Operators facing hurddles over 3G/WiMax deployment

The Indian government has earned Rs 67,719 crore from the 3G auctions, and Rs
38,543 crore from the BWA auctions. But for operators, these are challenging
times. While 3G is supposed to be more voice-centric and already has an
established vendor ecosystem in place, WiMax has been a tried and tested
technology in other markets, and promises higher data speed. It is also a
stepping stone to 4G, which is currently under trial around the world. However,
as WiMax lacks the ready devices and infrastructure that 3G has in place, it
will be altogether more expensive for rollouts, and the high costs will
obviously be passed down to users. For WiMax too, there is a battle going on
between TD-LTE and BWA between global giants like Qualcomm, and local telecom
operators, which is compatible with 3G WCDMA/HSPA and EVDO.

According to Naveen Mishra, lead analyst, telecom research practice, IDC
India, “The successful launch of 3G/BWA networks and services would help to
decongest mobile services networks, especially in metros/urban areas and improve
the quality of service for the Indian mobile service users. BWA spectrum is
expected to help launch WiMax services in rural areas. This would help reach
broadband connectivity to the rural masses.”

With 3G being delayed once more due to unresolved issues between the
government and defense over releasing required spectrum for operators, and
hurdles with import of Chinese telecom equipment coming up, operators' grand
plans to start 3G services by the end of the year, and a host of 3G enabled
handsets flooding the market-are all coming to rubble again. On the other hand,
BWA spectrum auction which ended a month after 3G, have already borne fruits in
terms of the government allotting spectrum to Infotel, Bharti, Aircel and Tikona,
of which Infotel's and Tikona's WiMax rollout plans are already in progress.

And there are those who believe that in India, 2G will still rule the roost
for at least the next two to three years. Remarks AK Dinkar, MTNL, “3G is not
going to make such a big impact on the masses in India. We expect only 10% of
the population to change to 3G. We are targeting 3 lakh 3G subscribers, but will
have to compete on the same level as private operators, who will pose stiff
competition. As far as separation of spectrum and licenses is concerned, it is
not possible, as no operator has a pan-3G presence, so they will have to use 2G
in certain areas or seek roaming rights from other operators for circles where
they do not have spectrum.” Jayesh Easwaramony, director, ICT practice, Frost &
Sullivan, APAC says, “A 80-90% penetration is what determines success of a
particular technology, and the Indian market is not mature enough to reach those
numbers immediately.”

Deployment of 3G

With telecom companies together shelling out nearly Rs 50,968.3 crore for
twenty year licenses in twenty-two service areas, pricing will be a key
component in deployment of services, with operators trying to cash in on RoI, as
soon as possible. According to a report by Wireless Intelligence, 3G subscribers
will account for 13% of the country's total mobile connections, with 150 mn
users by 2014. In order to actually reach these numbers, it is estimated that
telecom software and hardware companies are spending close to Rs 15,000 per
employee on training.

It is no doubt that mobile operators who have already witnessed a good amount
of return on their 2G services would find 3G services as an opportunity to
distinguish themselves from the existing competition by implementing innovative
business models. Late entrants to the 3G market will have to find improved
business models as compared to the early 3G entrants.

According to Easwaramony, “Profiting from 3G would entail maximizing
monetization through application retailing, shifting value from device to cloud,
sharing services with other players, harnessing the power of video, which has
the power to transform 3G in India and creating a multi-tiered pricing model,
will provide the potential to grow an enterprise customer, make adequate use of
smartphones and other devices, and give way to convergent approaches, which are
a combination of mobile and fixed ARPUs. One thing that should be prevented is
that one should not be short of capacity as soon as one launches, and thus the
current network needs to evolve in scale, scope and influence.”

The introduction of 3G systems and the convergence of IP and telecom are
expected to foster the emergence of hybrid models in service offerings. The
transition from a strictly operator-centric network to a dynamic open market
would lead to business models that preserve the positive features of the
existing paradigms while removing some of their limitations.

According to Jason Haworth, worldwide practice lead for telco service
providers, F5, “Two suggestions for scalable 3G for operators in India are:
making use of an open network architecture, as compared to the flat one which
was used in the 3G model by some operators abroad leading to frequent network
overhauling. Also, the RAN backhaul should be looked into due to the huge
network pressure of smartphones and large number of apps, leading to network
congestion.”

Some of the challenges for 3G operators are flat pricing models, with the
bulk of the traffic being web, video and P2P, and revenues not going in the same
direction as cost, leading to broadband revenue decrease and traffic congestion.
Cost infrastructure should not explode leading to congestion and in turn churn.
The solutions to overcome these challenges are inspection of data flow to
identify traffic types by optimizing traffic based on user profile, services
management by routing traffic to appropriate destination based on device and
subscriber policies, and rapid and flexible deployment with ability to roll out
new services and change existing packages based on user analytics.

Remarks A Sethu Raman, executive director, Huawei India, “3G will bring about
a complete overhaul of the network and we will cater to the trend of packet
based technologies, by offering multiple technologies on a single platform.” As
part of this strategy, Huawei recently introduced its line of new MBB products
to ensure seamless transition from 2G to 3G to 4G and future NGN technologies.
Thus, they are providing end-to-end solutions for access networks, backhaul and
backbone, applications and services-all of which work on a single platform and
are compatible.

WiMax Hurdles

It is estimated that the cost of setting up a WiMax BTS is close to Rs
5,40,000 (US $12,000) and capital expenditure is close to Rs 450 ($10) per 1,000
subscribers. The revenue per user in rural areas is Rs 90 to Rs 135 per
subscriber and in urban areas it will be close to Rs 450-675 per subscriber.
Thus, according to experts, operators will push their services in rural India.

Learnings from other countries where WiMax has been deployed show that
attractive pricing is the only key to successful deployment. For example, in
Pakistan, a 512 Kbps WiMax service costs $123 per year, it costs $1,296 in South
Africa. In India, a 512 Kbps DSL service costs $197, compared with $2,118 in
Nigeria. Even HSPA services vary, with 2GB capped service costing $223 in
Poland, but $2,924 in Colombia. Innovative pricing strategies, in terms of
sachet pricing that includes low usage caps, shorter period contracts, and
prepaid packages are the key. However, as broadband penetration in the country
picks up, cost of deploying WiMax is sure to reduce.

The cost of WiMax spectrum is affected by several factors, including
population characteristics, buying power of potential customers, broadband and
mobile penetration, spectrum allocation, and the competitive landscape. In
India, with 20 MHz spectrum available in the 2.3-2.5 GHz band, operators are
likely to adopt nomadic WiMax (802.16e). In the long term, operators have an
option to upgrade to TD-LTE at relatively lower cost as both the technologies
are based on the OFDMA standard. The spectrum is likely to be used for both
fixed residential and enterprise broadband access in urban areas and to provide
connectivity to common services centers, education institutes and health centers
in rural areas.

Over and above the spectrum cost, operators will need to spend an additional
$500 mn to $1 bn over the next three to four years to deploy the network.
Notwithstanding aid from the USO Fund, the wireless ISPs will have to come up
with innovative solutions to cover up costs and offer broadband at affordable
rates. ISPs will probably also tie up with content providers to provide
localized and suitable content via their service. Tikona Digital Networks, for
example, which has won BWA spectrum in a lot of circles, has announced its
willingness to tie up with SPs, and has started the hunt. According to Prakash
Bajpai, MD and CEO, Tikona Digital Networks, “We are presently working with
technology partners and suppliers to evaluate architectures and engineering the
roll out to cater to the growth potential in Indian urban markets. There is a
large pent up demand for wireless broadband due to lack of wireline
infrastructures. The mobile industry success over last few years is an
indication of what can be achieved, if services are made affordable for the
masses, and we believe that mobile broadband will be the central play and
therefore device availability will be the key.”

Tikona is in advanced stages of discussions to conclude collaboration with
several mobile operators to offer high-speed experience to its GPRS/Edge data
customer with Tikona's 2 Mbps speed experience on the mobile devices using the
Wi-Fi interface already built into the phone. Clearly service quality, indoor
penetration and customer support processes will be the key differentiation
matrices. Tikona has built a unique centralized 802.1x authentication system and
offers highly secured services to its customer and also deploys WPA2 encryption.
The new technology equipment once finalized shall also be offered for security
clearance as per prevailing regulatory norms.

The government also plans to award BSNL a Rs 18,000 crore project to improve
broadband connectivity in the country, which will involve building WiMax
networks across rural India and laying a 5 lakh km optic fiber cable to ensure
that broadband connectivity reaches every panchayat.

The Next Best Thing

WiMax's ultra-high spectrum efficiency allows operators to provide users
with more options like Internet browsing, streaming media, video on-demand and
so on. On the other hand, LTE (3GPP Long Term Evolution) can provide the
capacity to support an explosion in demand for connectivity from a new
generation of consumer devices tailored to those new mobile applications. It
will also enable fixed to mobile migrations of Internet applications such as
VoIP, video streaming, music downloading, mobile TV and many others.

The entry of Reliance's Mukesh Ambani into the telecom space, and subsequent
partnership with Infotel, the biggest winner in eleven circles, has also caused
a lot of excitement, especially with Mukesh Ambani announcing his plans to start
trials for LTE soon. For greenfield operators who failed to win 3G or BWA
spectrum, this news will only fuel their ambitions to go in for 4G or LTE,
seeing as it is the technology of the future and what is currently being used in
other nations.

According to S Krishnan, CTO, Videocon Telecommunications, “We will not lose
out to MVNO greenfield operators even without 3G/BWA. A case in point is Europe
where not many people use 3G for voice. 2G has reached 4 bn all over the world,
while 3G is still about 200 mn; thus, 3G won't succeed or help the company's
bottomline. Besides, lack of in-building penetration from femtocells causing
problems in coverage will still exist. Thus, we made a conscious decision not to
go for 3G, as this is not the technology of tomorrow. We will join the spectrum
race when a good technology comes in, and to that end we are looking forward to
4G, as we strongly believe which will help in building the future of the brand.
Olav Sande, EVP, Mumbai hub, Uninor, yet another greenfield operator who failed
to win 3G spectrum agreed with him, saying, “We are looking to launch 4G, since
we did not get 3G.”

IDC predicts that spending on LTE wireless infrastructure will outstrip that
of fellow mobile communications standard WiMax by the end of 2011.Trai also
wants the government to auction LTE spectrum in the next two years, since the
recent conclusion of 4G auctions in Europe, leaving Indian one generation behind
once more. LTE provides download speed of at least 100 Mbps, supports scalable
carrier bandwidths, from 20 Mhz down to 1.4 Mhz. Operators have already taken
precautionary measures when they bid for spectrum. They are bound to be cautious
when they start rolling out services as well.

Beryl M

berylm@cybermedia.co.in