Wireless Infrastructure: Betting on Rural Markets

Amidst rumors of a possible slowdown in the wireless
infrastructure market in the world (excluding India) in 2007-08, India has shown
sustainable growth in net additions of mobile subscribers in the past one year
and the overwhelming rise will continue in the coming years too. Indian service
providers and wireless infrastructure players have always been comparing their
statistics or growth stories with our neighbor China, the largest telecom market
in the world. Their efforts have resulted into some cheers in August and
September last year, when India added more wireless subscribers than China. This
is a very important achievement because this also means India is showing a
faster and sharper growth trajectory. This would suggest that India will reach
the same milestones that China has in a shorter timeframe. According to industry
estimates, approximately 80-100 mn wireless subscribers will be added resulting
into approximately $5-6 bn business opportunity. The future growth, which will
mainly come from GSM and WiMAX, will be in rural, with more than 35% of new
subscribers coming from C-category circles (rural).

Entering a New Orbit

The growth curve on penetration has now clearly entered a new orbit. And we
believe that the coming months and quarters should show a very healthy and
robust growth in the telecom services especially in the mobile segment given the
over all growth of economy and the accelerated GDP growth. Teledensity has
increased to almost 100% in the past two years, from 8.62 at the end of December
2004 to 17.16 at the end of December 2006.

Both the GSM and CDMA communities are framing enough strategies
for enhancing the network in India. For instance, the CDMA community to promote
further wireless penetration has spearheaded accelerating the availability of
entry-level devices in India. Since the beginning of 2006, CDMA handsets have
accounted for as much as 60% of all entry-level handsets imported into India on
a monthly basis. The CDG expects to see sub-$40 (wholesale) CDMA handsets become
commercially available in the Indian market soon.

CDMA offers the largest selection of fixed and mobile devices to
address the diverse needs of India's market segments. Introducing mobile
broadband services will stimulate foreign investment, increase productivity, and
help strengthen the economy. India's enterprises, small businesses, consumers
and government will be the benefactors.

What can Hamper Growth?

Cell phone penetration in India is just 13.5% in 2007, while the predicted
penetration will rise to 31.5% in India in 2010. Mobile subscribers want a wide
range of services over numerous networks with a seamless experience. Service
providers are looking for better ways to compete in a converged services world.
Infrastructure providers are fine-tuning their mobile broadband solutions offer
new user experiences and create market opportunities for service providers.

Wireless growth has taken over the growth of wireline in India.
India's integrated telecom player like Bharti is adding over a million
customers every month during 2006-07. The factors that are driving the growth in
the Indian telecom market-affordability, reduction in tariffs with reduction
in taxes, handset prices, innovative packages to suit different segments,
availability, network expansion, distribution reach, etc.

However, in order to achieve a sustainable growth, adequate
spectrum is required. The available bands for GSM spectrum are 900 Mhz and 1,800
Mhz. As of today, the 900 Mhz band has been fully utilized and the 1,800 Mhz
band has miniscule availability. The government has set up a committee for
enhancing spectrum availability. The defense services are expected to vacate up
to 75 Mhz in the 1,800 Mhz band, out of which 20 Mhz is expected to be vacated
in the next few months. In fact, India may never have adequate spectrum but we
are sure that we will keep getting our bit from time to time.

Service Provider Demands

Telecom operators are looking at curtailing project implementation costs.
This can be via sharing passive infrastructure and selecting one prime vendor to
undertake the end-to-end implementation. Operators are looking for solutions
that provide them with lower Opex and also help them in generating
higher ARPUs and taking leadership. Spectrum allocation by the government is a
main concern among operators as well as infrastructure providers. Another
concern for infrastructure providers are dropping prices.

Aspiring for Better Things

Speed of deployment, start-up costs and quick revenue returns are
significant factors in the favor of wireless technology. Wireless broadband,
WiMax, Mesh solution for SEZ, enterprise mobility solution for retail and new
VAS applications and contents will dominate the market. 

New HSPA Embedded Module

At 3GSM World Congress in Barcelona, Ericsson has launched its new HSPA
embedded module, which enables built-in mobile broadband in every new notebook
computer, as well as in any other device.

To further strengthen its position in the broadband market,
Ericsson is moving to bring HSPA to every new notebook, fixed wireless terminal
and any other device where 3G can replace ADSL. The launch is in line with
Ericsson's strategy to accelerate the growth of the mobile broadband market
and continue its world leadership. Ericsson wants to make mobile broadband a
mass market.

Networks all over the world are now being upgraded and users are
starting to realize that the same high-capacity services that, until now, have
been available only at home or in the workplace can be accessible using any
device. Users are beginning to see the possibilities of mobile broadband-connectivity
to any service, anytime, anywhere and on any device.

4G Scenario

Though India is yet to come out with its final policy on the 3G deployment
policy and both GSM and CDMA players are loggerheads on the spectrum pricing,
cellular service providers are talking about 4G, the short term for
fourth-generation wireless, the stage of broadband mobile communications that
may be way ahead of the 3G. While neither standards bodies nor carriers have
concretely defined or agreed upon what exactly 4G will be, it is expected that
end-to-end IP and high-quality streaming video will be among 4G's
distinguishing features.

Fourth generation networks are likely to use a combination of
WiMax and Wi-Fi. Technologies employed by 4G may include SDR (software-defined
radio) receivers, OFDM (orthogonal frequency division multiplexing), OFDMA
(orthogonal frequency division multiple access), MIMO (multiple input/multiple
output) technologies, UMTS and TD-SCDMA. All of these delivery methods are
typified by high rates of data transmission and packet-switched transmission
protocols. When fully implemented, 4G is expected to enable pervasive computing,
in which simultaneous connections to multiple high-speed networks provide
seamless handoffs throughout a geographical area. Network operators may employ
technologies such as cognitive radio and wireless mesh networks to ensure
connectivity and efficiently distribute both network traffic and spectrum.

The high speeds offered by 4G will create new markets and
opportunities for both traditional and startup telecommunications companies.
Japanese telecom major NTT DoCoMo is testing 4G communication at 100 Mbps for
mobile users and up to 1 Gbps while stationary. NTT DoCoMo plans on releasing
their first commercial network in 2010. Other telecommunications companies,
however, are moving into the area even faster. In August of 2006, Sprint Nextel
announced plans to develop and deploy a 4G broadband mobile network nationwide
in the US using WiMax.

4G Before 3G?

In India, many service providers are not targeting a huge subscriber-base
for their 3G services because the services may be pricey too. On top of this, 3G
may be restricted to metros because of 3G handsets may not be affordable to
masses in India's rural belt. 3G performance may not be sufficient to meet
needs of future high-performance applications like multi-media, full-motion
video, wireless teleconferencing, etc. We need a network technology that extends
3G capacity by an order of magnitude. Some feel that WiMax deployment may be
faster than the roll out of 3G services because of the scarcity of spectrum in
India.

Building 4G Networks in India

Is India gearing up to offer 4G? Not yet. A number of spectrum allocation
decisions, spectrum standardization decisions, spectrum availability decisions,
technology innovations, component development, signal processing and switching
enhancements and inter-vendor cooperation have to take place before the vision
of 4G will materialize. We think that 3G experiences-good or bad,
technological or business-will be useful in guiding the industry in this
effort. We are bringing to the attention of professionals in telecommunications
industry following issues and problems that must be analyzed and resolved: 

WiMax

WiMax, which is placing the world on the threshold of a total transformation in
wireless broadband communications, is one of the disruptive technologies for
several players in India where the deployment is slated during the calendar
year.

WiMax is undergoing changes in line with customer demands. Sify
recently launched a first-of-its-kind WiMax solution with mobility features,
with the deployment of Proxim Wireless Corporation's advanced wireless
product. For this, Sify has chosen and deployed Proxim's Tsunami MP.11 WiMax
product line as the core communications platform for last mile access using the
5.8 GHz frequency band. Sify has deployed over 700 Tsunami MP.11 base stations
and 3,500 subscriber units to provide Internet access, voice and video broadband
services to enterprise, residential and cyber café subscribers in over 200
cities throughout the country.

WiMax delivers standards-based, high-speed voice, data and
Internet connectivity in licensed spectrum for both fixed and mobile
applications. Most importantly, it is the first technology that delivers true
broadband mobility at speeds that enable powerful applications such as VoIP,
online gaming, mobile TV and personalized infotainment. WiMax doesn't depend
on scattered hot spots. WiMax makes the world one big, never-ending hot spot.
Service operators can provide high-speed communications to customers whether
they're at home, at the office, or on the move. WiMax is about to make the
Internet, and truly personal broadband, as common as air.

As an open standard with interoperable capabilities, WiMax
provides a common language between equipment vendors and operator networks and
devices. With industry-wide support, high performance and substantial cost
advantages, WiMax is poised to play a key role in the transformation of wireless
networks on a global scale. Motorola is building a true end-to-end ecosystem for
delivering fully integrated WiMax solutions worldwide founded on our global
presence, technology heritage and industry-leading collaborations in mobile
broadband.

The WiMax protocol allows for high speed (up to around 70 Mbps)
and long range (several and in some cases several dozen of kilometers) wireless
communication. WiMax could potentially allow cheap, high-speed wireless
communication everywhere and find uses ranging from VoIP mobile phones to high
definition wireless TV broadcasting. Like Wi-Fi, the power consumption of WiMax
is considerable, and therefore is not suitable for use in small, low power
devices.

Trends

Consolidation is already taking place in the world in the wireless
infrastructure space. Because of consolidation, major wireless infrastructure
players will look at their business model (following the consolidation) and
their manpower base and this will lead into restructuring globally. This may not
be an indication of a slowdown, but their strategy for pruning costs and
improving productivity will see realignment in business.

However, technology will drive the market growth. New
innovations will continue as the entire global telecommunication market is yet
to be tapped and there is enough room for growth, but some geography throws some
tough hurdles. In this case, wireless telecom service providers and
infrastructure companies will have to work together to offer customized
solutions.

Motorola recently announced that it has signed an agreement with
the GSM Association (GSMA) and MTC Namibia to conduct a trial for wind and solar
power systems to support the African operator's remote GSM cell sites. This is
the first customer-based trial globally and the trial is expected to run from
April 2007 to July 2007.

Green Solution

The trial involves the installation of the Motorola wind and solar solution
at an operational MTC Namibia cell site where the solution will become the
electrical power source for the site. The cell site will remain a part of MTC
Namibia's current wireless network and continue to carry the same levels of
traffic.

This 'green' solution provides a feasible and efficient
alternative to using fuel generators when a main grid connection is not
available or it will take months or years to connect or finally, where
electricity tariffs are expected to rise sharply in the next few years. Once
installed, the cost of power is almost zero, and wind and solar powered cell
sites require minimal maintenance unlike a diesel driven generator which
generally requires, at a minimum, a monthly visit for refueling and they can
also be heavily prone to theft. This translates into added savings in operating
expenditure (OPEX), a key factor to emerging market network operators.

Companies are framing strategies to produce portions of the
Reach GSM equipment locally in order to provide low-cost solutions for rural and
urban cellsite deployments. As part of this initiative, Motorola announced a new
commercial and production strategy that aims to reduce initial network rollout
costs by having elements of its Reach GSM portfolio manufactured locally.

The reach strongbox, a DC outdoor enclosure for Motorola's
Horizon II macro BTS, will be the first product delivered under this strategy.
Phased deployments of over 1,300 units have been started in India to serve major
cellular operators in the local market.

This localized production approach brings benefits for cost of
production and lower duties and taxes. Motorola will also roll out this strategy
to other markets including China and Africa. The reach strongbox solution also
allows a full 2G to 3G upgrade by being able to house the Motorola Horizon 3G-n
Node B or combined 2G and 3G operation using a 3G-n Fiber upgrade to the
strongbox enclosure.

Besides this clear upgrade path, Reach GSM provides high
flexibility at lower cost by delivering low-entry cost network solutions with
scalable voice coverage and capacity, support for data services, and sustained
low operating expenses.

Fuelling Mobility

New developments and innovations are catching up in India too, mainly
because of the nature of the Indian terrain. Indian mobile operator Idea
Cellular, Ericsson and the GSM Association's Development Fund have formed an
alliance to develop biofuels as a source of power for wireless networks in rural
India. In a pilot project in Pune and Maharashtra, the three organizations will
begin using biofuels to power mobile base stations located beyond the reach of
the electricity grid.

The first phase of the project, which is testing the feasibility
of non-edible plant-based fuels, such as cotton and jatropha, is nearing
completion. The second phase of the project will entail setting up a supply
chain using locally grown crops to produce biodiesel to power between 5 and 10
base stations in the Maharashtra region. The goal is to have these base stations
powered by cotton or jatropha by mid-2007. Biodiesel has several important
advantages over conventional diesel as a power source for base stations.
Biodiesel can be produced locally, creating employment in rural areas, while
reducing the need for transportation, related logistics and security. Biodiesel
has a much lower impact on the environment than conventional diesel. The cleaner
burning fuel results in fewer site visits and also extends the life of the base
station generator, reducing operators' costs.

Cost-efficient Solutions

Aimed at cost reduction and better efficiency, network upgradation and
sourcing of next generation products will be one of the key trends. For
instance, Bharti Airtel has signed an estimated $1 bn network expansion contract
with Ericsson. The contract will enable Bharti Airtel to rapidly expand its
mobile services footprint further and reach out to all towns and cities in 15
telecom circles in the country. The three-year service contract with Ericsson is
towards the design, planning, supply and installation commissioning of Airtel
networks in these circles. Ericsson will also upgrade the network with mobile
softswitch (Media Gateway and MSC Servers), the solution that paves the way to
an all-IP network. Bharti Airtel will be able to reduce the operational costs
and introduce new services in a cost-efficient way. With this, Bharti will be
able to deliver better customer experience. In addition, Bharti will also be
sourcing next generation products that will allow it to deliver innovative
products and services to our customers.

And, India is the hot bed for WiMax innovations. Alcatel-Lucent
recently announced that C-Dot Alcatel-Lucent Research Centre (CARC), Chennai,
has successfully completed India's first live WiMax IEEE 802.16e-2005 (also
called Rev-e) field trial, saying this technology is ready for commercial
deployment. The trials were conducted using the 2.5 GHz band and successfully
demonstrated applications in moving conditions such as video streaming,
high-speed file downloads, voice over IP (VoIP) and Web browsing. WiMax Rev-e is
a revolutionary broadband access technology and it has the potential to provide
the country with widespread broadband access that can usher in economic growth,
better education, healthcare and improved entertainment services.

As GSM operators expand their network coverage into new areas,
one of the biggest challenges is to overcome operational issues associated with
the lack of basic infrastructure.

Baburajan K

baburajank@cybermedia.co.in