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Spectrum Setback - Limited Wi-Max rollout in India

March 15, 2010
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  With the government postponing the 3G and Wi-Max spectrum auctions yet again, the much-awaited Wi-Max revolution has suffered another setback. Fast gaining popularity in countries like the US, Japan, Taiwan, Russia and Mexico, the technology is available in only a limited manner in India.

A handful of operators have received spectrum in the 3.5 GHz band for deploying fixed Wi-Max in the country. Mobile Wi-Max in the 2.5 GHz band is still a distant dream due to the non-availability of spectrum. Though the government has allotted one 20 MHz slot of spectrum in the 2.5 GHz band to Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), market sources claim that internal constraints have prevented the PSUs from carrying out any "meaningful" rollout of broadband wireless access (BWA) services.

The WiMAX Forum has, therefore, urged the empowered group of ministers (EGoM) looking into the spectrum auctions to delink Wi-Max spectrum (in the 2.3 GHz band) from the 3G spectrum auctions. According to it, the coupling of the two auctions was originally done to facilitate administrative convenience. However, since the spectrum for 3G and BWA services is completely unrelated, it is preferable to hold the Wi-Max auctions earlier.

The WiMAX Forum has also argued that Indian telecom operators have been prepared for the auction since December 2008, when the government stipulated that BWA spectrum be auctioned in two slots of 20 MHz each in the 2.3 GHz band, with their deployment plans scheduled for the third and fourth quarters of 2010.

During the past two years, most of the operators have managed to implement operational trial networks using demo spectrum for BWA. They have also visited the operational Wi-Max networks of other countries, hence acquiring a clear picture of the technology and its modalities.

Meanwhile, complicating the issue, the Internet Service Providers Association of India (ISPAI) has protested against the stipulated reserve price for BWA spectrum. According to ISPAI, the reserve price should not be more than 20-25 per cent of the highest bid for internet service providers (ISPs).

In a separate move, the ISPs have filed a petition against the Department of Telecommunications (DoT) with the Telecom Disputes Settlement and Appellate Tribunal. DoT recently announced that it was taking back the Wi-Max spectrum in the 2.5 GHz band that it had granted ISP licence holders in 2003.

Operator initiatives

The consequent lack of clarity on the policy front has had a negative impact on the Wi-Max ecosystem of the country. Only a few private operators have initiated any plans regarding Wi-Max. These include Aircel, which announced plans to increase the scale of its Wi-Max operations in January 2010, and Tata Communications, which, in August 2009, stated that it was planning to expand its Wi-Max footprint from 50 cities to 70 cities.

BSNL, however, has made substantial headway on the Wi-Max front. In December 2009, the state-owned telecom operator became the first company to launch mobile Wi-Max services in the country in Ajmer, Rajasthan. The company recently launched Wi-Max broadband services in the Assam circle, offering internet access at speeds of up to 7 Mbps.The service is being offered at a fixed monthly rental of Rs 140.

The PSU has also firmed up plans to introduce Wi-Max services in the National Capital Region (NCR) shortly. It will initially launch the service in Dhakor, Uttar Pradesh, and then extend the same to other parts of the NCR such as Bisrakh, Dadri, Jewar and Jahangirpuri in financial year 2010-11.

BSNL and MTNL are focusing on the Noida region and intend to set up 10 new exchanges in Noida and Greater Noida during the period. The move is expected to help the companies add 25,000 new subscribers. BSNL currently has 75,000 Wi-Max subscribers while MTNL has 25,000 subscribers in Noida.

BSNL has also outlined plans to roll out Wi-Max services in rural areas across the country by end-2010. In the first phase, the PSU will cover 1,000 block headquarters while the remaining will be connected through 50,000 common service centres in the next phase.

The company is currently in the process of awarding its Rs 10 billion WiMax equipment project and has so far shortlisted Gemini Communications Limited (GCL), ZTE and US-based wireless equipment maker Harris Stratex. The shortlisted vendors are awaiting security clearance from DoT. While GCL and its product subsidiary PointRed Telecom have emerged as the lowest bidders and have been awarded over 40 per cent of the contract, the rest is to be shared between ZTE, Aviat Networks (formerly Harris Stratex) and Alvarion. Sequans, a Wi-Max chipmaker, has reportedly been selected to supply chips to PointRed Telecom.

The contract entails the deployment of about 7,000 mobile Wi-Max base stations across the country. Once fully deployed, BSNL's Wi-Max network will be the largest in the world.

Interestingly, having learnt from their failure to monetise 3G effectively, BSNL and MTNL are also exploring options with the franchisee model for implementing Wi-Max services. In November 2009, BSNL received bids from five companies to set up and operate its Wi-Max business in 16 circles on a revenue-share franchisee basis. These include Adishwar India, Ampoules, Teracom, E-mall Infotech and Tech Solutions. Of these, BSNL has shortlisted Teracom, Tech Solutions, Adishwar India and Ampoules & Auto.Companies offering the highest revenue to BSNL will be awarded the contract. This is the second time that this tender has been floated by BSNL. The earlier tender, in June 2009, had to be cancelled after investigations showed that five of the six shortlisted companies were acting as fronts for certain individuals.

In August 2009, MTNL invited bids from foreign technology companies to enter into a revenue-sharing franchisee deal for the management of its Wi-Max broadband services. According to the bid document, one franchisee company each would be selected for the Delhi and Mumbai circles. The bidders are required to provide a performance guarantee deposit of Rs 150 million for each circle, which would be valid for a three-year period. Also, the franchisee cannot be a licensed telecom service provider in Delhi or Mumbai and cannot enter into any similar agreement during the period of contract with MTNL. As of now, Harris Stratex has expressed interest in bidding for MTNL's franchise project. The company recently acquired Telsima to boost its Wi-Max portfolio and is looking for tieups with other Indian operators.

The road ahead

The road ahead for Wi-Max is bright, as long as the auctions for BWA spectrum take place. India is slated to be one of the largest markets for the technology globally and is estimated to have 14 million subscribers by 2013. The spectrum auctions have already attracted the interest of several players. For instance, in January 2010, the Dhabi Group-owned Warid Telecom, which divested majority stakes in its Africa and Bangladesh operations to the Essar Group and Bharti Airtel, expressed interest in participating in the upcoming Wi-Max spectrum auctions in India. This makes good business sense since the company has experience in offering Wi-Max services in Pakistan and Georgia. In November 2009, Bharti Telemedia, a subsidiary of Bharti Airtel, also stated that it was planning to bid for Wi-Max spectrum.

Intel Capital, the venture capital division of Intel, had also chalked out plans to set up a consortium to roll out Wi-Maxbased broadband services in India. The company was reported to be in talks with both Indian and foreign players. However, in December 2009, the company decided not to participate in the auction, though it stated that it was keen to manufacture the relevant equipment to facilitate the WiMax rollout of other operators. (It has already collaborated with BSNL.)

Nevertheless, India has a long way to go before it can catch up with the mature markets for Wi-Max globally. The worldwide ecosystem for Wi-Max is already in place with multiple vendors and over 300 terminal devices. In fact, in two to three years, long term evolution is estimated to reach the same level of maturity as WiMax has today.

It is essential that the government addresses the outstanding issues in the industry in order to expedite the rollout of the technology in the country.

Key facts

Reserve price for pan-Indian Wi-Max spectrum: Rs 17.5 billion
Number of slots to be auctioned: Two
Frequency band to be made available: 2.3 GHz band with blocks of 20 MHz each
Looking ahead: WiMAX Forum is asking for delinking the Wi-Max spectrum auction from the 3G spectrum auction to expedite the process

Operator initiatives

First operator to launch mobile Wi-Max in end-2009 in Ajmer, Rajasthan Launched services in the Assam circle, offering internet access at speeds of up to 7 Mbps Plans to launch Wi-Max operations in the NCR and set up 10 new exchanges in Noida and Greater Noida Plans to roll out Wi-Max services in rural areas by end-2010 in two phases Awarding Wi-Max equipment projects worth Rs 10 billion to deploy about 7,000 mobile Wi-Max base stations across India Exploring the revenue-share franchisee model for Wi-Max implementation Bids received in November 2009; has shortlisted Teracom, Take Solutions, Adishwar India and Ampoules & Auto
Setting up 10 new exchanges in Noida and Greater Noida along with BSNL Bids invited from foreign players to enter into a revenue-share franchisee deal in August 2009

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