Analyst Angle: BWA in India: WiMAX, TD-LTE and things in the rearview mirror : Flap over security concerns could hobble Huawei, ZTE growth in India

The BWA auction that is scheduled to start two days after conclusion of the 3G auction under way in India, has sparked an intense debate over whether WiMAX or TD-LTE might be best positioned to serve the country’s wireless broadband needs.
At the center of the debate is the issue of technology availability and the maturity of the ecosystem required to support the technology standard. In other words, the time-to-market advantage.
WiMAX proponents are particularly vocal in arguing that WIMAX is here now and that TD-LTE, as the chairman of India’s WiMAX Forum has been quoted as saying, “will not be ready before 2013” and that it “will require several more years” to get to the stage where WiMAX, at least in its 802.16e incarnation, is today.
That may be overstating the case. A review of the technology landscape suggests TD-LTE is fast gathering momentum and, as friends in the automotive industry put it, things in the rearview mirror may be closer than they seem.
In a separate but potentially related development, India has banned the import of telecom equipment from China, citing security concerns. Beyond hobbling the growth plans of vendors like Huawei and ZTE, this could also impact BWA technology choices in India.
3G auction update
But first, a quick update of the 3G auction under way in India may be useful.
Earlier this week, after 21 days and 122 rounds, bids for a single pan-India 3G spectrum slot reached USD $2.4 billion, slightly more than three times the reserved price set by the government. The bidding activity requirement was still at 90%, where it had been pegged in round 104 on April 30, the 18th day of the auction.
Since not all of the country’s 22 operating circles are equal in their revenue potential, bids have varied markedly across circles. So, while Delhi and Mumbai have seen bids exceed five times their respective reserved price, some of the lesser circles – lesser in revenue potential – are yet to get a single bid. One assumes these circles will likely see bids when the activity requirement is set at 100%, most likely sometime early next week.
Shifting tides
WiMAX proponents are understandably frustrated over their rapidly shifting tides of fortune in India. It was not so long ago, after all, when India looked like such a sure thing for WiMAX.
In fact, when the state-owned incumbent, BSNL, was allocated nationwide 2.5 GHz spectrum in 2007/8, it seemed India was not merely going to be the big showcase for WiMAX, it was also going to provide the necessary scale and scope that would allow the technology to be deployed in Africa and the rest of the world’s emerging markets.
Then, things changed rather quickly, and dramatically. BSNL fumbled the ball, weighed down by classic pathologies – inefficiencies, if you may – endemic to state-run enterprises. Worse, India decided to assign 2.3 GHz spectrum for wireless broadband.
What looked like a sure thing for WiMAX, suddenly looks anything but – especially given the fungibility of spectrum and the government’s reluctance to impose choice of technology on market players.
Misplaced ire?
When Qualcomm announced its intent to throw its hat in the BWA ring, WiMAX proponents – some less subtly than others – wasted little time in suggesting that the San Diego chipmaker may be a game-spoiler, planning to hoard spectrum and hold up broadband deployment in India.
Understandable as it may be, the ire may be misplaced – largely because, in focusing on a single actor, it fails to take into account the larger dynamics at play. [On a completely separate note, there may be a dissertation topic here waiting to be addressed: What makes Qualcomm such a lightning rod for the ire of market rivals?]
Consider, if you may, the roster of participants in the imminent BWA auction that has two nationwide spectrum slots on offer. There are 11 players in the race, eight of whom have indicated an interest in seeking a pan-India spectrum slot. Six of these eight players – Aircel, Bharti-Airtel, Idea Cellular, Reliance Telecom, Tata Teleservices, and Vodafone-Essar – are the same six players seeking pan-India 3G spectrum. And, several of them have expressed little or no desire to pursue WiMAX.
This suggests that even if Qualcomm – one of the remaining two players seeking pan-India BWA spectrum, the other being Infotel Broadband Services – were, for the sake of the argument, to be taken out of the BWA equation, it may not have meant an uncontested run for WiMAX in India.
The TD-LTE momentum
Qualcomm’s decision to participate in India’s BWA auction perhaps only served as a catalyst igniting the global interest in TD-LTE. The momentum for TD-LTE surely had other antecedents.
Until recently, the LTE narrative was driven primarily by Verizon and AT&T in the U.S. and DoCoMo in Japan for deployment in paired spectrum; in other words, as an FDD, or Frequency Division Duplex, technology. LTE’s deployment in unpaired spectrum, as a TDD (or Time Division Duplex) technology, was only being considered by China Mobile, and had not captured the global imagination.
In the past few months, however, the interest in TD-LTE has heated up considerably – in part, driven by India’s BWA spectrum assignment. With the possibility that it might find a home in each of the world’s two biggest markets – China and India – leading technology and device vendors have been quick to signal, and demonstrate, their support for the technology.
The fact that most mobile operators in western Europe are also sitting on considerable, if as yet unused, TDD spectrum – albeit in the 2.6 GHz band – may also have contributed to the infrastructure vendors’ collective and new-found interest in TD-LTE.
Vendor & industry support
TD-LTE today boasts the widespread industry and vendor support that any technology needs to grow and thrive. All thye major players, and some smaller ones, have joined the chorus of support.
So, for instance, Ericsson last month announced its deal with Chinese vendor Datang to gain an early handle on TDD solutions. Nokia Siemens Networks had, likewise, announced setting up a TD-LTE R&D center in Hangzhou, China, to provide an end-to-end testing environment for networks and devices.
Alcatel-Lucent has already been working on TD-LTE and has installed a trial network being showcased at the Shanghai Expo. Motorola has also indicated that several operators around the world, lacking paired spectrum, have expressed an interest in TD-LTE. And, of course, Huawei and ZTE have demonstrated their interest in TD-LTE through trials.
Several chipmakers – from industry leader Qualcomm to Altair, Beceem, Sequans, Innofidei, Wavesat, among others – have indicated their commitment to developing TD-LTE chipsets in 2.3/2.5 GHz bands. Qualcomm has said it will have its TD-LTE version of MDM 9600 chips available as early as this quarter.
Clearwire, the poster child for WiMAX in the U.S., has also signaled an interest, asking the standards body, 3GPP, to begin working on specifications that would enable TD-LTE to be deployed in the 2.6 GHz band in which it currently deploys WiMAX.
Things in the rearview mirror
Given this current and rapidly growing interest in TD-LTE, it would seem that the “substantial” time-to-market advantage argued by WiMAX proponents may require some reconsideration. As friends in the automotive industry might say, things in the rearview mirror may be closer than they appear.
While my friends in the WiMAX camp are correct in observing that WIMAX is here and TD-LTE has yet to be commercialized, it would seem to me that the inferences they seek to draw from the proposition in the Indian context may be
a tad too optimistic – and self serving.
Especially so, given that WIMAX folks
themselves are still conducting validation testing for the 2.3 GHz Mobile WiMAX profile in the 5/10 megahertz and 8.75 megahertz channels.
For the uninitiated: The above profile is important given that India is allocating only 20 megahertz of spectrum for broadband wireless access. Technology vendors have noted that WiMAX, with its 3-cell frequency reuse, is best deployed in 30-megahertz bands to avoid the interferences that may undermine capacity and performance.
Evaluating choices
As someone who has been studying the industry for now over 20 years, it would seem to me that, caught up in the excitement of the moment, we tend to forget that network and technology choices – because of the size of the investment and the inherent path dependencies – are, as indeed they should be, about more than feeds and speeds and short-term advantages.
Networks are a business anchored in the economies of scale and scope. Because they create path dependencies – the idea that the initial choice of a technological standard can have important and sometimes irreversible influences on future market allocation of resources – they are often about long-term evolution which, beyond the unintended pun, speaks to predictability, interoperability, availability of cross-technology and cross-generational devices, and a well-managed ecosystem, among others
Further, technology choices are situated in a complex web of political, economic, and technological interdependencies. As I have often noted before, new technologies are rarely born in a vacuum; rather, they are brought forward in existing structures of power represented by legacy systems, by which I do not mean antiquated network gear but rather relationships — among industry players, between industry players and capital markets, and between technologies and developers – that represent continuously evolving ecologies of support.
I do not seek to imply that there is no place for a new technology, but rather that it is a considerable challenge for the new technology and its proponents – as my friends in the WiMAX world might agree – to supplant the obtaining order of things unless they can demonstrate they are orders of magnitude more valuable to the industry and the end customer it serves. A brief time-to-market advantage may not be sufficient – few get excited about a horse being ahead in an early lap of a multiple-lap race.
The Indian context
Given the burgeoning support for TD-LTE, I am somewhat concerned about the future of WiMAX in India, and convinced that while it will surely see deployment, it may not see as wide a deployment as might have been imagined.
Indian operators are starved for spectrum, as the intense bidding for 3G spectrum demonstrates. If the BWA bids are as intense as the 3G bids – and there is every indication that they likely will, if not more so, since many operators are likely to see BWA as a second chance at ensuring their future – then the operators are also likely to be strapped for cash.
As a consequence, they are likely to turn to their vendors for support (read vendor financing). Now, if the vendors are disinclined to support WiMAX – as indeed most, if not all, leading western vendors are – that might constitute a serious problem.
The country’s recent decision to curb imports of telecom infrastructure equipment from China, anchored in security concerns, might serve to dim WiMAX’s prospects further.
Flap over Chinese vendors
First, some background: Citing security concerns, India has blocked imports of telecom equipment from Chinese vendors for an indefinite period. While no formal ban has been imposed, Indian operators have been advised to seek security clearance for the equipment they may be procuring for their network operations.
The security clearance requirement is an existing licensing condition that the government has invoked to throttle the import of Chinese equipment into the country.
India is the second-largest market outside China for both Huawei and ZTE and the Chinese vendors are, understandably, scrambling to gain clarity and allay the government’s security concerns. The implications of the ban on existing infrastructure contracts are unclear, except that network deployment plans of some operators are being thrown out of whack.
Will hurt domestic industry too
Sources in government and industry suggest that the flap over security might persist for several months. If that happens, it would effectively hobble Huawei’s and ZTE’s growth opportunities in India, since both Huawei and ZTE might get excluded from the first round of contracts awarded for 3G and BWA. Western vendors would stand to gain, by contrast.
The ban on Chinese telecom infrastructure imports may, actually, hurt the entire Indian industry. The reduction in competition, especially elimination of aggressive competitors from the equation, may raise the bill for all telcos. While the large incumbent operators may still be able to extract favorable terms from the remaining vendors, if only because of historical relationships, the smaller operators are sure to see their bills rise.
But beyond this, the ban on Chinese vendors might also adversely affect WIMAX prospects in India. The Chinese vendors, much more than their major western counterparts, seemed inclined to pursue WiMAX contracts. In addition to providing the technology, they would likely have offered viable financing terms to help new WiMAX players roll out the networks.
If these vendors are forced to sit out the round of infrastructure contracts that are likely to follow the current auctions, WiMAX may have lost strong allies that could have helped their cause in India. There is always Samsung and the smaller infrastructure vendors, of course.
Dr. Shiv Bakhshi is founder & principal analyst of Mobile Perspectives. He can be reached at shiv@mobileperspectives.com