The Juniper Challenge

• "I
  
  have absolutely no concerns about focus being able to produce rapid
  
  growth",
  
  
  
  Scott Kriens, CEO, Juniper Networks

• Questions
  
  for Juniper
  
  
  
  Today, the point of debate is not whether Juniper has …? The question is
  what Juniper can …? And how?
  

• Fight
  
  for the Core!
  
  
  
  The router battle between Cisco and Juniper spills over to India.

Impact of Limited Mobility

"In the short term, the

market will see increased competition, resulting in lower tariffs and

rapid cellular penetration"

Anupam Srivastava,



vice president, operations, Infrastructure Development Finance Company (IDFC)

Mobile communication, till date, was the exclusive domain of cellular service

providers, but with the recent TRAI recommendations on limited mobility, even

basic service providers in the country can provide mobility to their subscribers

within SDCA. As per the recommendations, the FSP can provide mobility to their

subscribers by charging Rs 1.20 per 180 seconds for outgoing calls with free

incoming calls.

The

rush of 16 service providers bidding for 120 circles is indicative of the fact

that the majority of the subscribers will see limited mobility as full mobility,

as they are not going out of the SDCA. Pramod Saxena believes that not only do

the FSP have full mobility, but they also do have better interconnect agreements

making the business model of FSP look more attractive than the fourth service

provider.

But, Anil Joseph, manager, telecom practice, Frost &

Sullivan (I) Pvt. Ltd., feels that GSM operators are overestimating the impact

of limited mobility, as CDMA handsets are bulky, noise level is on a higher note

and there is a limitation on distance.

Anupam Srivastava feels that limited mobility will affect the

sentiments of the fourth license in cellular, however the medium term impact is

difficult to predict, as it would depend upon the relative pace of change in the

two technologies–GSM and CDMA. The tremendous economies-of-scale and

competition in GSM would reduce costs even below the CDMA levels. WLL tariffs,

as announced, are not remunerative and the final rentals as announced by TRAI

will be a crucial factor, added Srivastava.

Industry experts feel that as the limited mobility issue is

pending before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT)

and the non-decision by the DoT on the future of the terminated Punjab license

of Evergrowth Telecom, will have a negative impact on the bidding of the fourth

cellular license in that circle. The service provider has to clearly know how

many players are there in the market, before one can decide on how much to bid.

The Added Cost of Spectrum

"The market has not yet

reached a stage where the introduction of the fourth operator would add to

the growth of the market"

Pramod Saxena, general manager & executive director, continental

India telecom carrier solutions group, Motorola India Ltd.

In the case of the fourth operator, the government has given

the option of any digital technology and the frequency band of 1710-1785 MHz,

paired with 1805-1880 MHz. The fourth operator will get a frequency spectrum of

4.4 MHz + 4.4 MHz and if a service provider plans to have additional bandwidth,

it will attract an additional revenue share of one percent subject to the

availability and justification.

According to NTP’99, "WLL frequency shall be awarded

to the FSP requiring the same, based on the payment of additional one time fee

over and above the FSP entry fee. The basis for determining the entry fee and

the basis for assigning WLL frequency shall be recommended by TRAI. All FSPs

utilizing WLL shall pay a license fee in the form of revenue share for spectrum

utilization. This percentage of revenue share shall be, over and above the

percentage payable for the FSP license."

It is quite disturbing that though NTP’99 mentions about

the payment of an additional one time entry fee over and above the FSP entry

fee, the same has not been followed by TRAI and the policy makers have neglected

this aspect. The table (License Fees for FSP) mentions the entry fee but it does

not talk about the entry fee for operating WLL frequency. Even if we consider

that the entry fee has an element of FSP and WLL entry fee, the figure is too

small a value considering the fact that the cellular service providers (the

first and the second operators) in the past had paid huge amounts of money for

getting the spectrum.

NTP’99 says FSPs utilizing WLL frequency shall pay a

license fee in the form of revenue share, which will be over and above the

percentage payable for the FSP license. In this case, the policy makers have

levied an additional revenue of two percent of the annual gross revenue earned

through WLL subscribers for utilizing the frequency spectrum of 5 MHz + 5 MHz in

824-844 MHz paired with 869-889 MHz band.

If there is a fifth operator or a fourth operator, it should

be at the same level of playing condition, as one cannot have one set of

operators on a more advantageous set of conditions in comparison to another set

of operators on another set of conditions, says TV Ramachandran, director

general, Cellular Operators Association of India (COAI).

As we are moving towards the convergence regime, the

regulator has to see that a level playing condition is there for all the

services, before they switch to a composite license regime.

In terms of network deployment cost, Pramod Saxena of

Motorola, opines that any network built on 1800 MHz spectrum will be costlier as

1800 MHz is used generally as an adjunct to 900 MHz in many locations for

increasing capacity in congested and highly populated metropolitan cities. This

will not give a level playing field to the fourth operator as infrastructure

costs will be higher, added Saxena. But some of the experts in the industry feel that the network deployment cost will remain the same.

Absence of an Interconnect Agreement

"Operators planning to jump

in, will have to re-access the total regulation, technology, cost and

internal environments, and future evolution of the technology"

Rohit Chandra, director, marketing & technical solutions,

Ericsson

A cellular service provider opting for the fourth slot will

have a tough time in the absence of an interconnect agreement between CMSP and

FSP. The companies bidding for the fourth operator in CMSP will have to continue

with the bidding process in the absence of an interconnect agreement, though

this is uncertain. This affects the business model of companies, as the

contribution from long distance calls (STD and ISD) cannot be accounted for

while making the business model. In the absence of a proper interconnect, the

companies will have a tough time in the bidding process as interconnect revenue

is a major component of the total revenue.

License Fees for FSP
Circles	Entry fee (in Rs crore)
Andhra Pradesh	35
Delhi	50
Gujarat	40
Karnataka	35
Maharashtra (Mumbai & Goa)	115
Tamil Nadu (Chennai)	50
Haryana	10
Kerala	20
Madhya Pradesh (Chattisgarh)	20
Punjab	20
Rajasthan	20
UP West (Uttaranchal)	15
UP (East)	15
West Bengal (Kolkatta)	25
Andaman & Nicobar	1
Assam	5
Bihar (Jharkhand)	10
Himachal Pradesh	2
Jammu & Kashmir	2
North-East	2
Orissa	5

In the distant past, the FSP have already signed the

interconnect agreement with BSNL/MTNL, but CMSP are still negotiating and they

have not been able to resolve the differences, inspite of TRAI’s mediation

based on the principles of non-discrimination and level playing field. The CMSP

have been saying that the FSP are sharing revenues with BSNL/MTNL in the ratio

of 60:40, whereas the CMSP are not getting any revenue share from long distance

call charges, which they collect from the subscribers and pass on to BSNL/MTNL

for the termination of calls. Recently, TRAI has recognized that CMSP incur

collection costs and bad debt for collection of long distance calls, which they

pass on to the FSP for carrying the call. TRAI has determined that CMSP will

keep five percent of the revenue as their share to cover the cost of bad debt

and collection costs.

The regulator feels that the interconnect issue between CMSP

and FSP will take a minimum of eighteen months, as the two service providers are

unable to come to a mutual agreement. Talking about the delay, MS Verma,

chairman, TRAI, said that in the absence of the mutual agreement, the regulator

has to come out with a standardized accounting system for both FSP and CMSP,

approved by the Institute of Chartered Financial Analysts of India and the

Institute of Cost and Work Accountants of India. Once the accounting system is

out, the service providers will take time to switch to the standardized

accounting system. One year of operation in the standardized accounting system

will help the regulators to examine the different components, before formulating

the revenue sharing arrangement for the calls originating from CMSP and

terminating in FSP. So the fourth cellular service provider will have a tough

time in making their business model in the absence of interconnect.

Six Operators in One Go

"The Fourth



operator will help in increasing affordability and easy availability of
mobile telephony services."

Ashwini Bakshi,



general manager,


Nokia India Ltd.

It

seems that there would be an inflow of service providers in FSP and CMSP, as

most of them would be starting their services by the end of 2001 or in the

beginning of 2002. In the FSP arena, there will be a minimum of four service

providers who will get a license to operate in their respective circles, as

presently there is a limitation on the spectrum capacity for WLL.

MTNL, the third operator, has already launched its services

in Delhi, and services in Mumbai would follow soon. BSNL, the incumbent operator

has given a head start to the project by launching operations in Kolkata and

Patna on a small scale and is planning to start services in Haldia, Hyderabad

and Chennai. A large rollout of cellular services in all the circles is

scheduled between September and December 2001, according to Dr Devendra PS Seth,

CMD, BSNL. The total tender value is around four million lines and is to be

completed in two phases.

"There is going to be a sufficient market for operators,

but you cannot have six operators in one market place at the same time,"

said Pramod Saxena of Motorola.

Conclusion

It seems that the way the market is progressing, the future

of India in telecom is for a few big players who can provide multiple services

like limited mobility, complete mobility, roaming, mobile Internet, broadband

access, domestic long distance and Internet, believes Rohit Chandra of Ericsson.

The fourth operator has to move cautiously if it plans to

enter into different circles, as they will have to go for a 2.5G kind of

network, which will increase their investment in infrastructure. The fourth

operator will also have to focus on how to increase the efficiency of the system

thereby reducing the operating expenditure, providing better customer care, and

providing customers a wide range of packages and supplementary services, which

will also incur investment. One key factor would be rapid deployment of the

network and it is quite sure that only the companies with deep pockets will

survive in the market.

Telecommunications in India

Pravin Prashant