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Operator perspective

November 16, 2010

With the completion of the 3G and broadband wireless access (BWA) spectrum auctions, the sector is gearing up to replicate the success of mobile telephony in broadband. The potential of BWA technologies is evident from the fact that the auctions fetched the government over seven times the reserve price per block. recently organised a conference, “BWA in India”, to provide a platform to discuss the potential and challenges associated with these services. The following section on Operator Perspective brings forward the views of  Bharat Bhargava, Chief Strategy Officer, Aircel and  Sanjeev Tyagi, General Manager, Network Planning, BWA, BSNL….

Bharat Bhargava, Chief Strategy Officer, Aircel

Several technologies are available in the market for operators to provide broadband wireless access (BWA) services. Currently, CDMA operators are using the evolution data optimised band and other technologies such as high speed packet access in 2.1 GHz, long term evolution (LTE) and Wi-Max. The most important issue in providing BWA services from the operator’s perspective is the dilemma over choosing between LTE and Wi-Max, and adopting both. Each operator has 20 MHz of spectrum, which can be split into two halves for LTE and Wi-Max.

Wi-Max technology is available with all the equipment in place and so operators want to adopt it to capitalise on the 3G opportunity at the earliest. However, LTE is the evolution path for GSM operators and, therefore, they will need to migrate to LTE in the future. But this migration poses a major challenge. Network migration is difficult but manageable, but a bigger problem is the migration of subscribers from one technology to another, especially when they are using a single-mode device. For example, it would be difficult to replace Wi-Max dongles with LTE dongles. However, the problem with waiting for LTE is that it is still in the trial phase and large-scale adoption will take some time.

In the long run, it would be beneficial for all operators to adopt the same technology standard. If some operators choose to deploy Wi-Max and others LTE, intercircle and intra-circle roaming will not be possible. This functionality is very important as none of the service providers except Bharat Sanchar Nigam Limited (BSNL) and Tata Communications have a pan-Indian BWA licence. Also, the adoption of the same technology platform can help to achieve better economies of scale and lower costs.

Another important aspect is the type, cost and availability of terminals for both technology standards. While Wi-Max terminals are available, they are manufactured by non-standard vendors. Also, the vendors do not have an extensive distribution network to reach the remote parts of the country. If the operators take the LTE route, they would have to spend heavily on terminals irrespective of a rural or an urban rollout. Unless operators choose to subsidise the terminals, the wireless broadband market will be limited to urban and semi-urban areas. They should not focus only on low-cost dongles as the market for these devices is very small. The computing device market, which consists of personal computers and laptops, is maturing and the prices are coming down.

Apart from these two mediums, we also need to focus on terminals that support voice on both GSM and CDMA, and data on the broadband wireless technology. Smaller form factor devices like net-books and tablets are another upcoming segment but prices will govern their adoption. Thus, the availability and price of terminals is a critical factor in determining the adoption levels of wireless broadband as well as the revenues this segment can generate.

For private operators, given the cost and availability of terminals, an initial growth in wireless broadband can be expected in urban areas. Therefore, initially, operators would concentrate more on the cities and metros. As far as BWA network capex is concerned, it would not be very high for operators that own 3G spectrum and have a 3G network in place. The capex would be $10,000-$15,000 per base transceiver station (BTS). The opex would depend on the availability of an underlying 2G/3G network. If a 2G/3G network is available, the opex would be only Rs 2,000 per BTS, in addition to energy costs. It would be much higher for operators that don’t have an underlying network.

The launch of wireless broadband has sparked off a debate on whether operators should focus only on providing broadband access or should also venture into the broadband application space. Though a lot of opportunities lie in the application space, an operator needs to decide which part of the value chain it wants to belong to. Offering broadband access itself is a huge business opportunity. Providing end-to-end solutions is difficult and requires strategic partnerships as well.

Finally, with a high level of competition in the Indian telecom space, operators can differentiate their services based on the applications offered, content and terminals. The most critical factor for the success of an operator would be the quality of service it provides to the end-user.

Sanjeev Tyagi, General Manager, Network Planning, BWA, BSNL

BSNL was awarded Wi-Max spectrum in 2008, about two years before June 2010, when the BWA spectrum auctions were held. The company started Wi-Max deployment and rollout in 2008, in line with the government’s mandate of providing wireless broadband to the common service centres (CSCs) in rural areas. The company was provided financial assistance by the government for rural rollouts, but had to incur all other network costs. However, after the BWA auctions, BSNL had to shell out a huge amount to match the winning bids for BWA spectrum.

In urban areas, the operator is going ahead with BWA rollout using Wi-Max. It has adopted the franchise model to roll out services, under which the capital investment is made by the franchisee on a revenue sharing basis. The franchisee partners have been told to set up a network that is capable of migrating to LTE if required.

Currently, the broadband penetration in the country is less than 1 per cent. With the government’s target of covering 250,000 village panchayats and reaching 100 million broadband subscribers by December 2012, BSNL sees a huge potential in the wireless broadband business. 

BSNL currently has a 60 per cent share in the asymmetric digital subscriber line (ADSL) business. But ADSL has a limited capacity, and with this technology, the state-owned operator can reach a maximum of 15 to 20 million subscribers. The company is targeting an internet subscriber base of 35 to 40 million through 3G services.

Wi-Max will be a key focus area for the company in the future. The operator is targeting a broadband subscriber base of 205-210 million by 2018. Of this, 20 million subscribers would be provided the service using ADSL technology and another 25-20 million would be catered to through the fibre-to-the-home platform. A bulk of the connections will be on the company’s 3G network and the number of internet users on 3G is expected to reach 135-150 million by 2018. During the same period, the Wi-Max subscriber base would reach 50-55 million.

Given that the voice market is already saturated, data services are expected to generate maximum revenues for operators in the coming years. Therefore, operators are investing in their networks to capitalise on the wireless broadband uptake. BSNL has a strong presence in the country except in the Delhi and Mumbai circles, and has an extensive active and passive infrastructure. Therefore, on the capex front, the operator would incur only an incremental cost, especially for rural areas. It would also need to spend to achieve a pan-Indian Wi-Max coverage. On the opex front, BSNL will have to bear a marginal additional cost as it is using its existing infrastructure.

Initially, BSNL’s wireless broadband services were concentrated in the rural market. In these areas, the state-owned operator was focusing on providing wireless broadband access to CSCs and village panchayats. Therefore, the company initially purchased both indoor and outdoor customer premise equipment (CPE) and subsidised it for rural usage.

BSNL also offers a variety of plans including the nominal monthly rental of Rs 25 to Rs 30 per month for CPE in order to boost rural broadband penetration. However, in the long run, operators as well as device and hardware manufacturers would need to work together or tie up to develop affordable hand-held devices, personal computers, laptops and notebooks. The availability and affordability of devices is expected to play a significant role in the success of wireless broadband services in India. BSNL has tied up with Intel and is developing chips for embedded devices. The company is also in talks with device manufacturers to bundle offers for the smoother rollout of customer-end devices.


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