WiMAX Cloud in the Indian Sky

Analysis of Indian WiMAX Market Opportunities and Operation Models

Market Opportunities

According to Internet World Stats (IWS), India had a population of 1.16 billion as of July 2009, and its GDP increased by 7.3% in 2008. India’s population is not only huge, but its telecom market is the fastest growing worldwide.

The Indian telecom market is attractive because of its high growth rate and the prospective issuance of 3G and WiMAX licenses. Although the auctioning of these licences has been delayed many times, operators are still showing great interest. The Indian government even doubled the auction price of the 3G and WiMAX licenses despite many industries having been adversely affected by the global economic recession. Is there any chance then for 3G and WiMAX in the Indian telecom market?

It is significant that the Indian mobile voice market grew at a rate of 15 million new subscribers per month in 2009, and by the end of 2009, the total number of mobile subscribers had exceeded 500 million (see Figure 1). In India, there are more than 10 GSM operators and 6 CDMA operators. The wireless voice market is predominately shared by major operators Airtel, Reliance, BSNL, Vodafone, TATA, and Idea. Due to the large number of operators, intense competition in recent times has given rise to a price war that has seen call costs hit rock bottom. Some operators have even reduced call tariffs to 0.01 rupees per second, equivalent to a little more than USD0.01 cent per minute.

Compared with the fiercely competitive mobile voice market, the Indian broadband market is in its infancy. By the end of September 2009, the number of Indian broadband subscribers had reached 7.22 million with a penetration of only 0.6%. These figures are relatively low when compared with other developed or developing countries. The main reasons for low broadband penetration are lack of access to resources (such as copper or fiber cables), immature backbone networks, high taxes for Internet Service Providers, and high prices for Internet broadband.

But as PCs increase in popularity, and online games and videos are developed, the high-speed development of fixed-line broadband is inevitable.

If the Average Revenue Per User (ARPU) for dial-up Internet in India (see Figure 2) is taken as an example, we may infer that broadband tariffs would not decrease like voice call tariffs, but maintain a certain high price. This indicates the potential of the broadband market in India; how to seize upon such an opportunity has become a major concern of local operators.

WiMAX is a wireless broadband technology that has advantages over fixed-line broadband technologies like ADSL. Because it supports fixed, nomadic, portable and mobile access, and can be deployed quickly, WiMAX is well-suited for India—where there is a shortage of copper cable resources. In addition, some operators in India fail in their bid for a 3G license, while others—even with 3G licenses—cannot adequately develop wireless broadband services due to the limited 2×5MHz spectrum of their licenses. Therefore, utilizing the 20MHz spectrum in the 2.3GHz band for the operation of a WiMAX network is a desirable choice for Indian operators.

Operation Model

The operation model is concerned with a number of key issues, including revenue model, target customers, coverage strategy, service model, and terminal and pricing policies. For emerging WiMAX technology, a coverage strategy is devised according to target customers (determined by market supply and demand), and the operator’s own strengths. Its service model is similar to that of 3G data services (except that it has higher data throughput and multi-service bearer capacity), and its terminal and pricing policies are based on the operator’s development goal and target customers. As the revenue model of WiMAX is closely related to its service model, operators often deliver a package of several services according to their revenue models in order to generate more profit.

India is a country where mobile voice is growing rapidly but broadband supply is insufficient. Its low level of consumption is that of a developing country. The development of WiMAX in India can be divided into two phases:

Phase I: Rapid deployment of WiMAX networks in hotspots to deliver wireless broadband access services and to gain a greater market share

■    Revenue model: the main source of revenue comes from monthly flat-rate broadband access services

■    Target customers: small to medium sized enterprise users, and home users

■    Coverage strategy: to first cover hotspot areas of A-class cities (such as CBD and high-end residential districts), and then to extend into other areas using outdoor coverage solutions

■    Service model: to offer simple broadband access services

■    Terminal policy: to support WiMAX-enabled netbooks, WiMAX outdoor modems, data cards, and USB

■    Pricing policy: wireless broadband access services must have a distinct price advantage over other access services

Phase II: Developing VoIP, mobile broadband multimedia, and M2M services

■    Revenue model: Additional sources of revenue will come from cooperation and revenue sharing with Content Providers or Service Providers (CPs/SPs); renting networks to Mobile Virtual Network Operators (MVNOs) as pipe providers; offering services to customers as service providers

■    Target customers: small to medium sized enterprise users, home users, and high-end business users

■    Coverage strategy: to cover both A-class and B-class cities, and to achieve seamless coverage using combined indoor and outdoor coverage solutions

■    Service model: to offer additional VoIP, VPN, and M2M services to enterprise users; to offer VoIP, audio/video download, and mobile TV to home users; and to offer mobile/handheld services (such as mobile e-mail, mobile video phone, mobile office, and mobile online games) to high-end business users

■    Terminal policy: to support WiMAX indoor modems, data cards, USB, WiMAX-enabled terminals, and handheld WiMAX terminals

■    Pricing policy: wireless broadband access services to have a distinct price advantage over other access services; to set suitable and competitive prices for new service offerings based on evaluation of revenue models; and to offer a variety of price packages that bind subscribers

From the operator’s perspective, the development of WiMAX operation mode in India can be divided into the following categories:

BSNL and MTNL

BSNL and MTNL are Indian state-owned operators given higher priority for spectrum acquisition. Upon invitation, they have started bidding for 3G networks. As the largest fixed-line operators in India, they possess copper cable resources and a base of enterprise users. In Phase I, they could make use of their good relationship with their enterprise clients and to offer fixed-line voice, fixed-line broadband, and wireless broadband services (thereby quickly seizing upon that market). In Phase II, they could provide a variety of value-added data service packages for high-end businesses while developing M2M enterprise services.

TCL, Airtel and Reliance

TCL, Airtel, and Reliance are relatively mature operators in India with a large number of voice subscribers. They have operational experience, are competitive in the market, and have clearly defined objectives for the development of WiMAX. In Phase I, they could deploy mobile voice and wireless broadband services to seize a greater market share. In Phase II, they could deliver a large number of mobile multimedia services to high-end customers by cooperating with SPs/CPs or by renting their networks to small and medium sized MVNOs.

Vodafone, IDEA, and Aircel

Vodafone, IDEA, and Aircel are Indian operators with an interest in the development of WiMAX, but have no plan to deploy WiMAX networks on a large scale. In Phase I, they could participate in the auction for WiMAX licenses in cities where they have a competitive advantage, and deploy WiMAX wireless broadband services in hotspot areas to seize upon the market. In Phase II, they could rent WiMAX networks from other operators to develop their broadband services, thus acquiring part of the broadband market share.

Broadband has been developing slowly in India, but with the industry now being actively supported by the Indian government, broadband services will become a new source of revenue growth in India’s telecom industry. WiMAX licenses are soon to be issued for wireless broadband access, and this will quickly address the broadband access shortage, generating stable income for Indian WiMAX operators. Moreover, due to India’s huge population and vast communication demands, the issuance of WiMAX licenses will drive rapid growth of the WiMAX industry (which includes services, terminals, and operation models), and help operators move from broadband pipe providers to broadband services providers.