3G bidding - Is this the third & Last round of telco competition in India?

The DoT (Department of Telecom) will release a detailed information memorandum (IM) this week on the upcoming 3G auctions. As reported by economic times, the IM (information memorandum) to be released is likely to contains details regarding the billing schedule, qualifications of bidders, terms and conditions, payment schedules and other technical and commercial specifications that are critical to enable bidders to plan their auction strategy.

The DoT clarified that global telecom operators who do not operate in India are welcome to participate, though they will have to acquire a Unified Access Service Licence (UASL) to be eligible to bid. This implies some uncertainty for potential foreign bidders. At present, a pan-India UASL costs Rs 1,658 crore and comes bundled with 4.4 MHz of 2G spectrum. However, recent proposals to unbundle the licence from spectrum and to change its cost are still pending and could remain unresolved at the time India conducts its 3G auctions. This change is owing to a severe 2G spectrum crunch being faced in India with over 300 applicants waiting in queue for 24 months or more to get new spectrum/licences. DoT officials believe that global operators will be willing to join this queue, but given the fact that there is a shortage, the uncertainties relating to the cost and 2G spectrum availability may prove to be a deterrent. Any proposal to change the terms and conditions of licence has to be referred to the Trai and this usually involves a detailed process, including several consultations and Open House sessions with all stakeholders.

Domestic operators Bharti, Vodafone, Reliance, Tatas and Idea are expected to be the main players in the 3G auction ring. Nordic telecom giant Telenor, which recently secured 67% equity in Unitech Wireless is reported not to opt for a pan-India 3G licence but bid for a select few 3G circles. Aircel, Loop, Swan and Datacom may also place bids in some strategic circles.

The reserve price for pan-India 3G spectrum is pegged at Rs 3,500 crore. It is believed that given the limited number of slots, the government may be able to receive a price in the range of Rs 6,000 crore plus for each of the slots giving an additional revenue of Rs 25,000 crore to the exchequer for the current fiscal. The auction of third generation spectrum or airwaves, is likely to start this November. The EGoM has recently approved placing four slots of 5 MHz each in the 2.1 GHz band for auctions in 3G. If the auction is held in December as scheduled, it is highly likely that India will see four new 3G operators before the end of 2010.

To me this seems to be last round of competition between telcos in India. What I foresee is that after aggressive bidding for 3G licences, some of the operators will make huge losses. Then the consolidation phase will follow. By 2012 some of the players will start handling the batten - not to new players but to the one running in adjacent lanes.

Mobile Number Portability (MNP) to kick in from 31st Dec in India

Mobile number portability (MNP) — a facility that allows customers to switch operators but retain their numbers — will kick in from December 31 across the metros and category A circles, such as Tamil Nadu and Karnataka, while the rest of the country will have access to the facility from March 31, 2010.

TRAI, the telecom regulator in India, also issued a slew of guidelines for MNP implementation. - As per the norms, once a user switches operator, he must stay for at least three months (90 days) with the new service provider before moving to another operator.
- Besides, a user holding a mobile connection is eligible to make a porting request only after three months of the date of activation of his number.
- The subscribers, who wish to port their numbers must submit their requests in writing to their service providers. The new operator must mandatorily carry out all checks, including identity verification, before completing the process, the regulator said, adding that the entire process must be completed within four days.
- Pre-paid users must give an undertaking of being aware that balances on both talktime and minutes will not be carried over to the new operator they are switching to. Post-paid customers must furnish proof that all outstanding dues to their current operator have been cleared, TRAI added.
- The operators must inform the customer about the exact date and time for the process. The regulator has also made it clear that while the operator is porting the number, the customer may have to face a ‘no service period’ that can be extended for up to a few hours during which they will not be able to receive and make calls. But in a bid to address these concerns, TRAI has said the new operator must provide the customer with a list of missed calls and messages sent during the ‘no service period’.

Syniverse Technologies and MNP Interconnection Teleco Solutions, the two companies chosen to implement it in India, had projected to regulator that less than 3% of the country’s expected 550 million-plus mobile users will go in for MNP by 2010. The regulator, when issuing MNP norms, however, did not specify the charges that customers will have to pay for switching their operator. Syniverse and MNP Interconnection had proposed to charge customers between Rs 75 and Rs 200 for porting an operator, but the regulator is yet to take a final call on the pricing issue.

Unique Identification Number (UID) - Does the idea of roping in Telecom service provider has merit?

The Unique Identification Authority of India (UIDAI)has been established to provide a unique number to every resident in the country to target social security services as well as to assure the internal security. Authenticating 1.16 billion people is not an easy task. At this scale, it's going to be a one of its kind project and given the "as is" stage in which India is currently in, Mr. Nilekani needs to do lot of head scratching.

Nilekani, has already said that UIDAI would be looking for the databases of PAN card, passport, driving license, ration card, voter I-card and so on. But the first three cover only a small part of the population and the ration card data is subsumed in voter card data. The telecom user database of 500 million users is an obvious source which can be digged to help the UIDAI to have some part of the personal information checked.

Hence, The Indian government’s ambitious and high-tech unique identity or UID project is all set to ride on India’s 500 million strong telecom network as one of the largest available databases of subscribers anywhere in the world. So as a logical conclusion, DoT, along with the various telecom service providers, can be major stakeholder in this process. There are 480 million telephone subscribers in the country at the moment. Taking margin of error into account, the telecom database is an authenticated database of people in terms of identity and address is concerned.

To discuss how the database of nearly 500 million telephone subscribers can be used for issuing the unique identification number, the enrollment process of UID and how the telecom companies could help in the task of "Standardisation of Know Your Resident' norms which is a major goal of the all-India project for issuing the unique ID, UID Authority of India chaiperson and former Infosys cochairman Nandan Nilekani met telecom operators and DoT officials on 24th Sept seeking their cooperation.

While media reports indicate that Nilekani have sought similar cooperation from banks, post offices, and energy and fertilizer sectors, none of these offer the kind of large subscriber numbers and ready-to-use verification details as the telecom sector. This means that the country’s telecom subscribers could be among the first to be enlisted into UID scheme.

It is learnt that the project is expected to take 12 to 18 months to issue its first UID card and will then accelerate to clock half a billion citizens by the end of 2012. The telecom subscriber base works out perfectly since estimates place mobile users at well past 700 million by this timeframe. So essentially, if the UIDAI could convert every known mobile subscriber into a unique identity, it would have achieved a feat unmatched globally.

A major hurdle in implementing the project arises from the daunting task of developing appropriate software to support such a large database. The UID solution will have to have a quick query response system so that one can search by biometrics, particularly to track criminals. Further, the task of physically collecting one billion biometrics, photographs and other details in a short period of time is a logistics nightmare. Outlets will have to be nominated where people can go to have their data uploaded on to the database. Here again, the 10 million-strong mobile sales and distribution machinery may hold the key. This is because India has 97% mobile subscribers in pre-paid category who return month-after-month to renew the charge on their SIM cards.

As reported in press, Mr. Nilekani has said that the project will provide a unique identification (UID) number not a card. And hence the authentication can be made by using mobile phones. Once the UID is issued, one can go for online authentication.

Now all these seems to be just initial thoughts, getting the loose ends tied up will take its own time. In my opinion, the operators themselves rely on address proof and photo id proof which are unreliable for as far as linking to unique ID is concern. Further many forms (CAF) are missing and operators are being penalized for this. In my opinion, given the fact that many people carry more than two mobiles and also that many of reported numbers may not be operative, it will difficult to get meaningful information from mobile customer data beyond 100 million customer. To take the idea far, Mr. Nilekani's team will require to do some out of box thinking.

Its penalty time for Indian Telcos - DoT slaps Rs 32 cr of penalty for failing to adhere to sunscriber verification norms

Government has slapped a penalty of Rs 32 crore on mobile operators for failing to adhere to the subscriber verification norms in 2008-09. The penalty has been on all the mobile operators, including BSNL and MTNL, for failing to meet the subscriber verification condition. With a penalty of Rs 1,000 for each unverified subscriber, the number of such users comes to about 3.2 lakh.

Earlier in April this year, DoT introduced a graded penalty system under which operators pay Rs 50,000 per subscriber if more than 20 per cent of their user base is without valid identity documents. However,the penalty continues to be Rs 1,000 per user if the mobile operator's unverified subscriber base is less than 5 per cent of its user base in each of the circles.

With the customer base swelling at ~ 15 million per month, I bet, if strictly implemented, this can bring in about Rs 2000 to Rs 3000 million of revenues per year.

In terms of mobile minutes, Bharti Airtel is world's fifth largest operator

Bharti Airtel has latched on to the position of the fifth largest wireless telco globally, ahead of carriers like Sprint Nextel and T-Mobile and Latin American major America Movil. Airtel could trump global operators in providing cheaper calls to its subscribers. The company is way ahead of its global competitors by providing lowest cost per minute of usage.

China Mobile claimed the numero uno position in a recent research report, with 726 billion mobile minutes, followed by Verizon with 226 billion mobile minutes, during the April-June 2009 quarter. AT&T came up third with 166 billion mobile minutes, while Vodafone was in fourth place with 156 billion mobile minutes during the same period. Comparing favourably with global telecom giants, Bharti carried 141 billion mobile minutes on its network, almost twice that of Vodafone Essar, which is not listed in India.

The lowest-cost producer of voice minutes globally ensures a superlative cost structure, which is a key hurdle for challengers and green-field telcos. Bharti Airtel compares favourably with global telecom giants and has carried a total of 140.7 billion voice minutes on its network in 1Q from a single country operation, compared to Vodafone’s total network minutes of 143.6 billion, generated from its operations spanning 30 countries.

Rollout penalty for Indian Telcos - Delayed but not denied

The government of India has proposed a penalty of Rs 135.60 crore on private telecom operators, including Tatas, Airtel and Reliance Communication, for delays in rolling out networks. Though, the department of telecom (DoT) has lowered the total quantum of penalty from Rs 477 crore decided earlier to Rs 135.60 crore after repeated representations by the operators, giving a major benefit to all big private telecom players. Almost all private players except Vodafone-Essar face penalties.

As reported in Economic times, the penalty comes to over Rs 41 crore on Tatas, Rs 31 crore on Airtel and Rs 19.65 crore on RCOM. Among others, Aircel faces a penalty of Rs 28.85 crore, HFCL has a liquidated damages of Rs 7 crore and the two PSUs — BSNL and MTNL, along with Vodafone-Essar face no penalty.

The cases for imposition of liquidated damages were processed since 2005 and show-cause notices for imposition of liquidated damages (amounting to Rs 477.15 crore) were issued in 96 cases to 10 operators. There were representations from industry pointing out delays in statutory clearances, grant of spectrum for access, among other factors, for delayed rollouts. Thus, it was decided to revisit the subject and DoT has arrived at revised lower penalty for these operators.

As suggested in one of my earlier posts its also time to adopt Swedish model for penalizing operators for not meeting roll out obligations and are in turn hoarding spectrum. (For reading the full post click here)

China has 338 Million internet users !!

The state-run China Internet Network Information Center (CNNIC) said that its Internet statistics show that Internet users in China are up by an estimated 40 million from the end of last year. The internet user base has reached reaching 338 million users by June 2009 and the country has achieved a density of 25.5 percent, which is above the global average of 23.8 percent. By the end of June, there were 3,061 million websites registered in China, 16.25 million domain names and 205 million IP addresses.

In China, internet service providers include companies like Baidu, Alibaba group and Tencent.
Many of these Internet service companies have carved out niches using their market knowledge to satisfy consumer demand for music, news, instant messaging and search functions with the other four popular services being in way of online gaming, videos, email and blogging. As reported in Telecommunications online, Tencent Holdings achieved a total revenue of CNY 5.38 billion (US$787.9 million), an increase of 77.5 percent increase over the same period last year. It had a cash position of CNY 7.7 billion (US$1.1 billion) at the end of first half 2009. Noted for its instant messaging service, it reportedly has 990 million user accounts of which 448 million are active.

Also reporting positive results is China’s leading Internet search provider, Baidu, which attained a turnover of CNY 1.1 billion (US$161 million) for its second quarter in 2009, representing a 36.7 percent increase year-on-year. As for the online auction provider Taobao, the country’s equivalent of eBay, it had a favourable first half year of 2009 recording revenue of CNY 80.9 billion (US$11.8 billion) and it reportedly has set a target of CNY 200 billion (US$29 billion) for the whole year. Taobao is part of the Alibab group which also has interests in online payment and business-to-business platforms in 240 countries.

According to the CNNIC, the number of Chinese shopping online grew in the first six months with 14 million more shoppers to reach a total of 87.8 million. Online shoppers, however, only account for a quarter of Chinese Internet users, compared to two out of three in South Korea, the United States and Europe. Security risks of shopping on the Net may be one withholding factor.

I presume the things will not be much different in India

Nokia Siemens makes world's first LTE call on commercial software

­Nokia Siemens Networks claims that it recently made the world's first LTE ( Long Term Evolution ) call using commercial base station and fully standard compliant software. The Nokia Siemens Networks' call was made via base stations with fully complaint software to the 3GPP Rel.8 (March 2009 baseline) LTE standard, bringing LTE trials closer to the behavior of future commercial deployments. The LTE data call was conducted in Nokia Siemens Networks' R&D Centre in Ulm, Germany, with its Flexi Multiradio Base Station.

The first deployments for LTE services are foreseen for the end of 2009 with volume rollouts of commercial networks in early 2010. Nokia Siemens Networks has already shipped LTE compatible Flexi Base Station hardware to over 80 operators

Nokia's market share continue to slip in Western Europe

­According to IDC, The Western European Mobile Phone market recorded another quarter of year-on-year declines in the second quarter of 2009 (2Q09). Handset vendors shipped 42 million units to Western Europe, down 6% from 2Q08.

The switch from traditional mobile phones to converged mobile devices continued to be a major trend in Western Europe. Traditional mobile phones declined 12% during the quarter to 33.2 million units, and converged mobile devices (commonly known as smart phones) experienced a healthy 25% increase during the quarter to 8.8 million units, when compared to the same period last year. For the full year, IDC believes that the Western European market will decline 10%. Demand for converged mobile devices will continue to grow, but will not be strong enough to reverse the overall market decline as they represent only 21% of total shipments. On the other hand, traditional mobile phones will continue to decline, though at a lower rate, as vendors adjust their portfolios, bringing more features to the low-end devices.

But, the fact that caught my attention was that amongst the biggest handset vendors, Korean manufacturers continue to perform better than Scandinavian phone makers. For the first time, Samsung and LG together shipped more devices to Western Europe than Nokia. Nokia continues to be the market leader, with 36.3% market share, but the gap to Samsung, the second biggest vendor with 28.9% market share, continues to diminish. On the other hand, LG continues to challenge Sony Ericsson's market position, and the success of its touch screen handsets allowed LG to get 11.5% market share, the highest ever in Western Europe. The table below gives a better understanding -

Top Western European Mobile Phone Vendors,
Shipments and Market Share, 2Q09 (Units in Millions)

Vendor         2Q09 Unit    2Q09 Market      2Q08 Unit    2Q08Market    2Q09/2Q08
                     Shipments             Share       Shipments            Share          Change
Nokia             15.3                    36%                19                     43%             -19%
Samsung         12.2                    29%                10.9                  24%              12%
Sony Ericsson 5.1                      12%                6.2                    14%             -18%
LG                 4.8                      11%                2.8                      6%               71%
Apple             1.4                        3%                0.2                      0%             600%
RIM               1.2                        3%                0.8                      2%               50%
Others            2                           5%                4.7                    11%              -57%
Total              42                     100%                44.6                 100%                -6%

Source: IDC European Quarterly Mobile Phone Tracker, August 26, 2009
Note: Vendor shipments are branded shipments and exclude OEM sales for all vendors.

Nokia needs to connect differently.

Radio Spectrum fee -Lessons from Sweden

­The Swedish Post and Telecom Agency (PTS) has announced that it will gradually implement a new model for spectrum charges starting from next year that will penalise license holders who have not maximised the use of their radio spectrum. In general, it could be said that the new model means that licence holders with a large holding of spectrum and with no rollout, or a low degree of rollout, will be imposed higher charges. Licence holders with a high degree of rollout and a small holding of spectrum will have lower charges. Licence holders will have to pay more for spectrum in low frequency bands. However, the total charges imposed by PTS for the area of radio will not increase.

The new model for charges is technology-neutral and will be implemented gradually over the course of several years for various types of licence. The first category in line for implementation is block and television licences in 2010. RTTE fees will also be changed for block and television licences.

In The new model, Licence holders will find it easy to anticipate future annual charges, which will for example benefit the second-hand market.

FCC to propose 'Net Neutrality' rule - Implementation will be a challenge

It has been reported in the media that the head of the FCC plans to propose new rules that would prohibit Internet service providers from interfering with the free flow of information and certain applications over their network. The proposal is being refered by term 'Internet neutrality' — the equal treatment of Internet traffic. This would bar Internet service providers such as Verizon Communications Inc., Comcast Corp. or AT&T Inc., from slowing or blocking certain services or content flowing through their vast networks.

Now what I am wondering is that how would a regulator ensure the implementation. If an ISP decides to interfere in access of Youtube on grounds that such high content sites actually come in way of fair use of resources by all; its difficult for the regulator to know the same. Without strict rules ensuring Net neutrality, it is feared that the communications companies could interfere with the transmission of content, such as TV shows delivered over the Internet, that compete with services the ISPs offer, like cable television.

Internet providers have opposed regulations that would inhibit the way they control their networks, arguing they need to be able to make sure applications that consume a lot of bandwidth don't slow Internet access to other users.

The FCC adopted four principles on Internet policy in 2005. Two years later, it said it would study the business practices of high-speed Internet providers and consider whether a principle of nondiscrimination in traffic should be added. The FCC's existing net neutrality principles have focused on high-speed Internet access delivered over wireline systems. But Google Inc. and other big technology companies, as well as consumer advocacy groups, have called for rules that would require wireless networks to be similarly open to all devices and applications.

Extending the principles to the wireless arena is going to be a bit difficult because the regulation of wireless is very different than the regulation of the wireline networks, where the FCC has played a much stronger role. In wireless, companies operate in a very independent market with absolutely no government subsidies or government involvement.

The FCC began wading into the issue even before Genachowski became FCC chairman. Last year the FCC rebuked Comcast for blocking or delaying some forms of Internet file-sharing. Comcast agreed to stop the practice. The new rule to the extent will be more prescriptive and implementation, I think, will remain a challenge

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