Growing appetite for mobile data and suggested approach for India

Growing appetite for mobile data globally

Juniper has published it’s latest report on Mobile data traffic forecasts. As per them, the total mobile data traffic will exceed 90,000 Petabytes by 2017. What is more interesting is that 60% of this data will be offloaded to Wi-Fi networks and only 40% of the data generated by mobile devices will be carried through the cellular network by 2017. The report also emphasizes the roll that the small cells are going to play going forward.

Mobile data growth – Indian scenario

India today is on the verge of data revolution and in the current decade, data will transform the Indian telecom industry the way voice did in the previous decade. Indications are that data contribution from 2G will continue to rise, and 3G and LTE adaption will augment this growth. while the telecom industry in the rest of the world obtains 35-50% revenues from non-voice services, India derives only ~15% of sales from non-voice/ data services. Projections by UBS for major telecom players in India indicate that the non-voice revenues are going to be ~30% of total revenues for these players by 2020. These projections may well be surpassed if India is able to achieve a good broadband penetration backed by the recent policy pronouncement on National Broadband Plan.  As against the current broadband subscriber base of 14.68 million, the National Broadband Plan envisages provision of 160 million broadband connections (22 million DSL, 78 million cable and 60 million wireless broadband) by the year 2014. It is likely that the share of wireless broadband may be much more than the expectations as, like other countries, in India also; the data revolutions will piggy back on wireless broadband. 3G and Broadband Wireless Access (BWA) are expected to aid the growth of economy by boosting broadband growth.

Nokia Siemens Networks (NSN) M-Bit report indicates that mobile data usage in India has grown at 54% growth in 7 months and is likely to double every 12-14 months. This report can be accessed at http://www.nokiasiemensnetworks.com/sites/default/files/document/india_mobile_data_-_mbit_index.pdf . Evolution of data services in China provides some insight for the potential for the data segment growth for India. Data service revenue constitutes 30.6% of total service revenue in China as compared with 12.6% in India in FY11, giving an indication for strong data services growth trajectory in India in coming years. Credit Suisse estimates that over the next three years, data could more than double in size to a US$14 bn industry in India, contributing over half the incremental industry revenue and add 500 bp CAGR to an otherwise slowing voice industry. They estimate 3G’s contribution to mobile EBITDA to rise to 9-13% (from less than 5%) by FY3/14

Wi-Fi offload – a solution to handle growing data volumes and speeds

No doubt more and more carriers are adapting to Wi-Fi. Recently AT&T had inked a pact with Boingo - one of the leading Wi-Fi service provider having more than 600000 Wi-Fi Spots around the globe. Going forward the carrier-Wi-Fi adoption will be gather speed mainly because of two developments –

a)   NGH (Next Generation Hotspot) and Hotspot 2.0 specifications along with 5GHz enabled devices.

b)   Carrier-grade small cells along with Wi-Fi will enable high levels of capacity and along with the macro network will provide commercial and financial success to the operator.

Now what’s there for India in all this? Ironically, there are not many Wi-Fi hotspots in India currently. Given that almost one-sixth of the world's mobile subscribers are in India and that the country is already spectrum starved, in future offloading the mobile traffic on Wi-Fi is the only feasible and practical solution to cater to the growing hunger for data services.

ITU studies and other major research firms have already pointed out that the data requirements of future can never be met by increased availability of spectrum even if spectrum efficiency improve considerably. India cannot rely on vacation of frequencies by Defense ministry as the chances of this happening are remote. And even if this happens it will be a slow process. Thus demand and supply of spectrum in India will always have wider gaps than in other countries.

India specific approach – A Public Wi-Fi hotspot network

In such a scenario, it becomes important for the India to have a large number of Wi-Fi hotspots in almost all major cities and towns. There are two ways of doing this. The first way of approaching the problem is that the market is left to itself and the telecom operators or third parties like Boingo creates a Wi-Fi hotspot network. However the problem in this solutions can be  -

·         - The commercial criteria and not the country/public good at large will drive the hotspot creation

·         - All operators will target the same places for hotspot creation like Airports, bus and railway stations, big malls etc. They will end up creating duplicate infrastructure and in process may not get the return on investment. India missed the bus while the mobile towers were being erected and this resulted in sheer waste of resources by way of creating redundant infrastructure. All operators invested in mobile towers at same time and at same spots.

·         - Such approach slows down the rural penetration as all operators are busy spending their money in big cities. At least for Wi-Fi, we can eliminate this approach.

This leads us to the second and more practical approach of policy intervention to ensure that a common Wi-Fi network is created across major cities that can be shared on payment basis by all operators. This will help in savings on one hand and better ROIs on other. An added advantage can be faster rollout even in tier II and tier III cities. The Bharat Broadband Nigam Limited (BBNL) had been created by Government of India to roll out a common optical fiber network that can be shared across telecom service providers. On similar lines, BBNL can also be entrusted to create a common Wi-Fi network funded through USO. However, the entity will be able to make money once the Wi-Fi network is used by telecom operators. A Wi-Fi hotspot requires back-end connectivity, preferably on fiber so as to ensure that large numbers of users are supported by the hotspot at higher speeds. Suggested approach will ensure that BBNL will identify Point of Presence (POPs) for optical fiber as per the hotspot requirements. If implemented, such a solution can not only help in solving the spectrum crunch, but will also help Indian citizens to get higher broadband speeds at affordable prices – an objective that the NTP 2012 envisages to meet.

3G Intra Circle Roaming (ICR) issue

Last week couple of news on 3G Intra Circle Roaming(ICR) arrangements in India raised the interests of the stakeholders. A brief background will help in understanding the issue better. Department of Telecom (DoT) who is the licencor and issues all telecom licences in India had earlier asked 3 Telecom service providers viz. Airtel, Idea and Vodafone to stop ICR based 3G services in the service areas where 3G spectrum was not assigned to them. In reaction to this, these 3 operators filed petitions in TDSAT (the tribunal which hears cases related to telecom in India). Incidentally the two members of TDSAT gave a split judgement. Subsequently DoT asked these operators to stop the 3G services based on ICR arrangements and even slapped penalties. The operators went to High Court and got a stay. Last week the stay has been vacated. To understand the issue of 3G ICR, the best is to go through the split judgement of TDSAT. To help the readers of this blog, I have summarized the same below. However I advise the readers to go through the original judgement so as to obviate any errors that may arise because of my understanding of the judgement. In case you are short of time, here you go ----

    Split Judgment by TDSAT on ICR dated 03.07.2012 - Finding the plea acceptable and valid, TDSAT Chairman Justice  S B Sinha allowed the operators’ plea against the government's directive to stop intra circle 3G roaming saying that it was violative of natural justice. The Petitions were allowed, the impugned orders dated 23.12.2011 was set aside with liberty to the Respondent to pass appropriate orders upon giving due opportunity of hearing to the Petitioner. However, differing in the decision taken, TDSAT Member P K Rastogi dismissed plea saying that the petitioners who have not got 3G spectrum allotted by the licensor in certain circles, cannot provide 3G services to its customers in those circles by way of making intra circle arrangement with the service providers having 3G spectrum. 

 Salient points deliberated in judgement delivered by TDSAT Member P K Rastogi

a.   On the principal question as to whether the petitioners having UASL/CMTS license along with 2G spectrum in certain circles can provide 3G services to its customers in these circles although 3G spectrum has not been allotted to them and whether such services can be provided by making intra circle roaming arrangements with operators having 3G spectrum in these circles, Member TDSAT has taken a view that the reading of cl. 2.2 (a)(i) of UASL shows that services to be provided by the licensee cover collection, carriage, transmission and delivery of voice and/or non-voice messages over licensee’s network in the designated service area and includes provision of all types of access services. In addition to this, except those services listed in para 2.2 (b)(i), licensee cannot provide any service which require a separate licence. Further he deliberated on the issue –“whether provision of 3G services requires a separate license”. On the issue, he is of the opinion that it is clear from the terms and conditions of license that the provision of 3G services cannot be provided without amendment to the UAS licence under Indian Telegraph Act, 1885 and without getting a license from WPC wing of DOT under Indian Wireless Act, 1933 for the relevant spectrum required to provide 3G services.  Thus, in his view, the provisions of 3G services require a separate license.  If the UASL licensee does not have separate license to provide 3G servies, it violate clauses 2.2(a) (i) and 2.2(b) (i) of the terms and conditions of the license.  

b.   3G services have been defined in the notice inviting applications (NIA) issued in connection with auction of 3G and BWA spectrum as “In case of successful bidders, services offered under the scope of respective service licenses using 3G/BWA spectrum assigned through the auction process.” Therefore, 3G services are those services which use 3G spectrum and 3G spectrum can be got through the process of auction only. In this petition, the petitioners have not got the 3G spectrum allocated to them in the impugned circles.

c.    On the question as to whether it is possible to provide 3G service by the petitioners to its subscribers by way of intra circle roaming arrangement with other operators having 3G spectrum, Member TDSAT has taken a view that the definition of ‘service’ and that of ‘subscriber’ show that the petitioner should have the license and the required network to provide particular type of service to its subscribers.  The petitioners have established only 2G network and have not setup 3G network which requires separate equipment and separate allocation of frequency. In case of intra-circle roaming, the roaming seeker should also have its home network and the licence for the spectrum for which it is providing service to its subscribers. Its subscribers can roam on the facility of roaming provider temporarily only and not permanently. Such arrangement is not permissible under the terms and conditions of license. In fact, UASL licensee without having the relevant (3G) spectrum providing 3G services to its subscribers will be acting as Mobile Virtual Network Operator (MVNO) where the service provider does not have its network in that frequency still provides services to the subscriber.  At present, MVNO is not part of government telecom policy and is specifically prohibited. The arrangement made between the parties are such that it specifically bars 2G roaming, and allows only 3G roaming for the subscribers of the roaming seekers i.e. petitioners herein. The roaming seeker neither has network nor the spectrum for 3G services. As the roaming seeker is providing 3G services by using the spectrum and network of the roaming provider, the Petitioner work like MVNO which is not permissible at present.

d.   In its judgment, Member TDSAT also quoted the terms and conditions of the roaming agreement entered by M/s TATA and Aircel and opined that the agreement indicates that the roaming provider having 3G spectrum have limited the usage of its 3G spectrum to the roaming seeker to certain percentage. This shows that the 3G spectrum is being earmarked to certain percentage for roaming seeker. Such arrangement of earmarking the part of the 3G spectrum allotted by a successful bidder to a service provider without any authorization by the licensor is not permissible.

e.    3G and 2G spectrum are allotted with different carrier sizes. While 3G spectrum (in 2100 MHz Frequency band) has been allotted with carrier size of 5 MHz; TDMA (2G)spectrum is allotted with carrier size of 200 KHz each for in 900 MHz/1800 MHz frequency band and 1.25 MHz each for CDMA in 800 MHz frequency band.

f.     On the issue of promissory estoppel that was raised by petitioners on the grounds that the DoT in its response to specific query in pre bid conference has said that roaming facility between 2G and 3G service will be available and once that commitment has been made the responses given by the DOT are definitely binding on the licensor, Member TDSAT was of the view that the doctrine of promissory estoppel cannot be invoked by a third party.  The petitioners in these petitions are not successful bidders in the auction. No contract was signed between the petitioners and the respondent.  Any response given during the process of auction cannot be binding on the licensor vis-à-vis these petitioners. As no promise has been made to these petitioners, the doctrine of promissory estoppel is not applicable. Therefore, the petitioners will not get any benefit out of the response given by DOT during the auction proceedings. The petitioners will be governed by their own license agreement. The query and responses are not in the nature of circular instructions of the department. The responses are for the purpose of auction of the 3G spectrum only. These responses cannot create any new right to the parties having effect of changing the terms and conditions of their licenses.

g.    On the issue of Natural Justice raised by Petitioner that the impugned communication of DoT dated 23.12.2011 to stop 3G services violated the principle as neither show cause notice was issued before the said communication by the Respondent nor any opportunity of hearing was given to the Petitioners, Member TDSAT has taken a view that various TERM cells of DoT had issued letters to the petitioners. Thus, they were well aware of the objections raised by the respondent at different points of time. The unsuccessful bidders did not get either the amendment to their licence or the allocation of 3G spectrum from the respondent.  It is not understood as to how the petitioner got any right to start 3G services.  The licensor did not confer any right to such effect. The show cause notice would have been necessary, if the petitioner were conferred any right to provide the 3G services to its customer under the licenses granted to it and the impugned letter of the respondent dated 23.12.2012 would have curtailed such rights.

Has the 3G adoption in India taken a back seat?

Is the 3G customer acquisition in India encouraging enough? Has the performance of Indian PSU Telecom companies in acquiring 3G customers been Good? 

Judge your self. This is how China's 3G customer acquisition has shaped up since 2009. As of the end of October 2010, China had reached 38.64 mln 3G mobile subscribers which is almost 3 times from last year. The number of 3G users of each of China’s top three telecommunication operators, China Telecom, China Mobile and China Unicom, exceeded 10 million by the end of October, the MIIT data showed. Out of total 39 miln user, 10 mln were China Telecom CDMA2000 EV-DO subscribers, 16.98 mln were China Mobile TD-SCDMA subscribers, and 11.66 mln were China Unicom WCDMA subscribers. Compare this to almost 10 million acquisition in India in one year. Not Bad? TD-SCDMA users accounted for 43.9% of total 3G subscribers, with the total number of new 3G users in 2010 to date reaching 25.38 mln.

Earlier this month, the ministry said that China aimed to have 150 million 3G mobile users by 2011, while investment in 3G development would hit RMB 400 billion (US$59 billion).

China’s telecommunication industry reported RMB 744.8 billion (US$109.53 billion) in revenues during the first ten months of 2010, up 6.6 percent year on year. Business revenue of mobile telecommunications made up 69.84 percent of the total, while fixed-line revenues accounted for 30.16 percent, dropping 3.2 percentage points year on year, the MIIT added.

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 broadband expected to reach 418m Worldwide by 2017

­Newly released forecasts from Coda Research Consultancy's report show that portable laptop and netbook users accessing the internet via mobile broadband will produce US$48bn in operator revenues in 2017, will number 418m worldwide, and will generate and consume an immense 1.8 exabytes of traffic per month - a forty fold increase over 2009.

The most significant growth will occur in the Asia-Pacific region, where users will amount to 162m by 2017. Europe will account for 94m users, and North America for 58m users. Impacts of Long Term Evolution (LTE) will be dramatic, with half of all mobile broadband via netbook and laptop users employing LTE worldwide in 2017. LTE users will hit 38m in 2013 after a ramp up in LTE production in 2012, and will rise to 209m by 2017, a 1100% increase over 2012. Three quarters of users in Europe and nearly two thirds of users in North America will employ LTE in 2017. This contrasts with just over half of users in Asia Pacific, and 12% in Central and South America. LTE take up will be greatly skewed toward European and North American markets in the short to medium term, where ARPU will be highest. However, report envisage significant take up in China, and see countries like India bypass 3G altogether, and move straight to LTE.

More generally, mobile broadband user growth will not correspond with operator revenue growth, particularly in less wealthy regions of Asia-Pacific, thus significantly impacting mobile broadband ARPU. For example, operator revenues from Asia Pacific will grow at only 50% of the rate of users, which contrasts with 63% for Europe. The silver lining however, is that LTE ARPU will be 17% higher than for mobile broadband in general.

LTE operator revenues will be greatest in Europe, where they will rise by a CAGR of 47% from 2012 to 2017, and will form 83% of all mobile broadband revenues in that region. LTE revenues from North America will grow significantly more, at a CAGR of 59% between 2012 and 2017, and LTE will form 72% of its mobile broadband revenues. In contrast, LTE revenues will form only 13% of all mobile broadband revenues in Middle East and Africa.

LTE usage via portables will lead to more traffic per user than for mobile broadband in general. This will further increase pressure upon network capacity, and will hit 1.1 exabytes per month in 2017. Asia Pacific alone will take up 45% of this, whilst Europe will take up a third, and North America 17%.

Video will dominate mobile broadband traffic to and from portables, and will account for over half (53%) of traffic by 2017. The bad news for rights' holders is that one fifth of all traffic will be P2P. Nearly half of video traffic (47%) and nearly two thirds of P2P traffic will be consumed in Asia Pacific. This reflects the dominant position this region will play in mobile broadband usage and how mobile broadband will continue to be the sole vehicle for many people to gain broadband connectivity in developing countries such as India and China.

In summing up the report's forecasts, Steve Smith said, "Clearly, tremendous opportunities for both operators and device and component vendors exist, but the risks are significant. With enormous growth in traffic and considerable decline in ARPU, operators will need to be ruthlessly efficient. Asia Pacific is going to be the hotbed for growth, but it is a complex picture of emerging markets, developed markets and even markets that will leapfrog 3G altogether. LTE is going to be an important cushion for operators, but our research shows they will need to take into account the very different factors impacting 3G and 3G+ growth across regions and decide carefully how, when and where to market LTE."

Silver lining for fixed access opearators - Mobile broadband in UK fail to live upto expectation

­According to the latest data from the UK broadband comparison website Broadband Genie, only around one in ten (11 per cent) mobile broadband users are satisfied with the speed of their mobile broadband. While around a quarter were undecided, two thirds claimed their 3G broadband wasn't fast enough. According to Genie - Mobile Broadband Fails Miserably to Live Up to Consumer Expectations. The public perception of mobile broadband is often of a service that is comparable in speed and stability to fixed-line broadband, which simply isn't the case - and won't be for the foreseeable future. Exaggerated advertising and unrealistic 'up to' speed claims have given the public a rose-tinted idea of mobile broadband that the service cannot, in most cases, hope to live up to.

Bharti to launch 3G services, Revenues from VAS expected to go up !

Bharti Airtel has completed trials of third generation services that it plans to introduce. The company is now awaiting the allotment of spectrum from the government to launch 3G services in India. Other telecom majors such as BSNL, Vodafone-Essar, Reliance Communications and Tata Teleservices are also carrying out trial runs of 3G appellations and services. According to company executives, the pilots included testing all high-speed internet applications, next generation gaming, video and wireless streaming. Bharti has also put processes in place for seamless migration of all value-added services to the 3G space from its current 2G networks.

Bharti is said to have successfully tried out IMS-based applications, a software platform in line with the latest 3G standards. This implies that content and application developers can use this platform to develop services for Bharti customers. Currently, about 10% of Bharti’s revenues come from value-added services (VAS). This figure is likely to increase to about 15% following the introduction of a slew of new data services following the introduction of 3G services. Operators are currently unable to launch 3G services as the radio frequency for these services are occupied by the country’s defence forces. This comes as the project to get the defence ministry to release 45 Mhz of spectrum (20 MHz for 2G and 25 MHz for 3G) is long overdue. As per the initial plan, the release was due in the second half of 2006, which was later extended to March 2007 and then to July 2007. With the department of telecom (DoT) and the defence ministry locking horns over the release of spectrum, the launch of 3G services is set to be further delayed.

Fight for the scarce resource - "THE SPECTRUM"

Entry of Foriegn players in offering 3G mobile services
As per reports in economic times - A committee of Department of Telecom is said to have given its clearance on entry of foreign players in offering 3G mobile services and allocation of spectrum through auction. The group is said to have so far finalised two things -- that 3G is not an extension of 2G, implying that there is price to be paid through auction for spectrum to start 3G services, and entry of foreign players. Other issues including allocation of spectrum to public sector undertakings and pricing criteria are also being worked out.

At a time when voice revenues are falling, high-end value added services through 3G hold big potential for telcos to arrest the top line fall. The report indicated that the final policy is not likely to come out before July as lots of nitty-gritties have to be worked out along the broad framework of 3G, including allocation, auction methodology, benchmark price, number of players, PSUs (BSNL and MTNL) entitlements as per their existing rights. The sources said being PSUs, BSNL and MTNL will be given preference as unless supported they would not be able to compete and offer 3G services on their own. The PSUs will have pay some price for the spectrum to remain in the allocation benchmark, they said. Entry of foreign players will bring in competition and quality which would bring down the cost and make 3G services popular.

Meanwhile Tata Teleservices is opposing entry of foreign players in offering 3G services. Tata Teleservices feels this would lead to scarcity of spectrum and hamper the growth of existing operators and has demanded a level-playing field vis-a-vis foreign players.

Mandatory network sharing for roaming
Meanwhile, The Department of Telecom (DoT) plans to make it mandatory for all operators to open their networks to roaming customers from other service providers after the introduction of third generation (3G) telecom services in India. If implemented, private cellular operators will be largest beneficiaries as they will be roam on the extensive networks of state-owned BSNL. This proposal will also enable 3G subscribers to roam on the existing 2G networks. The move has been recommended by the internal committee of DoT, which is studying telecom regulator’s Trai recommendations on the allotment and pricing of 3G spectrum. The logic behind the DoT proposal is that “besides existing GSM and CDMA players, non-telecom companies and even non-Indian companies” will bid for 3G spectrum, when it is made available. As the constraint of 3G spectrum will limit the number of players in this sector, and since it will also not be possible for these players to roll-out these services on a pan-India basis, their customers will therefore have to depend on the 2G networks of existing operators when on roaming, the DoT committee has said. “In view of the limited number of service providers being recommended for 3G services and the fact that the extensive, country wide roll-out of 3G networks will take a reasonably long time, the 3G customers will have to depend on 2G networks and services in areas where 3G services are not available, or on 3G networks of other operators, wherever available for such time. Hence roaming amongst all service providers would be required and is therefore recommended to be mandated,” the DoT’s committee report said. Currently, all private operators share their network infrastructure and allow their customers to roam on the networks of competing service providers. The DoT committee recommendation gives private operators reasons to cheer as BSNL is the only telecom operator in India which does not share its infrastructure. In fact, many private operators have also demanded that the incumbent be mandated to share its nation-wide network created largely with public funds, on reasonable and non-discriminatory terms, adding that the terms of such sharing be regulated by Trai. The regulator has also been advocating the move. The Department of Telecom committee has also endorsed most of Trai’s recommendations on the allotment of 3G spectrum. While approving of Trai’s proposal that 3G spectrum be made available in the 2.l Ghz and 800 Mhz (for CDMA), it has however said that the availability of the 450 Mhz would be difficult. With just over 40 Mhz of 3G spectrum slated to be vacated by the defence forces, the committee has recommended that the allocation of the resource be limited to just four players, through a bidding process. Additionally, it has also recommended that ‘for security reasons, one slot of 3G spectrum be reserved for BSNL and MTNL’ during its allocation, where the PSUs will have to pay the price quoted by the second highest bidder during the auction process.

Limiting the number of operators to ensure spectrum availability
At this point of time the Indian telecom space is hit by the unavailability of spectrum. The Department of Telecom is said to be now considering to limit the number of operators in each service area to maintain a minimum quality of service. The step was necessary as "spectrum is a scarce resource and to ensure that the adequate quantity of spectrum is available to the licensees to enable them to expand their services and maintain the minimum quality of service." There are 23 telecom circles in the country. Currently, there is no cap on the number of service providers in a service area. As on date, 159 licenses have been issued for providing access services in the country and generally there are 5-8 providers in each service area. Since any Indian company can apply for unified access license, this is increasing the demand for spectrum in a substantial manner. In an evolving sector like telecom to ensure that the policies keep pace with the changes, DoT is seeking TRAI's recommendations on the issue of limiting the number of Access Providers in each service area. The Department is considering to review the whole set of crucial guidelines in the terms and conditions of access providers (cellular/unified access/basic) licenses. The terms and conditions slated to be reviewed are "substantial equity holding by a company/legal person in more than one license company in the same service areas, transfer of license and merger and acquisition guidelines." Besides, other guidelines like permitting service providers to offer access services using combination of technologies (CDMA/GSM and or any other) under the same license, roll-out obligations and requirement to publish printed telephone directory will also be reviewed. TRAI's decision could also decide the fate of Reliance Communications which is aspiring to enter the GSM space in a pan India presence and has thus applied for spectrum. As per DoT norms, no single company can have more than 10 per cent stake in two different cellular operators in the same circle. The guidelines also deal with market dominance and stipulate that the total market share of the combined entity cannot exceed 67 per cent in any circle.

Rajya Sabha MP and former owner of BPL Mobile, Rajeev Chandrasekhar, has joined the ongoing battle between the government and telecom operators regarding the allotment and pricing of 3G spectrum. In a communication to Prime Minister Manmohan Singh, Mr Chandrasekhar said that that the Department of Telecommunications’ (DoT) plans to allow foreign and non-telecom players to bid for 3G spectrum through an auction process must not be held hostage by Indian telecom companies. Mr Chandrasekhar’s communication comes as Tata Teleservices and GSM operators have expressed concern over DoT plans to allow foreign players to bid for 3G spectrum and said that “the existing 2G players must have the have the first right to use 3G spectrum as and when it is made available for allotment”. Mr Chandrasekhar is not a disinterested party. He is planning to bid for 3G spectrum in some metros, and will be prevented from doing so if the government bans non-telecom Indian players from participating in the auction. He has also pointed out that there were no restrictions on fourth round of cellular licenses and the recent FM licenses, while adding that restricting bidders would depress the real value of spectrum. Tata Teleservices, in its communication to DoT had alleged that the Centre was ‘disregarding the recommendations of Trai for facilitating the progress of existing GSM and CDMA operators from 2G to 3G services’. “At a minimum, we would expect that the issue of entry of new players, especially from overseas markets to be discussed openly. The interests of existing telecom licence holders who have done so much to make India the fastest telecom market in the world must be protected and a level-playing field provided to them,” the company had said.

Amid the ongoing debate over the entry of foreign players in 3G mobile services and opposition to this idea by domestic players, officials of Tata Teleservices, Bharti Airtel and Cellular Operators Association of India on Thursday met Telecom Secretary D S Mathur.
Sunil Mittal, CMD, Bharti group told the media, "My only point is existing players should get enough spectrum. We all know there is scarcity of 2G (voice spectrum)."
Former telecom minister Dayannidhi Maran had said foreign players should be considered to offer 3G services to bring in quality and comeptition. However, domestic players have opposed this proposal.

Who has got the right on spectrum - GSM v/s CDMA operators
In the fight for the spectrum, Cellular Operators Association of India has said CDMA players should be granted GSM spectrum only after the needs of the cellular service providers (GSM) have been fully met and secured.
Leading CDMA player Reliance Communications has applied for GSM spectrum to expand its mobile services in the country.
Both policy and regulation emphasize adequate availability of spectrum for existing service providers before considering the needs of new players, the COAI said in an approach paper on allocation 2G spectrum (voice).
It further said as the government is in the process of vacating spectrum in the 1800 MHz band to meet the additional spectrum requirements of GSM licensees, it is important to arrive at an equitable approach on how this additional spectrum be allotted among various service providers.
The requirements of CDMA service providers are met through spectrum in the 800 MHz band and when they migrated to UASL from fixed/WLL(M) licenses, it was on the understanding that they would provide the service in their already allotted spectrum and no additional spectrum will be given.
All the GSM licensees who are in commercial operations will come into the category of existing licensees and their spectrum requirements must be safeguarded up to at least 2x15 MHz before any subsequent licensee is considered, it said.

With the government expected to soon take a decision on the allotment of 2G spectrum for Reliance Communication’s GSM foray, existing GSM players have approached the Department of Telecom (DoT) demanding that allocation of this resource be prioritised. GSM players have said that despite the licence being technology neutral, they should have the first right to 2G spectrum as and when it is available. Besides, a GSM player who wants to expand operations to pan-India level should be given priority over new entrant Reliance Communications, they said. Last year, RCOM, which currently offers GSM services in eight circles, had applied for GSM spectrum on a pan-India basis. The company is also learnt to have floated a mega GSM tender estimated at over $6 billion. Recently, announcing the results for the year ended March 2007, chairman Anil Ambani had said that RCOM would roll out GSM services across the country within a year of spectrum being allotted. Opposing the move, the Cellular Operators Association of India (COAI), the body representing all GSM technology-based operators, had told DoT that telecom regulator Trai, during its earlier recommendations, had said that ‘additional spectrum, if available, should be given to existing operators for cost effective service. Quoting Trai, COAI said a fair balance between the two objectives of increasing competition on one hand and improving quality, coverage and price-efficiency of service on the other, has to be maintained so that the larger objective of providing quality services at affordable prices is not jeopardised. COAI also added that if new entrants were allocated GSM spectrum, at the expense of existing operators, then this will lead to ‘a sub-optimal cost structure and quality of service, which in turn will be detrimental to the growth of teledensity’. According to the GSM body, currently, the paucity of adequate spectrum for existing licensees have resulted in serious ‘quality of service’ issues, which have been highlighted by the regulator from time to time. Trai in its study papers have repeatedly said that spectrum shortage faced by operators was affecting the service quality. “Given that both policy and regulations emphasise on adequate availability of spectrum for existing service providers before considering the needs of new players, it is submitted that in the event that any CDMA licensee seeks an allotment of GSM spectrum, he will be able to get the same only after the needs of the GSM providers have been fully met and secured,” COAI said.

RCOM, Tata Teleservices and other CDMA operators have approached telecom tribunal TDSAT, seeking refund from the government of the excess fee charged during 2003-06 due to late implementation of the revenue sharing regime in allocation of spectrum. Accepting a petition by RCOM and CDMA body Association of Unified Telecom Service Providers of India, TDSAT chairman Justice Arun Kumar issued notices to the DoT and directed it to file a reply within four weeks. In the petition, the operators requested the tribunal to direct DoT to charge them for allocation of microwaves on revenue share basis from 2002 when the Unified Access Service License regime was implemented. AUSPI and Reliance in the petition also urged that spectrum charges should be taken from the date of commercial operations of telecom companies and not from the date of allocation of microwave. During proceedings, counsel Ramji Srinivasan, appearing for the operators, contended that after UASL implementation in 2002, DoT had assured them it would take spectrum charges on revenue share basis.

Tata Teleservices opposes DoT's plan to auction 3G spectrum to foriegn players

As per Economic times - "Tata Teleservices has opposed communication and IT minister Dayanidhi Maran’s plans of allowing foreign players to bid for 3G spectrum and said that this would lead to further scarcity of radio resources and hamper the growth of existing operators. The company which offers CDMA-based telecom services, has also alleged that the Department of Telecom (DoT) was ‘completely disregarding the recommendations of telecom regulator Trai for facilitating the progress of existing GSM and CDMA operators from 2G to 3G services’. The interests of existing telecom licence holders who have done so much to make India the fastest telecom market in the world must be protected and a level-playing field provided to them,” the company said. The company has pointed out that at present, there was shortage of 2G spectrum, and therefore the spectrum-efficient 3G network would primarily be used to provide voice services in the beginning. “The logical policy, therefore, has to be allow the entry of 2G companies into 3G to further develop their markets and to grow by getting more spectrum and by using their existing infrastructure, instead there is a move to cap the growth of the existing players completely disregarding the recommendations made by Trai...,” the company said."
Additionally, Tata Teleservices has also objected the proposals of the internal committee formed by DoT to study the 3G spectrum pricing and allocation recommendations of Trai. This committee has suggested that four telecom companies be given 3G spectrum in the 2.1 Mhz frequency, through a bidding process, while adding that if state-owned BSNL and MTNL did not figure among the top four in the auction, then the PSUs must be given 3G spectrum provided they match the price of the second highest bidder. Tata Teleservices has pointed out that Trai had recommended that only existing players be allowed to bid for spectrum in 2.1 Ghz, and that too for a quantum of 5 Mhz each. “Inviting external entities with blocks of 10 Mhz of spectrum, will not only drive the costs up, but will also limit the number of operators. Then existing licensees will be forced to conduct their operations in sub-optimal fashion with sporadic and minute allocations of as little as 1.25 Mhz at a time. The reasons for such unfair treatment must be divulged and such unfairness is clearly not going to be accepted by the industry,” the company added. On the proposal for a quota for BSNL and MTNL, Tata Teleservices said that such treatment, in addition to being against the recommendations of Trai, would also not offer a level-playing field between private and state-owned players. It has also added that BSNL and MTNL were no longer the sole custodians of public interest as the government itself had allowed civil servants and PSUs to embrace the services of private telecom service providers.

Doordarshan will be available on Nokia handsets in India

Public broadcaster in India Prasar Bharti and world's largest mobile phone maker Nokia are all set to start a mobile TV pilot project in Indian metro cities, which will enable cellular phone users watch Doordarshan channels on their handsets. Nokia India has entered into a pilot tender with DD to launch the service, which would make DD channels available on select high-end Nokia handset models. During the pilot phase, Doordarshan will test the reception quality of the broadcast coverage. Attendant things like a revenue structure or advertising opportunities will come later.

Nokia's N92 series of handsets are capable of catching television signals. Nokia officials said it is for Doordarshan, which has put up a mobile television platform to set a time frame about commercial launch of their TV on Mobile. The company has N92- the first DVBH (digital video broadcast handheld) device. Adoption of mobile TV will ultimately give way to a more personal and private TV experience than that of traditional broadcast TV, with big implications for users, content providers and advertisers.

CAOI demands 50% cut in ADC

Cellular operators have urged the Telecom Regulatory Authority of India to reduce Access Deficit Charge by 50% to Rs 1,600 crore for 2007-08 . In their communication to Trai, COAI, the body representing all GSM operators, has demanded that the incidence of ADC should be completely removed from the domestic consumers, and for 2007-08 , this levy be recovered only from incoming international calls.

Currently ADC (the levy paid by all telecom operators to state-owned BSNL to sustain its rural operations) is charged on all STD, ISD and also on incoming international calls. Operators pay 1.5% of the annual aggregate gross revenues (AGR), Rs 1.60 per minute for all incoming international calls to India and Rs 0.80 per minute for every outgoing ISD call, towards ADC.

Justifying the demand, COAI has represented that as per Trai’s estimates, India will receive 11,376 million minutes of incoming international calls 2006-07 which was a growth of 47% over the previous year. If the same growth rate was maintained, incoming ILD traffic for 2007-08 will be at least around 16,745 million minutes. On this basis, CAOI has projected that an ADC of Rs 1 per minute on incoming ILD calls will be sufficient to meet the ADC requirements for 2007-08 .

Reliance & InterCall enters into tie-up to provide conferencing services

Reliance Communications has entered into an exclusive partnership with Chicago-based InterCall, the world's largest conferencing services provider.
As a part of this strategic tie-up, Reliance Communications has rolled out an unique pan-India integrated audio conferencing service both to and from India to its customers.
Reliance InterCall conferencing transforms a phone connection into a virtual conference room, an online auditorium, an electronic brainstorming session and an audit summit depending upon the requirements, the company said in a statement here on Tuesday.
Presently, over 30,000 organisations and 2,00,000 individual conference leaders around the world make use of InterCall's state-of-the-art conferencing facilities and these will now be available in India both for 'anytime meeting' and for reservation-based' services.

BSNL challenges TRAI's decision to cut port charges

BSNL on 8th march challenged the telecom regulator TRAI's decision to cut port charges in the tribunal TDSAT, saying the reduction in fees will lead to a loss of about Rs 100 crore every year to the company. Telecom Disputes Settlement and Appellate Tribunal accepted the petition and issued a notice to TRAI, directing it to file a reply in two weeks.

The Telecom Regulatory Authority of India by its Telecommunication Interconnection (Port Charges) Amendment Regulation on February 2, 2007 that reduced port connectivity charges by 23-29 per cent.

BSNL's major argument in its petition is - "The TRAI vide its impugned regulation is attempting to modify and substitute its regulation over the interconnect agreements entered into between BSNL and private operators so as to effect an impermissible gain for private operators and loss to BSNL." BSNL also contended that while deciding the port charges, TRAI has not taken into consideration the cost of main equipments installed by it to provide interconnection.

Tata Teleservice plans to invest Rs 3500 Cr in 2007-08

Tata Teleservices (TTSL) is planning to invest Rs 3,500 crore in the next fiscal for expanding services across the country. TTSL has applied for licences in Jammu and Kashmir, Assam and the rest of the North East. Elaborating on the telco’s expansion plans, CEO Mr Darryl Green has said, “We will add more cell cites and reach out to another 1,000 towns and if we get the spectrum, we will roll out 3G services as well.”
The company has been adding over half a million users every month. Along with subsidiary Tata Teleservices Maharashtra, TTSL has nearly 16 million users in India.

BSNL added over 10 lakh GSM subscribers in Feb 2007

In a statement released by Cellular Operators Association of India (COAI), the GSM-based cellular industry has added about 50 lakh subscribers in February. With this, the all-India GSM subscriber base has touched 11.53 crore at the end of February 2007 compared to 11.05 crore as on end of January 2007 with Bharti Airtel .

The Indian GSM industry is a key contributor in the 200 million milestone reached by the telecom sector in India as a whole in February.
In February, the cellular subscriber base of Bharti touched 3.54 crore with additions of over 17 lakh users, capturing 30.74 per cent of the market share. BSNL at 2.54 crore with a marketshare of 22.07 per cent and additions of over 10 lakh subscribers.
Hutch-Essar added 9.28 lakh subscribers and now has 2.53 crore subscribers, taking its market share to 21.98 per cent.
Idea added 5.6 lakh mobile users with a market share of 11.83 per cent has 1.36 crore subscribers in February.
MTNL's GSM subscriber base in Delhi and Mumbai touched 25.78 lakh, while Spice Telecom has also over 25 lakh subscribers.
Aircel's user base in February stood at 50.94 lakh, followed by Reliance Telecom's 41.1 lakh subscribers.

Indian Telcos planning to spin off mobile tower business into seperate units

Tata Teleservices is said to be in talks with several firms about spining off its mobile phone towers into a separate unit, part or all of which could then be sold. As per media guesses (reported by Economic Times), Singapore state investor Temasek Holdings and wireless tower operator Crown Castle International are in talks to buy close to 15 per cent in the mobile phone towers business of Tata Teleservices Ltd.
The industry analysts valued the tower business at up to $1 billion. Tata Teleservices has more than 5,000 mobile phone towers. Tata Teleservices, along with subsidiary Tata Teleservices (Maharashtra) Ltd, has more than 15.5 million subscribers in India.

Reliance Communications Ltd had also said it would spin off its towers business into a separate unit, and leading mobile services provider Bharti Airtel Ltd has said it would do the same. Newspapers have indicated American Tower Corp, as well as private equity firms including Blackstone, Carlyle and Temasek were interested in Reliance Communications' towers unit.

The 'Idea' of investing $2bn

Idea Celluar, the Aditya Birla Group owned telecom company, currently operates in 11 circles out of 13 for which it has been issued license. It has applied for license in nine new circles. In the past six months the company has launched operations in Himachal Pradesh, Rajasthan and Eastern Uttar Pradesh. It will launch operations in Mumbai and Bihar this year.

As per a press release, Idea is planning tol invest $2 billion in the next two years to compete in the booming Indian telecom market. Aditya Birla Group and Idea Cellular Chairman Kumar Mangalam Birla meanwhile ruled out any tie-up to compete with rivals like Vodafone.

After Hutch, FIPB eyeing at Aircel ?

As per a latest news in Economic Times, after Hutch the shareholding structure of Aircel Cellular can also come under the lens of the Foreign Investment Promotion Board (FIPB). Like Hutch, Maxis Communications too consolidates nearly 100% of its stake in Aircel in its overseas accounts though its equity stake in the Chennai-based operator stands at just 74%. As per the filing by the company to the Malaysian stock exchange Bursa Malaysia in March 2006 - "With equity interest of 74% in Aircel (comprised 65% direct interest and 9% indirect interest) and 100% subscription of cumulative redeemable non-convertible preference shares in Deccan Digital, this effectively gives the group 99.3% economic returns from the investment in Aircel,” . Maxis had teamed up with the Pratap Reddy family and incorporated a joint venture company, Digital Networks Private Ltd, in India to buy Aircel in 2005-06. Maxis subscribed to the non-convertible preference shares in this company, giving the group nearly 100% economic interest in Aircel. Indian investment rules stipulate that foreign investors can own only up to 74% in an Indian company and that domestic investors should own the remaining. However, in some cases such as Hutch-Essar, the foreign company is also enjoying the economic benefits of the entire 100% raising questions as to whether this violates the investment guidelines. On February 28, the Foreign Investment Promotion Board (FIPB) wrote a letter to Hutchison Essar asking them to name the beneficial owners of the entities controlled by Indians.
Aircel provides cellular services in nine circles and has over 5 million subscribers.

Indian Telecom sector to get a unified tax structure?

Finance Minister P Chidambaram has asked Department of Telecom to commission a study for working out a unified tax structure for the sector. At present, total levies in the telecom sector, including the annual revenue share that the companies pay to the government stand between 28-30 per cent, which operators feel is very high. The annual revenue share ranges between 6-10 per cent of their revenues depending upon the circle where they operate.

GSM modems - $10 billion sale expected by 2012?

The sales of GSM modems is finally picking up. Although shipments of cellular modems in 2006 were slightly below expectations, the momentum is building for this market to reach sales of 68 million units worth nearly $10 billion by 2012, a 47-percent compound annual growth rate.
The growth will come from the proliferation of 3G networks and better cellular broadband pricing.