limited mobility services in Rajasthan and Andhra Pradesh,
respectively. Shyam Telelink has launched their service under the brand name
Citymobile; whereas Tata launched theirs, under the brand name Tata Mobitel. The
service is presently restricted to Tata employees and the company is planning to
launch the services commercially very soon.

P Swaminathan, CEO, Bharti Telenet Ltd said about the introduction of limited
mobility services, "Now that the government has allowed basic operators to
provide limited mobility, we are gearing ourselves to launch the same. Prior to
launching limited mobility in the state, we are moving towards creating the
necessary infrastructure." According to Sunil Bharti Mittal, chairman and
managing director, Bharti Group of Companies, there is a plan to launch limited
mobility services in April, in Madhya Pradesh.

On the other hand, "Hughes Tele.com is evaluating the policy, and only
after the regulatory tribunal finalizes the policy, we will plan to fix the business plan," says Prakash Bajpai, CEO, Hughes
Tele.com. Since Hughes Tele.com basic services is based on TDMA technology, it
will take the company a minimum of three to four months before they can launch
the service in Maharashtra. Presently, the company is waiting for the Telecom
Dispute Settlement and Appellate Tribunal (TDSAT) decision on the limited
mobility case that is being filed by cellular operators.

Reliance is yet to start the service in Gujarat. Regarding limited mobility,
Dr AK Seth, president, Reliance Telecom, said, "We were suppose to get
spectrum a month back but so far nothing has happened. We are in the process of
building up the network once we get the spectrum." But according to
reliable sources, Reliance is busy finalizing equipment and is in active
discussion with the service provider so that they can roll out the service at a
fast pace once they get the spectrum.

BSNL has an ambitious target of 6,830,000 connections in 2001-02, of which
650,000 are WLL connections. Out of this, 600,000 will be installed in rural
areas and the rest will be in urban areas, says Shabbir Ahmad, director
(planning), BSNL. In the first phase, BSNL plans to install 200,000 in the first
quarter of 2001-02, and in the second phase it plans to complete the remaining.
But chances are that the urban areas’ demand for fixed wireless will be
converted to limited mobility. "LG Electronics System India Limited (LGSYS)
has supplied 10,000 (limited mobility handsets) to BSNL," says WC Kim,
managing director, LGSYS. "The company is planning to supply an additional
37,000 line systems in March, of which 5,000 are mobile," added WC Kim.

BSNL has launched limited mobility service in India, in Gurgaon. Gurgaon
Telecom has deployed WLL systems that will support 500 limited mobility handsets
and 1,500 fixed wireless connections.

MTNL is not planning to lag behind and plans to launch their limited mobility
service in Delhi by end April. "The company has bought 39,000 limited
mobility handsets for Delhi," says K Srinivas, executive engineer, Hyundai
Electronics Industries Co. Ltd. MTNL (Mumbai) is planning to follow Delhi as it
has come out with a tender for 50,000, of which 35,000 are CDMA handsets.

It seems HFCL Infotel, the basic service provider in Punjab, is also not
planning to lag behind and plans to launch limited mobility services in the
major cities of Punjab in April, says Vijay Kaul, chief marketing officer, HFCL
Infotel.

Investment Plans

Earlier, one was allowed fixed mobility but with policy makers allowing
limited mobility, all the service providers have to make the network limited
mobility ready. Tata and Shyam are the two networks that are limited mobility
ready. Tata has invested Rs 180 crore for limited mobility infrastructure and
plans to invest a total of Rs 480 crore in the years to come. The company has
installed a capacity of 5,000 each in Hyderabad and Vijaywada. It seems that, by
September, limited mobility services will be expanded to Vishakhapatnam and
Guntur.

On the other hand, Shyam Telelink plans to invest Rs 150 crore in the next
five years for a limited mobility network of 500,000. "Presently, the
network has around 550 subscribers and plans are to have a subscriber base of
70,000 by end of March 2002," says Sunil Chopra, COO, Shyam Telelink Ltd.

Bharti Telenet is planning to introduce limited mobility in a phased manner
as was done with basic services under the brand name AirTel. Plans are to make
adequate investments towards providing distinct and differentiated services to
its customers. Reliance is yet to make an investment and Tata Tele.com is yet to
decide on the investment, as it is waiting for the TDSAT decision on limited
mobility.

Cost of Service

To avail limited mobility service in Andhra Pradesh, one has to buy a CDMA
handset, worth Rs 9,800, from Tata Teleservices and pay an activation fee of Rs
1,050. The airtime rental charged is Rs 1.20 for a three minute call plus a
monthly rental of Rs 600 as fixed by TRAI. On the other hand Shyam Telelink
provides the option to the consumer to buy handsets of their choice from channel
partners. After the handset is bought, one has to pay a registration fee of Rs
2,000 and an activation fee of Rs 840.

Companies are also looking at various financial options for making the
services at par with GSM, which presently has a cost advantage in comparison to
CDMA handsets. Various service providers are thinking of leasing the handset to
the subscriber rather than they buying the handset. The cost of the handset is
kept as a security deposit. If the subscriber plans to discontinue service at
any point of time, he can deposit the handset and walk away with the depreciated
cost of the handset depending upon the number of months the handset has been
used.

In order to give tough competition to cellular service providers, the basic
service providers have to focus on quality of service for limited mobility. As
both Shyam and Tata have started their service recently, they are still trying
to provide good quality service by minimizing call dropping while moving from
one cell site to another or when moving at a faster speed. Presently,
value-added services like call forwarding, call waiting and three-way
conferencing are provided.

Method of Distribution

One can distribute the handset either directly or through the channel mode.
Tata Teleservices moves the handset through the direct mode as one can buy an
activated handset rather than buying a handset. On the other hand, Shyam
Telelink has outsourced its handsets to the channels and concentrates on
providing quality service to the consumer. The consumer also has the option to
buy the handset from anywhere and get it activated. Presently, the company is
doing some sort of handholding for channel partners in terms of procurement,
conducting interoperability tests before procuring bulk quantities and
negotiating on the price front for bulk purchases. But, as the company feels
that the GSM channel strategy will also be applicable to CDMA handsets after a
period of time, it would be good for the industry, mentioned Sunil Chopra.

One also has the option to buy the handset from the gray market and go for an
interoperability test. If the handset qualifies, a person can pay the activation
fee and use the handset.

Target Segment

Seeing the way that prices are coming down in the cellular segment due to the
entry of MTNL and regulation, Tata Teleservices is not in a position to predict
the likely number of limited mobility handsets in the future as one has to see
at what price point BSNL launches cellular service in the country. One will also
see the introduction of new players in basic and cellular services, who will
roll out their service by the end of 2001, so things will take time before
settling down.

It seems that there would definitely be a transition from cellular to limited
mobility service. Companies are targeting those customers who are spending more
than Rs 3,000 for local calls (whether receiving or calling) and those who are
receiving a lot of calls–whether local or STD. Using limited mobility, one has
the advantage of not paying for the incoming calls, which are free.

Tata Teleservices is targeting 40 percent of cellular subscribers who only
make local calls to switch over to the limited mobility service. On the other
hand, Shyam Telelink is targeting those telephone users who have a monthly
rental of Rs 3,000 and above for their limited mobility services. It seems
around 30,000 to 40,000 DoT customers in Jaipur fall under this category and the
company is aggressively trying to convert them to limited mobility services as
the same handset will be used for the home and office environment.

The company is getting stiff competition from Hexacomm, a group of Shyam
Telecom, the cellular service provider in Rajasthan, as the company has cut down
on airtime charges by making incoming calls free for the first two minutes and
after that it is charged at Rs 1.60 per 40 seconds. The outgoing calls are
charged at Rs 2.50 for a 40 second call. As both the companies belong to the
same group, presently "Shyam Telelink is not targeting GSM
subscribers," says Sunil Chopra.

"New operators like Bharti Telenet feel that as Madhya Pradesh and
Chhattisgarh have one of the lowest teledensities in the country, there is great
potential for limited mobility service to provide additional advantages to the
commercial and corporate segment," adds P Swaminathan of Bharti Telenet.

With the coming of the BSNL, the CDMA monthly rental has dropped from Rs 600
to Rs 400, which is a welcome sign for people who plan to go for cellular
services, and also for existing GSM subscribers who plan to switch to CDMA. The
drop in rentals makes the service more affordable in comparison to GSM. The
airtime charges are far below the GSM rate and one also has the advantage of not
paying for an incoming call. The handset prices are presently hovering around Rs
10,000 and with the increase in demand, the prices will come down to around Rs
7,000 by the end of 2001. All these will help in making CDMA more popular in
India and help in meeting the targets of NTP ’99.

Pravin Prashant