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Indian Mobile Infrastructure – To 3G or Not To 3G
To most overseas investors circa 1994, a first look at the Indian Telecommunication Policy appeared to mitigate concerns. In our naiveté, we expected this Policy to put India at least on par with China where a stifling regime governed telecommunications. A disastrous implementation however ensured India languished behind its neighbor on tele-density, cellular usage and broadband coverage.
Fortunately, later developments like the Unified Licensing Scheme, albeit a reactionary response to events threatening to overwhelm TRAI (the Regulator), do pull Indian de-regulation ahead of even places like Hong Kong where a unified scenario is only just being discussed. Merits of particular aspects of de-regulation notwithstanding, the overseas investor expects to see a clear roadmap forward if the increase in permissible FDI to 74% has to hold any meaning. The recent imbroglio on the future of the 1900MHz band is an excellent opportunity for TRAI to use the controversy to draw up precisely such a map.
Of equal concern to the foreign investor and something on which operators on both sides of the GSM-CDMA divide concur, is the demise of high margin demand. The future holds a long slog uphill for every rupee increase to the ARPU (Average Revenue per User). Making it more interesting is the futility of erstwhile successful product and marketing strategies under today’s margin conditions. Additionally when one last looked, the government had its hand in the till for an unbelievable 22-25% of revenues in the form of license fees, revenue share and a second license fee through a disingenuous “spectrum usage charge”. Add the Access Deficit Charge (ADC) ransom being paid out to the Dominant carrier BSNL and one cannot blame some investors for setting aside their calculators and heading for the door.
With cellular collection rates at abysmal levels thanks to the pseudo-WLL/CDMA roll outs, the cellular operators look at additional infrastructure investments with trepidation. However, innovative value-added services being one of the few ways to elevate ARPUs out of their funk, invest they must. How intelligently they do so, decides their fate.
The 2003-04 EDGE (Enhanced Data for GSM Evolution) deployment by some GSM operators is the sort of response one hoped to see. Cost effectively providing three times the data capacity of GPRS, EDGE gives operators like Bharti, Hutch and IDEA the delivery system to offer innovative information and entertainment based services, as well as economically venture into rural areas. Using the same TDMA (Time Division Multiple Access) frame structure as GSM, EDGE allows existing cell plans to remain intact. On the other hand it uses a new modulation scheme that is also used for UMTS/3G. This makes it a sort of half-way house to 3G, for those still brave enough to contemplate that option. However while EDGE was a smart decision, the jury is still out on 3G.
Emulating European cellular operators whose track record belies such faith, some Indian cellular carriers have nevertheless started chalking out transition paths towards that Holy Grail. Even if the collection rates in India were not as dismal as they are, deploying 3G could be a disaster waiting to happen. It was heartening therefore when the Indian IT Minister stated last year that India aims to leapfrog to fourth-generation wireless technology, skipping 3G as it has not been found cost-effective. This is one of the rare occasions when the industry is well served by listening to its Minister.
However these are mere words until the Honorable Minister first unfetters VOIP (Voice-over-IP). Unless the chastity belt around VOIP networks is discarded and they are allowed to mingle with the PSTN, India is going to tie itself into knots over 4G, inside which by the way, the pervasive theme is IP. Living outside India one usually lags behind unfolding events, but to the best of my knowledge even today the VOIP – PSTN interconnect incredibly, remain illegal.
One beneficial outcome to the 1996 fiasco surrounding the bids for regional circles has been an all around reluctance to consider further auctions, including for 3G. This saved Indian operators from the fate of their European counterparts. While Europe’s 3G license fees did nothing to secure a future for the technology, emerging OFDMA (WiFi/ WiMax MMDS) alternatives may very well deliver the coup de grace. Whatever the counter-arguments out there, the fact that 3G services in The UK still resort to distress sales of basic voice services to garner a customer base, says it all.
Unlike EDGE, going 3G does not just involve software upgrades and the math becomes more daunting by orders of magnitude. For starters, the air-interface/ frame structure (WCDMA as against TDMA) is totally different. This means changes at every cell-site in the network. And then of course there is the entire wherewithal required to inter-operate with existing 2G elements of the network.
An alternative however does exist, that until recently dare not speak its name for fear of the Telecommunication establishment.
Contrary to negative press stemming largely from the large cellular operators, it’s possible to co-opt Wireless LANs (WLANs) into one eco-system with cellular networks. An EDGE-enabled cellular network patched into WLAN (WiFi/WiMax) networks in high density locations could allow Indian operators to deliver high-speed data services with laser precision exactly where required and at far less costs than in 3G-ing a similar area. I trust this is akin to what the IT Minister has in mind. Additionally, such meshed network could provide indoor voice connectivity over cell phones in broadband-enabled locations with poor cellular reception.
An interesting twist comes from the recent furtive WiMax deployment in Japan by Vodafone and elsewhere by other marquee 3G operators, vidicating the position taken in this paper.
The cellular operator may have to offer different fixed line/broadband type tariff structures in these locations, raising fears that they would eat into cellular revenues, But one has to wonder how much of the generated traffic would represent cannibalized revenue and how much would bring in incremental dollars from traffic presently going any way over fixed/wireless broadband and over the different flavors of Voice over Broadband (VoB) services used increasingly from precisely such locations.
No one touts OFDMA air-interfaces as an alternative to WCDMA /3G. It’s the integration of the two technologies that creates a potentially winning alternative, especially in the Indian context. Integrating selected WLAN Hot spots into a cellular network requires an IP Network Controller (INC), an IP access network, a patch to allow the WLAN access network to issue the relevant accounting information to the cellular AAA (authentication, authorization, and accounting) server and an investment in IP roaming. Barring a few more widgets, that’s essentially it.
Given the relative simplicity of this solution, anyone who has seen engineers sweat over cell site deployment in congested locations has to wonder why the operators have not already adopted WLAN to augment cellular coverage on the cheap.
Costs aside, there is an interesting aspect of 3G technology that could force operators to consider OFDMA based options to augment cellular data delivery systems. It may not be common knowledge, but 3G differs from 2G (GSM) in one important aspect – the interdependence of network quality. In 2G, high traffic in one location tends to introduce poor quality in just the particular cell covering that location. In 3G however, the bad quality also impacts surrounding cells because a cell size may vary depending on the traffic load it carries. Called “cell-breathing” this is due to the interdependence between capacity and coverage over WCDMA air-interfaces and could end up impacting voice quality.
No service provider however, is going to jeopardize voice quality and capacity for the sake of data. This implies there are merits to a separate data-centric network. And if such options are available at least at the peripheries, at costs substantially lower than the vaunted 3G and if these options appear slated to become the bulwark of future 4G data delivery mechanisms, it then surely behooves the Indian cellular operator not to adopt the same blinkered thinking that’s the hallmark of his European counterpart and to look seriously at a GSM/EDGE-WLAN based solution.
It baffles why instead of prevaricating, the European and American cellular companies haven’t swooped in and massively sequestered wireless access for IP traffic from the fragmented but potentially formidable WLAN and Voice over Broadband (VoB) players. After all, at least for now the cellular operator holds all the cards. Only he gets to decide whether the customer receives a combined cellular + WLAN bill. This gives his combined cellular-WLAN service a killer advantage over any other Fixed/wireless broadband or Vonage-type VoB offering. By now the cellular operators could have usurped great chunks of IP traffic and decimated the upstart VoB players before they ever took root. Alternatively, just a declaration of intent could have the WLAN & VoB players scurrying to negotiate interconnect and revenue share agreements on terms that could only be favorable to the cellular operator.
It’s too obvious a scenario and one doesn’t expect such shortsightedness to last. T-Mobile’s extensive WiFi deployment in the USA and in Europe is apparently with such an end-game in mind. And so was, we hope, the honorable IT Minister’s intention, when he squared off against 3G.
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