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Challenges Abound: A long way to go for large-scale LTE adoption

March 31, 2014

4G represents a significant growth opportunity for telecom operators. However, large-scale launch of these services has not taken place. The key reasons for the delay in service roll-out have been the limited availability of devices and inadequate backhaul infrastructure. Industry experts express their views on the challenges and outlook for the segment…

Benoy-CS-DirectorRohan-DhamijaArpita-Gupta-Senior-Consultant-KPMGHemant-M-JoshiAmit-Sachdeva-Partner-Ernst--Young

What are the likely growth drivers for 4G uptake in India?

Benoy C.S.

The prospects for LTE services in a country like India are bright as the growth of fixed broadband subscribers has been abysmal and if we have to increase broadband penetration beyond urban habitats, mobile broadband services, especially LTE, would be expected to drive growth. Also, availability of low-cost access devices and innovative applications, coupled with favourable government policies, is likely to enable the proliferation of mobile broadband services such as LTE. Besides, poor fibre connectivity and cost effectiveness of wireless technology as an access medium will drive the adoption of LTE as the broadband technology.

Rohan Dhamija

The growth drivers for 4G uptake in India are:

•Device affordability: Currently, there is a price premium globally on 4G devices as compared to 3G devices. With 3G devices being expensive for the mass market in India, availability of affordable 4G devices will take a couple of years. 4G device prices are expected to decline with the development of the 4G ecosystem.

•Network roll-out: Given the current ecosystem, lack of sub-1 GHz bands, and a continued focus on 2G and 3G, 4G network roll-outs are expected to start in real earnest in only a couple of years from now (though city-level deployments could start sooner).

 

Arpita Gupta

A key differentiator for 4G technology is high speed connectivity, which facilitates the use of data and bandwidth-intensive applications. The Indian market offers strong growth drivers for data consumption. 4G adoption, however, is limited by a nascent device ecosystem and the challenges related to voice capabilities.

Strong data consumption indicators are likely to drive 3G penetration. This would prepare the ground for 4G uptake till the time the key enablers are put in place.

The following are some of the key drivers for data-focused telecom services:

•Device availability: The biggest determinant of data consumption is the availability of access devices, primarily smartphones. Smartphone adoption is still at a nascent stage in the country and these devices account for about 17 per cent of total handset sales. However, the segment has shown strong growth with sales increasing from 16 million units in 2012 to 44 million in 2013. 4G uptake would also depend on the availability of affordable LTE-enabled handsets.

•Data volume growth: The top four Indian operators witnessed 120 per cent growth in data volumes between the quarter ended September 2012 and the corresponding period in 2013. This is expected to increase with higher usage of social networking sites and growing popularity of over-the-top applications.

•Data revenue: The year 2013 witnessed doubling of data revenue for the Indian telecom industry, driven by the growth in data volumes. Data revenue is expected to account for a significant 10 per cent of mobile revenue for leading operators. This growth may be exponential after the 10 per cent threshold based on international experience.

While these drivers augur well for the adoption of data-focused technology in India, seamless voice support would be critical in driving 4G penetration.

Hemant Joshi

The key growth drivers for 4G services in India are:

•Highly connected youth population who demand 24x7 high speed connectivity

•Proliferation of machine-to-machine communication

•Availability of multimedia applications in local languages.

Amit Sachdeva

4G is a mobile network technology which enables a faster and richer data experience. The first 4G networks are capable of offering download speeds that are five to seven times of those provided by existing 3G networks.

Availability of 4G along with a seamless network across the country would be a game changer for data consumption by Indian consumers due to the following factors:

•India has low wired-broadband penetration (1.3 per cent). Further, connectivity in Tier 1 and Tier 2 markets is unreliable.

•The growing dependence on internet for day-to-day activities is leading to increased data uptake. India has the third largest internet user base with 200 million subscribers but internet penetration stands at only 17 per cent.

•The higher throughput supported by LTE networks will support rich media content like videos and new applications.

•Government efforts in e-governance will be a key growth driver.

•Reaching rural areas through e-initiatives like telemedicine and remote education would result in higher demand for reliable connectivity through 4G services.

•Machine-to-machine services in the enterprise segment also present a promising opportunity for the 4G segment.

What would be the operators’ pricing strategy for 4G services given their current financial situation and the high spectrum payout?

Benoy C.S.

Despite the high spectrum payout, the pricing strategy for such services is expected to be inclusive as this will be critical for market expansion. Initially, the tariff is expected to be on the higher side, but gradually as the awareness about these services increases, it would drop, resulting in higher adoption. Also, operators might offer attractive tariffs to retail consumers in the 1800 MHz band, which will be used for voice as well as data services.

Rohan Dhamija

Pricing 4G services at par with 3G offerings may be an effective way of driving adoption. Also, 4G services could be monetised through content partnerships.

Arpita Gupta

Bharti Airtel is the only operator to have launched 4G services in the country. It has priced its 4G offerings at par with 3G data. However, customers need to buy new devices for 4G access (dongles or Wi-Fi routers). This, coupled with relatively weak network availability, may impact service adoption. The operator recently launched 4G mobile services in Bengaluru. These were priced at par with 3G offerings, though the tie-up with Apple suggests premium positioning of the services.

For the 4G segment to gain subscriber share, data pricing is likely to remain at par with 3G. 4G data prices are expected to fall further after the launch of services by Reliance Jio Infocomm Limited (RJIL). Packages may be created around additional services such as movie subscription to drive 4G ARPU. The adoption of such services, however, would be driven by niche content.

Hemant Joshi

Operators need to build an ecosystem – devices, applications, etc. – to attract customers. Also, establishing pan-Indian coverage is critical. Operators may not launch unlimited plans and stick to metered tariff plans. However, they may launch bundled offers to increase adoption.

Amit Sachdeva

India is a price-conscious market dominated by prepaid users. Operators are not likely to charge a premium for 4G offerings over 3G to drive the adoption of the former. This has been signalled by the early plans launched by operators in the country and the LTE plans launched in developed markets.

Also, the Indian telecom industry has a competitive environment, which would not let the price increase or a premium be charged. Therefore, a price increase is not a possibility. However, unlike voice, data is not a homogeneous service. In 4G data plans, operators can offer different prices for different data speeds, that is, prices increase with the throughput.

Which spectrum band offers cost and efficiency advantages in terms of network roll-out? How will device availability impact the uptake of 4G services in various spectrum bands?

Benoy C.S.

Bharti Airtel is the only player offering LTE services in the country using spectrum in the 2300 MHz band (long term evolution-time division duplex [LTE-TDD]). Due to the underdeveloped 4G device ecosystem for this band, these services have witnessed limited adoption. However, operators will now look to offer 4G services to consumers on their existing handsets through spectrum in the 1800 MHz band (long term evolution-frequency division duplex [LTE-FDD]), thereby eliminating the hurdle of an underdeveloped 4G device ecosystem. This would facilitate the uptake of such services. Several countries have launched LTE in the 1800 MHz band. In India, since LTE has been deployed in  the 2300 MHz band, deploying it in the 1800 MHz would mean improved coverage at lower costs. The latter offers cost advantages in terms of network roll-out as it requires fewer towers than the 2300 MHz band.

Rohan Dhamija

Sub-1 GHz bands (the 700 MHz APT band plan, or the 850 MHz band) will be the most cost-effective LTE bands and will serve as the coverage bands for LTE network roll-out.

Arpita Gupta

Network roll-out cost is a function of the number of cell sites being deployed. This, in turn, is a function of the propagation characteristics of a spectrum band. Sub-1 GHz spectrum bands offer superior propagation characteristics as compared to spectrum in the 1800 MHz band and over-2 GHz frequency bands. This difference in propagation characteristics reflects in the base station density. To cover the same area, deployment in the 2100 MHz band requires almost twice the number of cell sites as that required for 900 MHz deployment. This leads to higher network operating costs, along with a high capex. Thus, deployments in sub-1 GHz bands (700 MHz, 800 MHz and 900 MHz for cellular networks) are cost effective in terms of network roll-out.

However, for LTE, ecosystem maturity becomes the key driver for deployment in a spectrum band. In sub-1 GHz bands, LTE support is primarily available in the 700 MHz and 800 MHz bands globally. The device ecosystem is the most developed for the 2600 MHz band, closely followed by the 1800 MHz band. The majority of global LTE network deployments have happened in the 1800 MHz band, driving device roll-outs in this band. Therefore, although the 900 MHz band offers cost and efficiency advantages over 1800 MHz, future LTE deployments are more likely in the latter band given device availability.

Hemant Joshi

Spectrum in the 1800 MHz band may offer cost and efficiency benefits since most countries have deployed 4G technology in the 1800 MHz band. Therefore, from the device compatibility perspective, it will be easier to develop the ecosystem and ensure faster adoption.

Amit Sachdeva

Frequency has a direct impact on network capex. Capex and network roll-out cost increase significantly with higher frequency bands. Lower frequency bands such as 700 MHz, 800 MHz and 900 MHz have superior propagation characteristics as compared to the higher frequency bands (1800 MHz, 2300 MHz, 2600 MHz, etc.). The poor propagation characteristics of higher frequency bands also translate into a smaller cell radius as compared to the lower frequency bands. This results in the need for more cells and towers, which adds to the capex/network roll-out cost.

The available device ecosystem plays an important role in the uptake of 4G services. Globally, LTE-FDD technology (700 MHz, 800 MHz, 850 MHz, 900 MHz, 1800 MHz, 1900 MHz, 2100 MHz and 2600 MHz bands) has witnessed significantly higher deployments (~8X) as compared to LTE-TDD (1900 MHz, 2300 MHz, 2600 MHz and 3500 MHz bands). Most deployments have been in the LTE-FDD 1800 and 2600 MHz bands. Hence, the device ecosystem for LTE-FDD bands is better developed as compared to that for LTE-TDD bands in the commercial market. Upcoming deployments in India are based on LTE-TDD. Thus, device availability at the right price and a developed device ecosystem will be critical for LTE-TDD growth in the country.

What have been the key challenges in setting up 4G networks in India?

Benoy C.S.

Only Bharti Airtel has deployed LTE networks in India in the 2300 MHz band (LTE TDD). As compared to LTE FDD, the device ecosystem for LTE TDD is not very developed or advanced, and only a fraction of LTE devices launched by vendors globally support this technology. Besides, India currently lacks the backhaul infrastructure to support the high speeds offered by LTE. Until we have a robust backhaul infrastructure, the higher speeds will not translate into an enhanced user experience.

Rohan Dhamija

Some of the key challenges in rolling out 4G networks are:

•End-user affordability and demand at this point

•Lack of ecosystem development

•Sub-1 GHz bands still not allocated.

Arpita Gupta

In India, BWA spectrum was offered in the 2300 MHz band. The disadvantages associated with a high frequency band in terms of roll-out requirements impacted operators by increasing the cost of network deployment. The lack of device support in this band has aggravated the problems.

Also, despite being a data-friendly technology, the lack of voice support has severely constrained the potential of LTE in the country. Leading BWA spectrum holders Reliance Jio Infocomm Limited (RJIL) and Bharti Airtel chose LTE-TDD, which offers very limited device support globally. While RJIL is yet to launch operations, Bharti Airtel’s services were initially available only through dongles and broadband customer premise equipment (Wi-Fi router), tapping a very limited consumer base. The latter only recently launched 4G mobile services in Bengaluru. Circuit-switched fallback technology is being used to route voice calls to the 2G/3G network, provisioning the LTE network purely for data browsing. This would, however, need to be supported by adequate LTE coverage to ensure a quality and data experience for customers.

Meanwhile, both Bharti Airtel and RJIL plan to use the recently acquired 1800 MHz spectrum for LTE-FDD, which has a more evolved device ecosystem. Affordable device availability would be key to driving LTE service adoption in the country.

Hemant Joshi

Most countries have deployed 4G services in the 1800 MHz and 2600 MHz bands while the 2300 MHz band is allocated for deploying 4G services in India. Therefore, limited availability of devices compatible with the 2300 MHz band is a challenge. Other issues include:

•Lack of local applications/services and, therefore, demand

•Establishing pan-Indian coverage

•High equipment costs.

Amit Sachdeva

Operators are facing major challenges in setting up 4G networks. These include:

•Technical challenges: Besides the higher number of towers, a high speed 4G mobile network in India requires high speed backhaul infrastructure. In India, only 30 per cent of telecom sites have fibre connectivity, which means upgrading and building fibre-based backhaul is critical for the success of 4G services.

•Higher number of telecom towers: Providing a seamless data experience through 4G services using spectrum in the 2300 MHz band in India would require at least 2.5x towers as compared to spectrum in the 900 MHz band. Therefore, to launch successful 4G operations, an operator needs to build larger tower infrastructure besides upgrading backhaul to fibre.

•Availability of devices: The device ecosystem for LTE-TDD is less developed globally. It would be important to ensure handset availability at less than $100 and a well-developed device ecosystem to drive 4G service uptake in India. Further, the device subsidy model has not worked for Indian operators in the past.

What is your view on the need for spectrum harmonisation across the world for providing 4G services?

Rohan Dhamija

Spectrum harmonisation will expedite ecosystem development. However, the band plan that India has selected (700 APT plan), is well harmonised across several countries and should be beneficial for India in the future.

Arpita Gupta

Through uniform allocation of radio frequency bands for the same or similar services across regions, spectrum harmonisation is expected to drive down mobile device prices owing to economies of scale. This would go a long way in addressing the issue of LTE device affordability, making the service available to the masses.

A more far-reaching impact would be on the availability of seamless roaming across LTE networks. Today, global LTE deployments are being undertaken in a piecemeal, one-region plan in various spectrum bands. Globally, over 10 frequency bands are being used for LTE. This requires end-user mobile devices to support multiple frequency bands, increasing the cost of 4G service access. For LTE deployments in spectrum bands with a limited device ecosystem designed for a particular country or operator, roaming becomes an even bigger problem.

Therefore, spectrum harmonisation would be key to 4G service penetration, as was the case with GSM services.

Hemant Joshi

Spectrum harmonisation across the world is the need of the hour for all technologies – 2G, 3G, HSPA, EDGE, 4G, etc. This will enable efficient interoperability and provide scalability.

Amit Sachdeva

Harmonisation can play a key role in the expansion of 4G services and needs to be a key spectrum policy objective.

Globally, LTE deployments will be technically allowed across 40 spectrum bands in the near term. Commercial deployments have been undertaken in over 10 frequency bands. Deployment across several bands has led to fragmentation, with competing regional end-user device ecosystems, country-specific or even operator-specific solutions and network equipment. Therefore, devices will need to support multiple frequency bands, leading to higher handset costs. Interoperability and roaming capabilities may pose further challenges. Therefore, harmonised frequency arrangements are needed to reduce the overall cost of networks and terminals by providing economies of scale.

 

 

 

 
 

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