WiMax: The Profit Maximizer

If 2005 is remembered as the year in which broadband was
introduced in India, then 2007 will go down as the year in which Worldwide
Interoperability for Microwave Access or WiMax made its presence in the country.
The current year has witnessed a string of rollouts triggered off by several big
guns in the industry led by BSNL, Aircel, VSNL, Bharti Airtel, Reliance, and
Sify.

Indian mobile operators have set their sight on higher income
avenues from enterprise services such as data carriage, storage, and management
of total telecom infrastructure for companies. The data carriage services
business, primarily through broadband, as well as storage services, has around
40% operating profit margins, which is 10% higher than the margins from mobile
services. No doubt then that WiMax is making business sense for ISPs and
integrated players.

While the debate over spectrum allocation continues to heat up
most seminars and podiums on wireless topics, ISPs are moving along with WiMax.
Several ISPs and cellular operators are already using WiMax to connect their
towers (often referred to as a backhaul), and provide last mile connectivity for
their enterprise customers on fixed wireless.

"WiMax deployment could be much faster with the
availability of spectrum. But, operators are now realizing that they need not
wait for the spectrum," says Manish Gupta, VP, Marketing and Alliances,
Aperto Networks. According to him, business models around WiMax can yield return
on investment within 12-18 months. "Different markets can show different
RoIs. The operators can be assured of easy upgrading from fixed WiMax to mobile
WiMax."

Revenue's Avenues

WiMax is a disruptive technology ideally suited for last mile wireless
connectivity at higher bandwidths. For a country like India, where there is
little planned municipal infrastructure and widespread habitation to cover,
WiMax is a real alternative to copper pipes. Jasjit singh, MD and CEO, Net4
elaborates on the cost advantage for both customers and ISPs. "The two key
advantages are faster customer provisioning and, more importantly, the one time
fee for last mile compared to much higher annual recurring fees on terrestrial
networks. Further, for multiple E1s, the costs multiply, while with our WiMax
services customers can easily go up to 8 mbps (4xE1) without the need for
additional links and equipment," he adds.

Among the early birds, Aircel was the first operator to launch
WiMax for broadband services for its customers, particularly enterprise
customers. It has so far invested over $1 bn in providing WiMax infrastructure.
The company has entered into a tie-up with Intel for advice on WiMax standards
that can be adopted in the future. Ram Shinde, senior VP, Aircel Business
Solutions (ABS), a wholly owned subsidiary of Unified Aircel, informed that the
company is also exploring a tie-up with Nokia for making mobile handsets with
WiMax technology.

Heralding 2007 as the broadband year, BSNL is expanding its
WiMax pilot project, initially being executed at ten urban and rural centers to
other locations across the country. It will enable Wi-Fi access with 300 new
hotspots at airports, malls, and hotels in twenty cities.

BSNL has plans to introduce WiMax services in the country. It
will be floating a tender for procurement of WiMax systems based on IEEE
802.16e-2005 standard. Mobility feature will be supported by these systems in
future. BSNL has plans to provide WiMax services through franchisees. It is also
planning to roll out broadband services in talukas and villages, with an initial
rollout planned for the three circles of Haryana, Tamil Nadu, and Karnataka. It
would set up soft-switch infrastructure to leverage on VoIP traffic under a
revenue share arrangement and invite expressions of interest (EoIs) from IT
infrastructure companies for the same.

VSNL plans to extend its WiMax network to around 120 cities
across India for enterprise customers and in five cities for retail customers by
the end of this financial year. VSNL also provides services in the Wi-Fi space,
with nearly 300 public hotspots in India.

Bharti Airtel has already deployed fixed WiMax in eleven cities-Ahmedabad,
Mumbai, Pune, Hyderabad, Bangalore, Cochin, Trivandrum, Kolkata, Jallandhar,
Chandigarh, and Kolhapur. According to sources, the company had plans to roll
out 600 WiMax outlets in rural India by the end of the financial year.

Sify has successfully deployed more than 14,000 radio links as
customer last miles and is aggressively using wireless products. Sify has plans
to expand the network coverage to rural India. "We will be leveraging both
fixed WiMax as well as mobile WiMax to expand the coverage areas," says
Bhaskar S, CTO, Sify.

He, however, laments the delay in spectrum allocation. The
government is yet to come out with a spectrum allocation policy for WiMax, which
can delay rollout plans. "Shifting of existing satellite based operations
in the band 3.4—3.7 GHz is getting delayed and trials are in progress to
assess the possibility of co-existence between terrestrial broadband services
and satellite-based services as per the latest communication from the Ministry
of IT and Communication," adds Bhaskar.

Reliance is also catering to the enterprise, especially small to
medium sized businesses, for the data business offering wireless broadband
service. It launched a premier Internet package over WiMax broadband wireless
network while activating the network in Pune and Bangalore to provide full city
coverage.

Prakash Bajpai, president, Home and Enterprise Business,
Reliance Communications, says, "We anticipate monthly subscriptions from
our broadband wireless service for SMBs segment to yield a minimum of Rs
1,000-10,000 per subscriber a month, ie, $25-250 per subscriber per month,
depending on the package. We are targeting around 100,000 broadband wireless
subscribers across selected cities in the first year." The company plans to
expand from two cities (Pune and Bangalore) to at least twelve cities by the end
of 2007.

Net4 (Trak Online) is another stand-alone ISP that has taken the
WiMax route to expand operations. Currently, it provides fixed WiMax services in
Mumbai, Delhi, Chennai, and Bangalore, and plans to increase its reach in phases
over the next eighteen months to cover eleven major business cities in India.

Jasjit Singh, MD and CEO, Net4, explains the company's
strategy on choosing WiMax, "We are focused on providing IP communications
solutions to business and hence are initially concentrating on Fixed/Nomadic
WiMax services. We see bundling bandwidth and VoIP services as a key market
driver for business customers." At present, the CPEs are fixed. However, by
the end of the year, Net4 shall be providing nomadic services also to serve
certain industry specific small and medium enterprise with slightly varied
needs.

More With Mobility

WiMax, though deployed by over fifty operators and ISPs globally, is yet to make
its mark in the mobile consumer domain owing to the non-availability of
hand-held devices that support the so-called fourth generation communication
protocol.

So far, only state-owned BSNL has plans to set up a mobile WiMax
network in India. As cities like Pune and Bangalore are getting unwired, there
are aggressive plans to introduce mobile WiMax there. According to MN
Vidyashankar, secretary, Department of Information Technology, Bangalore will be
ahead of Pune in mobile WiMax. So far, Pune has overtaken Bangalore in offering
fixed WiMax connections.

Encouraging signs are already visible. The devices currently
being designed by the five companies-Motorola, Intel, Samsung, Nokia, and LG-will
be customized for running on WiMax-CDMA dual network. These devices can be
shipped to India too, provided there are enough orders placed in time.

Motorola is one of the only three big consumer electronics
companies building WiMax hand-held devices ground up from the chip level.
Samsung and Intel are also engaged in developing the chips, the other two big
brands, Nokia Oyj and LG Electronics are expected to use third party chipsets.

Navini Networks, a leading provider of Mobile WiMax solutions,
has recently signed a VAS agreement with GTL, India's largest network services
provider to the world to provide services and solutions to telecom operators
deploying Navini's Mobile WiMax solutions. Intel is confident that by 2008, it
will roll out notebooks that will have the WiMax Silicon Chip inside allowing
for anytime-anywhere connectivity.

During his recent visit to India, Mike Zafirovski, the president
and chief executive officer of Nortel, reiterated Nortel's aims to be the
tier-1 WiMax player in India. It is currently carrying out pilots with all
leading telecom companies on WiMax deployment. "We are talking to most of
the service providers in India for our WiMax solutions. Nortel is the only WiMax
vendor with extensive experience across all other wireless technologies
including CDMA, GSM, GSM-R, Wireless Mesh, and WLAN, with more than 300 wireless
networks deployed in over seventy countries by the carrier service
providers," adds Ravi Chauhan, MD, Nortel India.

Bhaskar is positive about mobile WiMax. "It has the
potential to do almost everything that traditional cellular systems do, but at
far lower cost and with higher data rates. But, mobile WiMax is yet to mature as
a technology and, hence, wide spread acceptance will take some time." He
further adds that timing, pricing, and scale will be critical to the success of
WiMax, and service providers must prove that WiMax can deliver much more than
basic broadband.

However, with the 802.16e standard yet to mature and capture the
mindshare, operators carry on with the wait and watch approach. "While they
do that, they will certainly not hold on to rolling out HSPDA- or CDMA-based
mobile broadband networks, and that is what we are already seeing in many
telecom markets," says Singh. "In the medium to long term though it
would be a combination of networks from the integrated telcos and pure play
WiMAX from other players," Jasjit adds.

Call for Growth

"More has been done this year for broadband than previous years,"
says Gupta. Aperto Networks, like many other WiMax equipment providers, is very
optimistic about India's WiMax potential. "Currently India contributes
10% to the overall revenue for Aperto, but we clearly see this figure doubling
in the next 12-18 months," he adds. He, however, adds that subsidy on WiMax
CPE could trigger off a further surge in growth.

And, there are statistics already supporting the claim. As per a
market study entitled "India Wireless Broadband and WiMax Market Analysis
and Forecasts 2006-2012" by Tonse Teelcom and Maravedis, India will have 13
mn WiMax subscribers by 2012. "However, shortage of spectrum is a serious
obstacle for massive adoption of broadband wireless and WiMax in India. For
WiMax to prosper in India, license holders will need at least 20 MHz of spectrum while they currently hold 12 MHz or less. 20 MHz is a minimum
to support wide scale deployments and hence a profitable business case,"
warns Sridhar, co-author of the report and CEO of Tonse Telecom.

Undoubtedly, the market opportunity is vast, and cash registers
have begun to ring. However, the critical factor will be how much spectrum is
good enough for the moolah to keep pouring in.

Malovika Rao

malovikar@cybermedia.co.in