What the Reliance brand did with mobiles, when Reliance Infocomm was launched, was a red-letter event in Indian Telecom history, successfully revolutionizing the mobile space; but that is now history. The question that hangs on many-a-telecom-executives lips today is about what exactly the company intends to do with broadband and even whether it will really be able to spark the broadband sector. Exact details are not available, but there are some clues in a company presentation, which we’ve simplified for your reference:
On June 11, 2010, Reliance Industries Limited announced it would invest Rs. 48,000 million in buying a substantial stake in Infotel Broadband Services. RIL will own 95% of Infotel. Infotel and BSNL have BWA spectrum all 22 circles.
What technology will Reliance use?
RIL will initially roll out WiMAX, followed by Long Term Evolution (LTE), clubbed as 4G. 4G will provide the boost in speed to these services and all existing features such as video conferencing and video on demand services, web browsing, 3D gaming, streaming music and full motion video as well as voice and SMS. The first wave of WiMAX will see this reaching 23 Mbps and the second wave of WiMAX (802.16e), for which Reliance has acquired BWA spectrum, will deliver 50 Mbps. LTE release 8, will offer 270 Mbps download and 62.7 Mbps upload speeds.
Which global operators/countries have adopted LTE?
There are 110 LTE network commitments in 48 countries and up to 22 LTE networks expected to be in commercial service by end of 2010 and 39 more by the end of 2012. Norway & Sweden are already operational. Major supporters of LTE include AT&T, Verizon, Vodafone and Orange.
- KT, Korea – Deployed 600 base stations covering 12 million people
- Clearwire, USA – Operates in the United States, Ireland, Belgium, Spain, Denmark (with Danske Telecom) and Mexico (with MVSNet). Will offer internet speeds of up to 6 Mbps per user device. Yet to roll out.
- Yota, Russia – Rolled out in 5 cities in Russia and in Managua, the capital of Nicaragua. Offers internet speeds of up to 10 Mbps per user device.
- UQ Communications, Japan – WiMAX services rolled out, aims to extend coverage to 90% by 2012.
- P1, Malaysia -Launched commercial WiMAX operations in Malaysia in 2008; acquired 100,000 subs within 6 months of launch. It has investment plans of over $300 million in the next 5 years.
(Note: The LTE network by TeliaSonera has not yet been rolled out – it has only pledged to launch in 25 cities in Sweden and 4 in Norway by the end of the year.)
How Much Did RIL Spend On Spectrum?
BWA spectrum for pan-India cost $0.06 million per MHz per population, compared to 3G which cost $0.32 million per MHz per population.
Our Take: The government has earned Rs. 390 billion from the BWA auctions. A comparison with the highly overbid 3G auctions may not be appropriate. RIL will take on an “asset light” approach, with shared infrastructure, which will help it reduce its capital expenditure going ahead.
The case for India as a broadband market?
The Down Side: The Indian broadband landscape of 2010 is similar to the cellular voice landscape of 1995. India ranks almost at the bottom with under 1% penetration. Between 2002 and 2007, it lagged behind other emerging markets such as China (130 million broadband users), Malaysia, Vietnam, Philippines and Thailand. The problem – one can’t expect the same explosion of broadband that Reliance precipitated with voice.
The Up Side: From only 75,000 mobile subscribers in 1995, we now have 621 million. India is the fourth largest economy today and Reliance’s presentation has a graph showing a correlation between per capita GDP and broadband access. The number of broadband connections in India is expected to grow 23% between 2009 and 2013.
Lack Of Spectrum: The company has highlighted that the lack of spectrum is the cause for poor user experience on current 2.5G networks and that more spectrum needs to be dedicated to data access.
Low Revenues From Data Services: Indian operators have one of the lowest non-voice revenue mix globally. Even within the approximate 10% non-voice mix, bulk of revenues come from SMS – which is a primitive non-voice service. 3G and BWA will be key drivers for rapid growth of advanced data services. Their contemporaries in other countries such as NTT-DoCoMo and Verizon observe 45% of their revenues from non-voice services.
Dial Up Still Rules The Roost: Currently, Dial-up and DSL comprise of about 85% of the total internet connections in India. However, both Dial-up and DSL have limited reach due to low penetration of the wireline.
Negative growth: Currently total wireline subscribers stands at around 37 million and has been showing a negative growth.
Speeds: Overall connection speeds are lower.
Access: Getting last mile connectivity is also an issue in many places.
Unpopular: Less than 5% of cellular subscribers use wireless broadband.
Content: Not enough variety of content and applications to appeal to all segments of people, especially those who do not already have Internet access. Limited content and applications for which the people are willing to pay.
Devices: Cost of smartphones and PCs are still in the above $300 range. Reliance believes it is imperative that subsidies be offered for for institutions and educational sectors; and OEMs innovate to manufacture low cost smart phones and affordable PCs for the mass market. Reliance intends to offer device-service integration for better user experience.
Rural India: Providing connectivity in rural areas is a challenge due to the high cost involved in laying new copper / fiber BWA for connectivity in rural areas, for both common service centres (We add: CSCs or kiosks are information services run in rural areas) and for individuals. The presentation states that spectrum vacation in the lower frequency bands is imperative for larger coverage in rural areas.
Our Take: A pity that the ‘Kar Lo Duniya Mutthi Me’ slogan is not coming through with this project: one hopes for RIL to push prices down and for services to be pushed to all and sundry.
Targeting businesses: Serve business enterprises, social organizations, educational and healthcare institutions and Indian consumers.
Our Take: From the presentation, it appears that RIL will target organisations and campuses first for wireless broadband. But will Indian consumers come last?
Mobile broadband versus wireline Internet access: Mobile broadband likely to be primary means of broadband access. Like voice telephony, increase in data penetration will also be led by wireless technologies.
On the device front:
As IBNLive reported Mukesh Ambani as saying, devices such as car cams, home security devices and iPad-like devices will proliferate.
Again from IBNLive: Interactive high speed broadband will come at the same cost of broadband today – between Rs. 750 and Rs. 1000 per month.
Our Take: We are skeptical about this pricing, we think that they will have to either reduce it to make it an attractive proposition or offer creative subscription plans with freebies and offers to woo users.
He also said he expects “formidable” competition from mobile operators (IBNLive).
Our Take: He may have the money and the vision, but the timing? 3G would be mainstream and operators will be ready to fight back with a price war.
How will it affect other industries?
RIL will collaborate with technology players, service providers, infrastructure providers, application developers and device manufacturers.
Addressing the entire value chain, not just the pipe: RIL will create end to end solutions that address the entire data value chain – from rich content/advanced services to compelling end-user experiences.
Our Take: Wireless broadband will develop into an attractive value proposition only when there are plenty of new devices and services ready for users. If it takes the same path as it did with mobile devices, Reliance will be signing up with various OEMs to mass-manufacture 4G gadgets with a smart price tag.
Will there be collateral damage?
Our Take: IPTV, DTH and TV channels will be faced with a whole new challenge: think of a set top box that connects to WiMAX – it could effectively replace a desktop. TV channels would compete with YouTube videos for eyeballs and LTE could ring the death knoll for IPTV which is yet to grow. And will the current legal restrictions on VoIP be lifted, offering an alternative to voice communication?
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– Qualcomm May Sell 26% Stake In BWA Ops To Tulip; Enterprise?
– India’s Broadband Wireless Auction Ends; Operator & Circlewise Results