The 4G segment is yet to take off even after four years of the broadband wireless access (BWA) spectrum auction, which was conducted in 2010. Faced with policy and regulatory uncertainty, operators have repeatedly failed to deliver on their 4G roll-out commitments. While the strained balance sheets of incumbents such as Bharti Airtel have discouraged them from dedicating any major capex towards long term evolution (LTE) network and equipment installation, small players such as Aircel have adopted a cautious approach in a highly uncertain environment.
The delayed service launch also reflects the absence of a mature ecosystem for the technology. In the past, operators received a lukewarm response to 3G service launch, when the service ecosystem was largely underdeveloped.
However, with increasing regulatory and policy clarity in the past one year, operators now plan to launch a range of 4G services in latter half of 2014. Liberalisation of spectrum by the government, along with successful conclusion of recent spectrum auctions in the 1800 MHz band, has brought a wave of optimism in the market. The BWA spectrum holders have supplemented their existing 4G spectrum while other operators are now planning to enter the 4G space by utilising the newly acquired spectrum in the 1800 MHz band.
The data demand is growing exponentially and every operator is relying on high-speed data services to usher in the next wave of growth in the industry. Moreover, successful trials of voice over LTE (VoLTE) technology worldwide as well as increasing availability of LTE-enabled devices have encouraged operators to take a leap towards 4G commercialisation in India.
Besides a well developed 4G ecosystem, the approaching BWA roll-out obligation deadline set by the government (August 2015) will be a key driver for large-scale service launch in the next 8-10 months. These services will also go a long way in meeting the government’s ambitious broadband targets set under the National Telecom Policy, 2012.
tele.net takes stock of telecom operators’ plans in the 4G space as well as key growth drivers for these services…
Current status
As of March 2014, Bharti Airtel is the only BWA player to launch 4G services in the country (currently available in Kolkata, Bengaluru, Pune, Chandigarh, Panchkula and Mohali). The customer response to these services has been poor. While the operator has not shared any subscriber numbers, the country’s 4G user base is estimated to be over 5,000. The lack of coverage expansion or service launch in new circles in the past seven to eight months shows that Bharti Airtel’s plan of leveraging the first-mover advantage in 4G space has fallen flat. Therefore, players which had adopted a wait-and-watch approach, did not gain any significant lessons from Airtel’s experience as the 4G ecosystem remains underdeveloped. During the conference calls to its investors, Airtel has reiterated the challenge of offering seamless 4G coverage in the 2300 MHz spectrum band, which has a penetration of only 300-350 metres. Further, the device ecosystem continues to be at a nascent stage of development for the long term evolution-time division duplex (LTE-TDD) platform.
Bharti Airtel currently provides LTE- compatible wireless devices (dongles and routers) including multi-mode USB dongles and the Indoor Wireless gateway, manufactured by Huawei. Limited device compatibility, in fact, has been a damper for several 4G tariff reduction schemes introduced by the operator in the past several months. Recently, Airtel marked a major milestone by offering these services on a mobile platform in Bengaluru. The services can be accessed through some Apple handset models, while Android-based phones (which dominate the Indian handset market) are not 4G-compatible. Users will be required to upgrade to a new 4G SIM card to use these services on Apple iPhones. While data browsing will take place on 4G networks, voice calls will be routed through the 2G/3G network using circuit switched fall back technology.
Despite the challenges, Bharti Airtel is betting big on 4G services. The operator has acquired Qualcomm’s four BWA licences, which will allow it to roll-out services in the high-revenue circles of Delhi and Mumbai. Recently, Bharti acquired liberalised spectrum in the 1800 MHz band in several circles, which it plans to use for providing 4G services. However, interoperability between spectrum in the 1800 MHz and 2300 MHz bands will pose to be a key challenge for BWA spectrum holders.
The issues of interoperability and contiguity of spectrum are likely to be more severe for Reliance Jio Infocomm Limited (RJIL), which acquired pan-Indian BWA spectrum in 2010 and recently won 1800 MHz spectrum in 14 circles. RJIL has approached the Department of Telecommunications’ (DoT) Wireless Planning and Coordination cell seeking a reconfiguration of the spectrum blocks in the Northeast region, where only 25 of the 32 spectrum blocks won by RJIL are contiguous.
Spectrum issues notwithstanding, the market is looking forward to RJIL’s service launch. In the past one and half years, the company has signed key infrastructure sharing deals with Reliance Communications and Bharti Airtel, which will help in the initial launch of services. Further, it has been working on developing a suite of products ranging from remote healthcare to high-definition TV via the internet. These include high speed broadband, VoLTE and value added-services like Live TV (Jio Play), video on demand (Jio World), cloud base sync and storage (JIO Drive), video calls over LTE, and live video surveillance. RJIL will provide outdoor customer premise equipment (CPE) which will connect to its mobile tower. This CPE would be connected to various devices to create a local Wi-Fi network for users to access broadband services. A set-top box (STB) may also be provided which will facilitate both broadband and TV services. The STB has been developed on Google’s Android platform.
RJIL has showcased a series of healthcare products that it plans to deliver on 4G networks. While the bouquet of services that the company plans to launch in the country is distinct from that of its competitors, most of these services do not have a ready demand at present. Their success will be gauged in September 2014, when the operator plans to launch 4G services starting with the circles of Delhi and Mumbai. Trials have already been conducted in Delhi, Mumbai and Jamnagar. The second phase of roll-out is likely to take place in high revenue southern circles followed by a foray in the western, northern and eastern circles.
Among other BWA spectrum winners, Aircel recently partnered with ZTE for rolling out a 4G network. The operator will cover Chennai, the rest of Tamil Nadu and a few other business-critical circles in the first phase. Other players such as Tikona Digital Networks and Augure Wireless do not have any concrete plans of a service launch in the near future. State-run operators Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) have already surrendered their BWA spectrum to the government. While this has resulted in the release of funds for the ailing operators, the decision was also an outcome of poor uptake of their BWA services. Both BSNL and MTNL were provided BWA spectrum in the 2500 MHz band, much before their private counterparts. The PSUs had a head start in launching services but their decision to launch 4G services on the Wi-Max platform backfired when private players selected the LTE platform for service delivery.
New entrants in the 4G space
Although the majority of existing BWA spectrum holders are yet to test the water with a commercial 4G launch, several operators are looking to enter this market in the near future. The government has liberalised the spectrum allocated through multiple rounds of auction in the past two years. As a result, operators which acquired spectrum in the 1800 MHz band in the November 2012 and February 2014 auctions can utilise it for offering 4G services through the long term evolution-frequency division duplex (LTE-FDD) platform.
Videocon Mobile Services is one such player that is gearing up to launch 4G services in its six circles of operations, where it acquired spectrum in the November 2012 auction. Similarly, Idea Cellular plans to launch 4G services in eight of its key revenue markets where it acquired additional spectrum in the recent auction. It now has access to 10 MHz of liberalised spectrum in the 1800 MHz band in the Kerala circle, and 5 MHz of contiguous spectrum each in the Maharashtra and Goa, Andhra Pradesh, Karnataka, Madhya Pradesh and Chhattisgarh, Haryana and the Northeast circles. Vodafone India, with an additional 5 MHz of liberalised spectrum (in the 1800 MHz band) each in the Mumbai, Delhi, Kolkata, Karnataka and Kerala circles is also likely to become a 4G major in the Indian market.
High expectations
The Indian telecom market is showing a huge appetite for high speed data services. Going by the current trends, data consumption is likely to grow by 10 times from 180 petabytes in 2012 to 1,800 petabytes in 2015. Smartphone usage is growing at a rapid clip and these handsets are likely to account for one-fifth of the total handset market in India by 2015. Online video services have proved to be major driver of data consumption in the country and are expected to contribute to over 50 per cent of data consumption in 2017. In this scenario, the launch of 4G services will open up new avenues of high speed connectivity, especially in the metros and Tier 1 cities where on-the-move access to social networks, photo/video sharing and live content streaming have gained popularity. The introduction of LTE will also provide a major boost to the adoption of high-definition voice services.
The optimism among equipment vendors is driven by the expected high demand for 4G-related telecom equipment in the next two to three years. Huawei Technologies is aiming to increase its revenues from Indian operations from $800 million in 2013 to $2 billion by 2017, driven by the commercial launch of 4G services. Alcatel-Lucent is also betting big on LTE and VoLTE.
Moreover, 4G is expected to provide a major market for small and medium enterprises (SMEs). The country is moving towards e-commerce applications and 4G will help SMEs in leveraging technologies like cloud computing. 4G will offer vital links at faster speeds to connect the IT infrastructure of SMEs with that of the cloud service provider at affordable prices. In fact, enterprises comprise the biggest share of customers that currently avail of Bharti Airtel’s LTE services.
Finally, 4G services can be a major game changer in achieving the government’s objective of bridging the digital divide in the country. Fixed line services are unlikely to offer mass broadband access outside urban areas, particularly in the short term. Further, 4G networks will facilitate the delivery of several e-governance services in the areas of medicine, banking and education.
The way forward
The demand for data services will increase in the coming years and a well developed 4G ecosystem will be necessary to cater to this demand. As the industry move towards the deadline for rolling out services, the 4G space is likely to witness significant action. Assessing the market’s readiness and the demand for such services will be key to operators’ success in the 4G space. While the benefits of 4G services will be realised over a long term, it remains to be seen whether 2014 will finally become the year of 4G services for the country.