The most significant trend that is being seen in telecom markets across the globe, including India, is the rise in data consumption. This can also be seen in the Indian telecom industry, which is driven by the launch of high speed mobile networks. To stay relevant in such a competitive market, operators have been devising strategies to tap into the growing demand for high speed data. This has led to a constant evolution in mobile networks from 2G to 3G and 4G.
In India, 4G was first launched in 2012 by Bharti Airtel in Kolkata, two years after it was allocated broadband wireless spectrum (BWA) for the purpose of offering 4G services. After a few years of moderate growth, the second half of 2015 was quite eventful in terms of service launches. By the end of 2015, almost all major Indian operators had gone live with their 4G services in select circles and pockets.
Operators in launch mode
The successful 4G launches in 2015 were driven mainly by the government’s decision to liberalise spectrum, which allowed operators to offer 4G services by utilising airwaves in the 1800 MHz band. This led operators like Idea Cellular, Vodafone India, Reliance Communications (RCOM) and Videocon Telecom to buy substantial spectrum in the band during the March 2015 auction. Spectrum in the 1800 MHz band also attracted interest from operators like Bharti Airtel and Reliance Jio Infocomm Limited (RJIL), which had been unable to successfully launch 4G despite having held BWA spectrum since 2010. The auction allowed these players to pick up spectrum in the more efficient 1800 MHz band and strengthen their foothold in the market.
A look at the reach of major telecom operators…
Bharti Airtel: Bharti Airtel launched 4G services as early as March 2012 in Kolkata, thereafter extending them to other cities at a sluggish pace. However, by mid-2015, the operator had adopted an aggressive strategy and partnered with Ericsson to roll out its 4G network. Its 4G services are currently available across more than 350 cities across a range of smart devices like mobile phones, dongles, 4G hotspots and Wi-Fi dongles.
Idea Cellular: Towards the end of 2015, Idea Cellular began launching its 4G services across all the southern states where it holds spectrum – Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Telangana. It has kept up this momentum in 2016 as well, making 4G inroads into the central and north Indian circles as well. So far, it has launched 4G in eight telecom circles, the latest being Odisha in February 2016. The operator is now in the process of rolling out 4G in the Punjab, Madhya Pradesh and Chhattisgarh, and Haryana circles. It will also launch 4G in Maharashtra and Goa, and the Northeast by March 2016, taking its coverage to a total of 750 cities and towns across 10 circles by mid-2016. To this end, it is planning to roll out 30,000-35,000 3G and 4G cell sites and invest about Rs 10 billion in 4G launches. It is also planning to roll out 4G in the Gujarat and Uttar Pradesh (West) circles after its deal with Videocon to buy spectrum in these circles concluded.
Vodafone India: The operator marked its 4G entry in December 2015 by launching services in Kerala, followed by Karnataka. It currently offers 4G in select cities in both circles on the 1800 MHz band. It has also rolled out 4G in the Kolkata, Mumbai and Delhi-National Capital Region (NCR) circles, taking its coverage to a total of five circles. The operator is planning to launch 4G in the Haryana and Uttar Pradesh (East) circles by April 2016. In January 2016, Vodafone awarded Nokia a contract for deploying its 4G network in Mumbai, Kolkata and Punjab. While services in Mumbai and Kolkata have been launched under the first phase of the operator’s 4G roll-outs, they will be launched in Punjab in the next phase.
For developing its 4G strategy in India, Vodafone can draw lessons from the global 4G experience of its parent group. The UK-based telecom giant has launched 4G in 18 countries so far and currently has over 20 million 4G customers.
BSNL: Bharat Sanchar Nigam Limited (BSNL) entered the 4G space by rolling out services in Chandigarh on a non-commercial basis in January 2016. They are currently available for a limited number of BSNL employees. Customers can visit the 4G centre to avail of the same. With this launch, BSNL became the first operator to launch 4G in the 2500 MHz band. It currently has spectrum in the 2500 MHz band in 15 circles.
BSNL is planning to take the Wi-Fi route to increase its 4G uptake. It will integrate its Wi-Fi hotspots with the mobile network so that they virtually act as 4G hotspots. It has already established 620 such hotspots and will be setting up 2,500 by the end of March 2016. It intends to take the total number of hotspots to 40,000 by March 2017.
RJIL: Along with Bharti Airtel, RJIL has held BWA spectrum since 2010. However, the launch of its 4G services has continued to elude the industry for several years. In 2015, however, it did conduct a soft launch by offering 4G to its employees on a small scale. While the operator has done significant groundwork in terms of deploying robust physical network infrastructure and developing relevant applications and content, the industry is now looking forward to the commercial launch of its 4G services. The company has announced that this will take place in the latter half of 2016. It has already invested about Rs 1,000 billion in readying its telecom network. In January 2016, its board approved a proposal to infuse fresh equity of Rs 150 billion by issuing 15 billion shares to existing shareholders.
The operator has tied up with RCOM for sharing and trading 4G spectrum. This is not only likely to adversely affect the incumbents’ business but will also bring in significant gains by allowing RJIL to access the majority of RCOM’s existing user base. Meanwhile, RJIL will be able to provide voice services to subscribers by using circuit switched fallback technology in addition to voice over long term vvolution (VoLTE) and voice over Wi-Fi.
Others: Aircel is currently offering 4G services to enterprise clients through leased lines and Wi-Fi devices. Meanwhile, Tikona Digital Networks has announced its plans to roll out 4G across 30 cities in its five telecom circles in the first half of 2016. Telenor has also announced plans to launch 4G in five to eight cities in India by mid-2016.
Pricing, marketing and content
In order to attract more users, operators are adopting strategies like easing price points to bring 4G at par with 3G, making 4G SIMs available before service launches for a smooth transition, and offering relevant digital content.
For instance, Bharti Airtel has brought 4G tariffs down to 3G levels. It is also offering add-ons like unlimited mobile voice calls, bundled movies and music packs, and a mobile application that gives users access to a vast collection of videos. The operator has tied up with retailers for home delivery of 4G SIMs on buying specific brands of handsets. It is offering the home delivery of 4G SIMs for existing customers as well.
Meanwhile, Vodafone India has been selling 4G SIMs in a circle before launching the service in that circle. For instance, its 4G SIMs were available in Delhi before the commercial launch of its high speed wireless data services in the national capital. Customers who chose to upgrade were offered 1 GB 4G internet free at the time of the launch. Prior to that, Vodafone had sold 4G SIMs in Mumbai.
On the content side, RJIL has put in place strategies to position itself as a digital content company. It has readied its network for offering end-to-end solutions across the entire value chain of digital services including education, health care, security, communications, financial services, government-citizen interfaces and entertainment. It has also launched applications like Jio Chat and Jio Money exclusively for its network in various categories. In addition, it has launched its own 4G-enabled handsets with features like VoLTE and voice over Wi-Fi.
Challenges
While operators have finally devised strategies for 4G deployment, they continue to face several challenges. These challenges can be mainly categorised as technical, regulatory and ecosystem driven.
Technical challenges are on account of the fact that transitioning to 4G can involve significant changes in network architecture. 4G LTE requires new radio access technology and core network expansion. The process is cost-intensive as well as complex. In addition, since 4G has to co exist with 3G and 2G for some time, there is an additional burden on operators to maintain two networks and support interoperability, seamless roaming and call handovers across multiple service providers. As data consumption over high-speed networks increases, the backhaul requirements of operators will also go up. This will drive operators to upgrade their existing capacity to ensure that the user experience does not deteriorate. Moreover, they will need VOLTE to counter potential threats from over-the-top (OTT) applications that thrive on high-speed networks like 4G. All these demands require huge investments, which debt-laden Indian operators might find difficult to make. This is probably one reason why 4G roll-outs in the country have been selective.
On the regulatory side, there is a lack of consensus on a standard frequency for deploying 4G. This has increased complexity for device manufacturers and chipset vendors as these components are required to support multiple bands. However, in India, the regulator has left it to operators to choose the most efficient band for deploying 4G. While most of them have launched 4G over the 1800 MHz band, they are now gearing up to buy spectrum in the 700 MHz band as it is considered the most efficient in this regard. Meanwhile, the lack of contiguous spectrum in the 1800 MHz band remains a key issue. This has put a constraint on the provision of seamless services across circles. The industry is lobbying for contiguous spectrum to ensure a better 4G experience.
The rapid deployment and adoption of 4G has also been limited due to the lack of a supportive ecosystem. For instance, the paucity of affordable 4G-enabled devices has kept operators from deploying these services on a large scale. Handset vendors, in turn, are required to make devices that support multiple frequency bands.
Outlook for 2016
While multiple challenges are involved in the widespread adoption of 4G, these are expected to be resolved as operators gain more experience with this technology. India offers immense potential for 4G as the growth of fixed broadband subscribers has been quite low. To increase broadband penetration beyond urban areas, mobile broadband services, particularly 4G/LTE, can drive future growth. A key differentiator for 4G technology is high speed connectivity, which facilitates the use of data-and bandwidth-intensive applications. In addition, the poor fibre connectivity and the cost-effectiveness of wireless technology as an access medium will drive the adoption of 4G as the broadband technology of choice, going forward. The availability of low-cost access devices, innovative applications and content and favourable government policies are also likely to enable the proliferation of 4G.
Meanwhile, operators will need to ensure adequate returns on 4G investments. Since traditional operators are being threatened by the rapid emergence of OTT players, the former must invest in VoLTE to remain competitive. Some operators have already taken steps in this regard. In 2015, RJIL awarded Nokia a contract worth Rs 6.7 billion for pan-Indian VoLTE deployment. Meanwhile, Airtel and Vodafone India have reportedly signed deals with Nokia to deploy VoLTE on their networks. Idea is reported to be in active talks with the vendor as well. However, unlike RJIL, the incumbents are likely to use VoLTE as a complementary service to their existing offerings. On the other hand, VoLTE will form the basis for RJIL’s voice service as it has limited 2G and no 3G fallback network.
The upcoming auction holds immense promise for the industry as the government has announced that it will be selling spectrum in seven bands, including 700 MHz, 2100 MHz and 2300 MHz, which is expected to help operators offer data-led services. The increased availability of LTE spectrum is expected to aid in the launch of next-generation technologies and provide a better user experience. According to industry analysts, there is going to be higher demand for the 2100 MHz and 2300 MHz bands as the device ecosystem is more mature in these bands. The 700 MHz band could face a situation similar to the BWA spectrum auction in 2010. However, there is a clear indication that operators will be vying for more LTE spectrum to maintain their competitiveness.
In sum, the year ahead is expected to be a milestone one for 4G in India as the mass launch and uptake of services is expected across the majority of cities and towns. However, its success depends largely on the evolution of the supporting ecosystem and the market dynamics after RJIL’s launch in the second half of 2016.
