Analyst Angle (Special Edition): For all the hoopla over broadband, Indian operators focused on 3G : ‘WiMAX now, TD-LTE later' may pose challenges for operators

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Perhaps, because it led to Mukesh Ambani’s dramatic re-entry in the country’s telecom sector and to Qualcomm’s emergence as a power player, the recently concluded BWA spectrum auction in India has all but eclipsed any discussion, leave alone any meaningful analysis, of the 3G spectrum auction that preceded it.
In fact, if one were to go by the media and analyst community’s preoccupation with Mr. Ambani and with Qualcomm, one might think the 3G spectrum auction never ever took place!
Two questions dominate the discussion of the Indian mobile sector these days: What will Mr. Ambani and his Reliance Industries (or RIL) do next, now that they have pan-India BWA spectrum under their belt? What does Qualcomm’s BWA spectrum win in the coveted Mumbai and Delhi metros mean for the TD-LTE/WiMAX debate?
Sometimes the two questions are fused together: Will operators, including RIL, wait for TD-LTE or will they follow the ‘WiMAX now, TD-LTE later’ path advocated by the WIMAX cheerleaders in India? (The answer might disappoint the WiMAX folks, as I discuss below.)
This preoccupation with broadband in general, and RIL and Qualcomm in particular, is understandable. For one, RIL and Qualcomm will likely have a huge impact on the imminent reconstitution of the Indian telecom sector in the wake of recent spectrum auctions as I discussed in my last column. Spectrum is, after all, the lifeblood of all that is mobile and wireless.
For another, as the Indian mobile industry moves beyond voice, mobile operators that can, will build a comprehensive and integrated mobile data strategy that takes into account both 3G and BWA spectrum assets, especially given the fungibility of spectrum.
The preoccupation with BWA is also fuelled by the ‘WiMAX now, TD-LTE later’ drumbeat of WIMAX proponents seeking to affect RIL’s choice of broadband technology. The drumbeat has grown louder since RIL hinted that it might prefer TD-LTE over WiMAX. The fact that the Indian government plans to make BWA spectrum available a couple of months before it makes 3G spectrum available in September has also contributed to the BWA hoopla.
Blinding preoccupation?
However, that said, I cannot help but observe that a preoccupation with broadband has the potential to blind one to the importance of the 3G spectrum auction and the obtaining and unfolding realities of the Indian telecom sector. That, I fear, might be a mistake.
This, principally, because it invites one to forget that the future is necessarily the child of the present – and always indeterminate. The eventual industry landscape that everyone seems so concerned about will be shaped by the manner in which market players play the game today. And that game, on which might rest the very survival of some operators, is 3G.
As one of the Indian operators with whom I was discussing the WiMAX group’s ‘WiMAX now, TD-LTE later’ mantra put it, “How about 3G now, and the rest of it all, later?”
The WiMAX/TD-LTE debate is of relevance only to Aircel and Bharti-Airtel, the two mobile operators that acquired any BWA spectrum. For the other four of the six major operators who bowed out of the BWA auction – Reliance Communications, Tata, Vodafone and Idea – it has only limited relevance.
Focus on 3G
In all this hoopla about BWA and the future industry landscape, we tend to forget that, whatever their fate tomorrow, each of the six major operators today enjoys a fairly significant market position in different circles or operating areas and has a business to run today.
Further, that each of them bid for, and won, 3G spectrum in a fair number of the country’s 22 circles. And, while each of these operators may be financially stretched, none is so stretched as to want to leave the market in a hurry.
In sharp contrast to the preoccupations of industry observers, the operators are focused on issues relating to 3G network deployment – from infrastructure vendor selection to orchestrating a meaningful network rollout strategy, building the device/services ecosystem, and inking roaming agreements.
The roaming agreements are of critical importance, given that none of the private mobile operators was able to acquire 3G spectrum nationwide. The state-owned MTNL, which owns 3G operations in Mumbai and Delhi, is already seeking roaming partners.
The operators’ focus on 3G is as much a function of their desire to exploit 3G’s revenue potential as to improve their company valuations ahead of the eventual consolidation in the market (which, given the rules laid down by the sector regulator, may be about 12 to 18 months away at the very least).
The recently reported decision of Reliance Communications – controlled by Anil Ambani, and not to be confused with Reliance Industries that is controlled by his elder brother, Mukesh Ambani – to spin off its telecom towers business to GTL is only one example of mobile operators’ focus on company valuations. The cash infusion from the spinoff will reduce RCOM’s debt and improve its market valuation in advance of the company’s planned sale of a 26% stake in its mobile business.
Puffery, posturing and challenges
My recent conversations with some of the major operators in India leads me to believe that most of them are geared to following through on the pragmatic strategy that informed their spectrum bids. That is, to deploy 3G networks in areas in which they currently face a capacity crunch and in areas in which they believe they can find high-end customers with a greater proclivity for mobile data usage.
If you discount the puffery and the posturing, most operators seem concerned about MNP, mobile number portability. As a result, their interest in mobile data services notwithstanding, they seem inclined to use a fair share of their new-found 3G spectrum for voice in a defensive move to hold on to their subscriber base.
By most indications, MNP is likely to be implemented only in the first quarter of next year – after most operators have had a shot at putting their houses in order. This is notwithstanding the government’s pronouncement yesterday that it will be implemented in October. This is the third time that the MNP deadline has been moved.
As a result of MNP-related concerns, most operators are carefully orchestrating their network deployment strategies. On the one hand, they are seeking to shore up their defenses – that is, address the voice capacity crunch in urban areas they dominate – while, on the other, they are seeking to make carefully calibrated forays into areas in which they may attract high-end mobile data users.
But beyond RAN deployment strategies, operators are also focused on building and upgrading their backend systems, specially the billing systems and the service delivery platforms. The operators are also devoting greater attention to embedded mobile devices, as opposed to mere dongles, that can stimulate and drive their data strategies.
Vendor selection issues
Vendor selection poses its own challenges for Indian operators. For some, the challenge is anchored in strategic concerns relating to technology migration paths and time lines. For some others, who may be working with or considering Chinese vendors, the challenge is anchored in the government’s national security concerns. The Indian government has expressed fears that telecom gear imported from China may be equipped with spyware that may be inimical to India’s national security.
Op
erators favorably inclined toward one or the other Chine
se vendor – Huawei and ZTE, to be precise – are worried that signing on with the Chinese might compromise their deployment schedules owing to tougher security clearance measures being applied to Chinese gear.
Tata Teleservices, for instance, has publicly decried the Department of Telecom’s differential treatment of infrastructure vendors with respect to security clearance requirements arguing that it creates an uneven playing field.
Technology competition
It is one of the anomalies of Indian mobile sector that CDMA EV-DO has never been considered as a 3G technology. As a result, it seems that GSM operators seeking to deploy HSPA networks might be in for a rude awakening. CDMA players are, appropriately, but still somewhat half-heartedly, ramping up their EVDO-based mobile data initiatives.
Most of the CDMA operators in the country – Reliance, Tata, MTS and BSNL – have been largely content with providing broadband connectivity through dongles. But since the 3G spectrum auctions, some of them have started to focus on designing services based on smartphones and smartbooks with embedded connectivity. These players are working, some more diligently than others, on initiatives that will likely pre-empt their GSM peers moving to 3G. In India, broadband connectivity is currently defined as a 256K connection.
The RIL question
The industry’s preoccupation with Mukesh Ambani and his RIL is anchored in the fact that Mr. Ambani, the richest man in India and the fourth richest in the world, does have the wherewithal to shake up the telecom sector in India, especially as the industry moves from voice to data.
He has the financial muscle, and the political clout, not to mention a team that is skilled in navigating the shifting sands of Indian regulation. But more importantly, he has a good sense of the sector, from his earlier stint in telecom. It was, one might recall, Mukesh Ambani and his team that had spearheaded Reliance’s initial foray in the telecom sector at the turn of this decade.
Sector players are closely monitoring what Mr. Ambani might do by way of a cellular play. Convinced – and rightly so – that Mr. Ambani is unlikely to limit himself to a fixed, or nomadic, broadband play but rather opt for full mobility, folks are curious whether he will acquire (or at least gain a controlling stake in) a mobile operator, or build roaming alliances will existing cellular players?
It is a pertinent worry: Mr. Ambani has no cellular property, and therefore no claim to cellular spectrum. As a result, given the current rules of the M&A game set by the sector regulator, Mr. Ambani and his RIL may be in a great position to acquire a cellular operation without having to pony up huge amounts to the exchequer – particularly if the spectrum holdings do not exceed 6.2 MHz (for GSM and its derivative networks).
Further, RIL’s choice of the broadband technology is being closely watched, since it could mean “make or break” for a broadband technology. The ‘WiMAX now, TD-LTE later’ drumbeat, as I noted earlier, seems aimed, primarily, at swaying RIL’s broadband technology choice. The drumbeat could not be aimed at Qualcomm given the chipset vendor’s obvious preference for TD-LTE.
Watching Qualcomm
Sector players are also monitoring Qualcomm’s play in India, but for a somewhat different reason. Sure, Qualcomm’s play in India has obvious implications for the future of WiMAX, at least in the 2.3GHz band – not merely in India but also the rest of the world.
But sector players are watching Qualcomm because, beyond influencing BWA technology choices, the company is also in a position to pick winners among the highly competitive, and equally spectrum-starved, mobile operators in India.
For the present, it is widely believed that Aircel and Bharti-Airtel – the two players that did win some BWA spectrum for themselves – may be the key beneficiaries of Qualcomm’s investment in India’s BWA spectrum.
The WiMAX narrative
On the face of it, there is some merit and plausibility to the ‘WiMAX now, BWA later’ argument. WiMAX has been around for some time, and the ecosystem for TD-LTE is still at a nascent stage. Industry players who have invested millions, if not billions, in acquiring BWA spectrum would be ill-served if they sat on their haunches waiting for TD-LTE to mature. The collective interest of the industry’s investment in BWA spectrum, in and of itself, could run into millions of dollars.
Network operators, therefore, must make a move to deploy WiMAX today in their own interest, and the in the interest of advancing public policy goals. Since some of the leading mobile operators are already trialing WiMAX networks, they could get the vendors to expand the WIMAX networks today and eventually migrate the networks, and the user base, to TD-LTE.
The argument sounds plausible because some mobile operators are, indeed, trialing WIMAX networks in India. Bharti-Airtel, for instance, has five WiMAX trials in and around Delhi. True, too, that mobile operators who have paid millions upon millions to acquire the BWA spectrum are unlikely to sit back and do nothing with that asset – especially when early deployment of a broadband network might allow an operator to establish a beachhead in the market, earn some revenues and whet the consumer’s appetite for mobile data and, in the process, inculcate a culture of mobile data consumption.
Flawed argument, false choices?
For all its plausibility, it would seem that the argument may be flawed and could be positing false choices. The problem with the argument is that it does not lead one to ineluctably conclude that mobile operators must, or even should, deploy WiMAX in the short term.
The quintessential flaw with ‘WiMAX now, TD-LTE later’ argument is that, like many bumper sticker slogans, it paints the world with too wide a brush, and invites us to gloss over too many details. .
The key issue with WiMAX, that WiMAX proponents seem to understate, if not actively fudge, is that operators do not see WiMAX as a mobile technology but rather as a fixed/nomadic one – that is, as a DSL replacement. Indian operators that I spoke to confirmed this view of WiMAX.
Given that, I am not sure it is clear what benefit an operator may derive from following the ‘WiMAX now, TD-LTE later’ precept. If an operator is only considering a DSL replacement strategy, why would it not choose single-mode TD-LTE that is available today?
Shanghai as evidence
If the widely publicized demos at the Shanghai expo indicate, the single-mode TD-LTE chipsets (from Innofidei, Sequans, etc.) and networks (from Motorola, ZTE, Nokia-Siemens, others) are already in place and ready to roll.
If nothing else, opting for single-mode TD-LTE would serve several important needs of the operator. For instance, it would afford an operator a learning curve with respect to a technology it plans to use over the long haul. Further, it would allow the operator to serve a customer without forcing him or her to change out his/her CPE or dongle after a while.
Equally important, it would allow the operator to avoid fragmenting the spectrum across technologies and sidestep the pain of migrating networks and customers from one technology to another. Last but not the least, it would save the operator the hassle of tapping into a new ecosystem of products and services as it migrates from one technology to another.
So, what about the current trials, one might ask. Well, there is a reason why trials are called trials; they do not necessarily lock operators into any technology groove. In any case, one should assume that an operator would make an informed choice based on obtaining realities in a changing marketplace, rather than follow through with a tech
nology that may be fast losing support across the world.

Finally, there is the political economy of network deployment, including vendor support of a chosen technology. The choice of WiMAX today and its subsequent migration to TD-LTE later, might involve introducing a new vendor into the mix if one’s current vendor does not support WiMAX today. That, by itself, is not a proposition to be taken lightly.
Dr. Shiv Bakhshi is founder and principal analyst of Mobile Perspectives, a research and analysis firm serving the mobile industry. He can be reached at shiv@mobileperspectives.com. You can follow him on Twitter @ShivBakhshi.