China recently allocated TD LTE licenses to its carriers on the 2300MHz band. This is a significant event in the technology life cycle of LTE as TD LTE develops as mainstream standard and is set to massify on the global scale. The debate between TD and FD LTE has hovered around the lines of GSM versus CDMA and the emergence of one technology as the dominant standard. However, with technology and eco-system maturities, TD LTE emergence alongside FD LTE is now seen as a complementing effort and effect. This would create technology inter-operability between TD and FD LTE.
Why is the China LTE launch key to LTE eco-system world over?
China LTE implementation is all about scale – China Mobile for instance has deployed 200K BTSs for the LTE pilot covering 500 million people initially. That’s the size of the whole of Europe put together. The number of 4G base stations is expected to increase to 500K by the end of 2014. In addition, China Mobile is set to offer more than 200 different 4G-compatible handsets this year, including a handset priced at CNY 1,000 ($165) and a number of self-branded 4G devices. Apple’s iPhone portfolio has also recently been made available to China Mobile customers. Similarly, China Telecom plans to launch entry-level 4G smartphones at similar prices to its rival in the first half of the year before introducing mid-range and high-end models before year-end. By this time it expects to have 60,000 4G base stations. In contrast, China Unicom confirmed in December 2013 that although it has been issued a licence for TD-LTE (like its rivals), but it remains focused on running the majority of its 4G network via FDD-LTE – for which it is yet to receive a license. It is likely we will see a rather slower start to the 4G era for China Unicom.
With such large-scale rollouts underway, China Mobile and China Telecom will have the fastest initial 4G migration rates seen outside of South Korea, with close to 10% of their combined total connections migrating to 4G by the end of this year. According to new GSMA Intelligence, take-up of 4G-LTE in China will happen twice as fast as the earlier move to 3G HSPA networks. By contrast, it took twice as long for China Mobile and China Telecom to migrate their 2G customers (on GSM and CDMA2000 1x networks, respectively) on their 3G networks (TD-SCDMA and CDMA2000 EV-DO) following launch. For example, it took China Mobile 14 quarters to migrate 10% of its 2G connections base to 3G, but it will take approximately half that time to reach the same milestone in the move from 3G to 4G. Subscribers are estimated at 900 million 4G connections in the China by the end of 2020, up from around 100 million this year.
It is important to note that FDD and TDD LTE are two flavours of what is essentially the same standard, marking a different situation to when two technology standards (GSM/HSPA and CDMA) were competing for 2G and 3G hegemony. The availability of dual-mode FDD-TDD chipsets help mobile operators running either LTE variant to offer a wider choice of attractive 4G devices. Device manufacturers can therefore generate greater economies of scale given that dual-mode FDD-TDD chipsets remove the need to create multiple variants, serving to lower costs. Currently TD LTE accounts just over one in 40 LTE connections globally. However, China Mobile, China Telecom, Reliance Jio and Airtel could alter these TD LTE subscriber numbers by a wide margin. Even though there could be more instances of FD LTE launches by operators, number of subs on TD LTE networks could outweigh those on FD networks.
As the industry waits with baited breath for reliance Jio to create the landmark disruption, there has been an uproar over VoLTE i.e Voice service over LTE spectrum. Reliance Jio paid Rs 1,658-crore fee to the government for supporting 4G VoLTE on its universal services licence. VoLTE was the final piece that would complete Reliance Jio’s portfolio of services. However is that really a disruptor as it is purported to be?
Voice Telephony on LTE is made possible through apps such as Skype. However, with prohibitive CAPEX on full carpet area coverage – Data connectivity in a wide carpet area will be patchy at best. It means no voice calls when driving or outside city limits.
The 2,300 MHz spectrum, is one of the worst when it comes to creating a large area network. Compared to a GSM/HSPA 900 MHz; LTE on 2300MHz requires exponentially higher number of towers in one shot. Voice is not profitable enough, to support such high infrastructure costs.
Thirdly, Voice requires a better quality of experience. A data subscriber rarely notices fluctuations in speed, but a user in a moving vehicle will expect the same call quality throughout. Thus, for data services can afford lower initial investments and expand incrementally afterward, but for voice telephony, all investments are needed up front.
The one way VoLTE might make commercial sense is if Reliance acquires or partners with an existing mobile operator, such that its current 2G or 3G network becomes the fallback network that will carry voice calls or data when 4G airwaves aren’t around. That appears to be the only way Voice can happen for Reliance Jio. (Or alternatively, a tie up with Reliance (Anil Ambani) could provide Mukesh Ambani the where with all to su[pport voicee services).
Thus VoLTE under the current understanding is not the disruption as many earlier thought it to be.
Continued from an earlier post – RIL’s 4G push and the disruptions that could happen there-off. The first disruption was the ability to create data hotspots with high speed WiFi through 4G Backhaul.
Disruption 2: Triple play services across voice#, data, media, education and broadcast segments
The second disruption, is in terms of triple play services – and the game really looks close to the broadcast services that I had written about some time back. To that extent, RIL would look to cut into revenue space of cable companies. In one of my earlier posts, I had mentioned about how Telco operators could up-end both cable distribution and content management and RIL seems to be planning content exclusivity along with data-pipe ownership. (Now that is something even Apple hasn’t perfected). The triple play strategy of voice, data and video could be very effective in acquiring wallet share of the customer. By exploring the television and cable space, RIL was looking to tap another potential 100 million screens for its broadband services and drive the triple play offering.
RIL as a broadcaster is geared up for media convergence and will deliver content to any new platform. RIL has been creating a walled garden for content, which will give new opportunities to VAS (value-added service) providers and open up space for new niche channels.
Disruption3: The price factor
With an eye on the larger pie, Reliance would bet on building data habit into Indian customer psyche mainstream. There are rumours about Rs.3500 tablets and data plans priced around Rs10 per gigabyte. With a mighty 4G backhaul, powered by 802.11n WiFi and data speeds upto 100mbps-1Gbps and Rs.10/GB cost of data, the traffic rates are bound to multiply. RIL is betting on this traffic surge to build its big push in Telecom.
#: Assuming that RIL will find a way to muscle in VoIP regulation for Inland calls also. RIL does have that clout to make that possible.
Why RIL’s push into 4G services could be the most disruptive effort in India’s Telecom history?
As Reliance Industries (RIL) readies to launch 4G services in India, it is worth looking at the game plane for RIL – how it plans to disrupt the industry and the present Telecom business paradigm. While there is no launch date for Reliance 4G launch yet, it is expected that RIL will launch its 4G services in 4-7 metros by mid 2013 (3 years after it acquired 4G licences by acquiring Infotel).
The 2300MHz 4G band in India is prohibitively costly for plain carpet area coverage and most of the operators are picking up traffic hotspots to put up their equipments and BTSs. Interestingly enough, RIL’s gameplan of riding on WiFi actually works on the contrary – it will create 30000 hotspots across selected metros which will let users access 4G-LTE network speeds on a WiFi framework. The cost of providing one to one terminal based solutions through a wireless route would have been extremely costly in terms of OPEX and CAPEX. However, RIL has turned this weakness into its strength going through the Fibre Optic route and a MiFi terminal.
- This allows it to serve more devices/ users per terminal thereby reducing cost of servicing per unit device
- It also caters to a segmented strategy – SOHO, SME, HNI Homes, Retail, Enterprise etc.
- Therefore it makes WiFi the short area wireless standard.
Going forward, in the future, RIL will ride on its fibre optic network coupled with Femtocells to increase coverage carpet area. Refer to the illustriation below for understanding of the MiFi zones and Femtocell solutions to cater to focussed carpet areas.
The disruption here is that, by the use of WiFi, RIL will tap into every operator customer by providing a WiFi over-ride on the wireless services of competitors. A XYZ operator customer will also have RIL pre-paid data card which will allow him high speed WiFi in catchment areas- schools, colleges, restaurants, offices, airports, railway stations etc. The XYZ Operator services will only be used for low volume/low value services outside RIL hotspots. Inherently from a customer perspective, he uses bulk of his data/voice plans from only certain catchments (Office, College, Home etc). The service platform of RIL 4G will be device agnostic targeting both wired and unwired devices.
While LTE is the future in telecommunications, in light of the negative business case around 2.3/2.6Ghz deployments, the Indian roadmap looks a little less promising then it should be. Please refer to my Slideshare presentation below-
2011 is perhaps Indian telecom’s biggest year yet with launch of 3G services, mobile number portability implementation and 175 million new mobile phone subscribers in 10 months, taking the total subscriber base to 881 million.
However there have been challenges for the Indian telecom businesses-
1. 93 percent of users are low-spending pre-paid users
2. A low ARPU together with high energy costs for the diesel backup for a half-million towers, it’s a struggle for margins.
3. 3G licenses have come at a very heavy cost and the impact is in terms of cash strapped operations for many Telcos. The government made a lot of money and squandered off a little more, but that is a different story.
4. Inspite of huge investments on 3G, Poor user experience and a lack of content failed to draw users, killing all operator hopes of recovering that money.
5. Mobile number portability: 25 million users applied to switch operators while retaining their number, with 2.5 million requests pouring in each month. The churn is also taking its toll as Operators are responding with tariff cuts and deals.
A few future defining trends also shaped up in 2011 as markets evolved, matured and consolidated:
1. 2011 is possibly the year, when the Indian Telecom Industry moved up from a entry to a replacement market. The new sub adds plummeted to 6-7 million per month as against an average of 15-20 million activations in 2010.
2. Data emerges the hero as Telecom starts evolving from a some-what voice centric industry. 2011 should herald the decade of data for India with preliminary 3G and EVDO Rev. B launches. LTE is round the corner.
3. New classes of devices such as Smartphones and Tablets in the entry level with advanced OSs and application capabilities widen the consumer choice as well as the experience. Low cost Androidss are driving smartphone adoption rapidly across in ~$80 price segments
4. Tariffs bottoming out, Indian Telcos look for the next springwell of revenue and profits and new revenue models would start to emerge. Operators are looking at various VAS aided business models to augment their margins and profits.
5. The Aakash Tablet (and NotionInk’s Adam before that) established India’s status as a low cost innovator. Going forward with the markets in SE Asia and Africa being key to telecom growth, India will feature as a global innovation and R&D centre
6. The government has announced the NTP (National Telecom Policy) which is a proactive step in terms of defining telecom sector businesses going forward. The industry awaits greater clarity on a few issues such as mergers and acquisitions and we will see things get more clear and better as wel go along.
This post is the second of a two part series on the scenario around LTE network deployments in India.Read First post here
Aircel and Bharti Airtel are believed to be targeting the enterprise segment. While the enterprise segment are the biggest in terms of data usage, the success of LTE will depend on the fact that there has to be a compelling reason for large enterprises to move to LTE network.Initial traction on Data services will depend on how well the vertical applications are engineered for key industry verticals. Verticals like healthcare and banking, which have to be always-on are likely to be the early adopters of LTE, provided applications are developed around them. In case this happens, it might be possible to expect a much higher ARPU from LTE. Having said that, going by the 3G experience, it is quite clear that price is going to be a critical factor (if not the deciding factor!) for the uptake of BWA services.
Further to this, the government needs to put in place a telecom policy that could be instrumental in regulatory guidance and support which would impact faster roll-outs of the services at reasonable tariffs. Unlike 3G auction mechanism, where spectrum licences were bought by operators had extremely high bids leaving precious little CAPEX for network roll outs and resulting in high and unreasonable tariffs (for recovery of investment), government needs to play a more inclusive role in successful 4G LTE roll outs. In the 3G auction case, the only winner was the government who made a handsome lot through the bidding process. This time, the government could keep the bids controlled, lease the spectrum, sponsor the networks infrastructure (or cost share) and foster network infrastructure sharing arrangements between the service providers. This would leave a pool for the Telecom sector where investments could be made into value added ancillary services which would promote usage of the network.
Besides enterprise segments, some operators might also be looking at the rural market initially for LTE services. Experts believe that it will be sometime before Indian operators expect returns from this new service. They might have made huge investments, but right now it is unclear as to how long the investment will take to make profit.
This post is the first of a two part series on the scenario around LTE network deployments in India.
Ten years of trailblazing performances and more, the Indian Telecom story needs a new super hero. This is necessitated by the demands of the bandwidth starved data hungry customers are placing an inordinate amount of pressure on the spectrum. The Indian government has been instrumental and forward planning to meet the challenges of increased data bandwidths. That is where 4G LTE services hold out a promise to provide super speed technology on high bandwidth spectrum.
Despite the initial success in field trials, a key question facing the operators is the financial viability and the unclear business models surrounding this emerging technology. Though the industry remains gung-ho about the potential of LTE TDD, it is imperative that the industry evaluates certain critical factors to decide on the business case of the technology. Of the 160 million broadband connections expected by the end of 2014, a good percentage is to come from LTE services which is expected to drive 60 per cent of next level mobile broadband growth.
However, post the lukewarm response to 3G, experts believe that operators need to have a viable business model, clear go-to-market strategy and a marketing campaign designed to target specific segments, niches and user segments of the society to make a business case from the soon-to-be launched Long Term Evolution Time Division Duplex (LTE TDD) technology. There has to be a proper strategy in place to make sure that all investment-related decisions (for LTE TDD) are being taken after due consideration. Operators are yet to make 3G a true business case in India, and if proper targets are not set, many operators may find it challenging to survive.
Contrarian to the earlier view, analysts also believe, what works in favor of operators in India is the relative lukewarm response to 3G, which leaves a lot of scope for LTE to make headway. However, on the flip-side, discouraging numbers for 3G uptake is likely to have some impact on LTE roll-out as well. If 3G has been unable to set the mobile broadband segment on fire in the country, what is it that LTE would offer which will make customers embrace it.
Broadband wireless access, a Rs.40,000 crore dream to offer high speed internet, media streaming and video services to users has been in the horizon for an year now. Inspite of the great big promise, there hasn’t been much that has happened on the BWA space. The eight operators who had invested in BWA, the govt bodies are still searching for solutions and answers in terms of technology, time of rollout and business model, respectively. Most of the operators, after getting the BWA license in June and spectrum in September-October, had said they they would launch the services in the second half of 2011, but it is now believed that operators have deferred the rollout plans to the 1st or 2nd quarter of next year.
The isn’t good news for spectrum starved India, in light of the fact that regulatory and legislative bodies are much undecided about the future course of action in Telecom Industry in the country and there are punitive initiatives against a lot of the operators around the 2G spectrum sale and the subsequent revenue loss to the exchequer.
Here’s examining the factors that could be responsible for the BWA roll out delay in India:
1. Lack of Global Precedents: Over the last one year many operators have announced their interests in LTE and most of them have made some kind of trials and deployments. However, the issue lies that, no operator globally has launched BWA services on TD-LTE. China Mobile which had launched 7 TD-LTE trial tests and provisioned for infrastructure accordingly is said to have deferred the launch of BWA services until 2014. That could have a big setback for the Indian operators who were waiting desperately to look at a case study before they go full steam.
2. Lack of an eco-system:Looking at the Indian scenario, where the spectrum is scarce and the mandate of providing broadband services to the masses is herculean, the need of the hour is to select a technology which is flexible, cost effective and future ready. However, one of the other stumbling blocks to LTE implementation is the lack of a developed ecosystem. Infrastructure companies, Operators, Cloud Service providers, Content owners and licences and other technology vanguards need to stake a claim to the Greenfield that is BWA. It is believed that while China has been the first in terms of conducting trials on TDD-LTE, it would be India which would lead the large scale deployment of the technology. The launch of BWA services on LTE technology has been done through dongles because the product ecosystem for LTE technology is also, yet to be fully developed.
3. Where’s the money?(Lack of a business model): Another big reason for the delay in rollout of BWA services in the country despite of getting permission for last 1 year, seems to be the lack of clarity on the business model. 3G, which had been launched in India by most of the operators, has not seen the success that the industry had anticipated and the flop-show of 3G is definitely be at the back of mind of the BWA players. The 3G license holders have spent close to `68,000 crore on just getting spectrum and must have spent a huge some on laying out the 3G network but so far the operators have failed to roll out services in all of their licensed circles and in most cases 3G has not rapidly augmented data revenues. It has instead served as a complimentary channels for the voice channel.
4. Waiting for Big Brother’s first move:What has also influenced the thought with regards to BWA is the presence of Reliance Industries-the only player to win BWA licences in all 22 circles. It is expected the Reliance will be the first mover in terms of BWA launch and Reliance’s opening move might well set the stage for other operators to follow suit.
Doomsayers and analysts have in the recent past rubished future prospects of WiMAX in the face of a greater acceptance (by major operator/Telecom consortiums) of its competition standard LTE. Nokia has gone to the level of stating that it was withdrawing its investments in WiMAX since it believed that WiMAX was the analogical equivalent of Betamax in the war of standards. Read the reference story and an earlier post on this subject.
A recent market survey by Maravedis, “WiMAX and Broadband Wireless Access Equipment Market Analysis, Trends and Forecasts, 2009-2014,” has come up with a few interesting and noteworthy points on the viability of WiMAX as a technology standard.
1. Inspite of a tough year 2008, and a growing buzz about the 3GPP backed LTE being the telecom standard, the WiMAX ecosystem experienced a healthy growth in 2008 and mobile WiMAX has made significant inroads (although short of targets)
2. Over 1.2 million WiMAX complaint CPEs and embedded chipsets supporting mobility were shipped in 2008. MIMO mobile WiMAX devices being a new entrant into the market the previous year, new deployments in various regions worldwide created a substantial market for MIMO mobile WiMAX terminals and infrastructure equipment. Expansion of existing WiMAX networks and conversion of some existing networks from fixed to mobile WiMAX has also contributed to these numbers.
3. Contrary to belief, WiMAX equipment demand didnot taper and operators continued rolling out infrastructure, sourcing terminals and adding new users using 802.16d – 2004 technology. CPE shipments reached 880000 in 2008.
4. US $145 was the ASP of a mobile WiMAX device during 2008 and by the year end USB dongles were selling at prices between $60-70 for high volumes.
5. Mobile WiMAX devices shipped in 2008 were mainly indoor units.
6. 40% of mobile WiMAX devices had embedded VoIP capabilities and about 7% had other advanced functunalities such as WiFi. USB dongles accounted for 34% of total shipments and were operating almonst all in the 2.3GHz and 2.5GHz spectrums.
7. Korean vendors (Muyngmin, Modacom, Samsung) accounted for 36% of all mobile WiMAX terminal shipments. Taiwanese vendors (Zyxel, Asus, Gemtek, AWB) accounted for 25% of terminals shipped.
8. WiMAX market infrastructure: Alcatel-Lucent, Samsung, Alvarion and Motorola were the key suppliers of WiMAX equipments and 151,000 sectors were shipped at an ASP of $11,500 generating $1bn in revenues.
9. In the Chipsets makers, the market was dominated by Beceem, GCT and Sequans. Intel and Runcom had a stake in the Wave 1 devices capable of MIMO operations and with very limited support of mobility. Samsung’s own chipset solution gained 7% of the market share.
10. In light of recent technical and commercial wins by LTE, WiMAX is not certainly an all conquering solution, but Maravedis predicts that there will be an accumulated 75 million WiMAX subscribers by the end of 2014. Service revenues generated by BWA will reach US$15 billion in 2014 and WiMAX equipment market will reach an annual US$4 Billion in 2014, from over US $2 billion at the end of 2008.
What the report seems to be poiting at it that, though LTE has the backing and auspices of a majority, it is unlikely that LTE would deploy sooner than 2012. That gives WiMAX a 3 years headstart and it could greatly benefit WiMAX since, Proprietary and fixed WiMAX equipment markets will continue to grow organically to meet the needs of WISPs and vertical segments. These 3 years and the market traction would become a strong foothold for WiMAX in the face of competition from LTE as the 4G Tech Standard. WiMAX may not be the winner ultimately, but given its earlier time to market, it will not be the looser as well. The eco-system will thus have both tech standards and rightly so, because there are nuances in WiMAX that LTE cant better and vice versa. In effect, there are parallel markets that could thrive under both these technologies. After all, one technology standard may not be the healthiest thing in the market.
So much so for the analysts, doom-sayers and nay-speakers for WiMAX.