THE buoyant Indian telecommunications sector is growing at a frenzied pace, but lack of ‘spectrum’ is likely to slowdown growth in the coming years. Many of the telecommunication service providers, who have been rolling out services in a big way, are facing a huge problem because of lack of spectrum capacity.
The sudden resignation of former telecommunication’s minister Dayanidhi Maran – who had to quit the federal cabinet following differences with his party supremo, M. Karunanidhi, the DMK chief minister of Tamil Nadu – has resulted in further uncertainty in the government’s spectrum allocation plans.
Another DMK representative, Andimuthu Raja, has replaced Maran, but he is not known for his dynamism unlike his predecessor. Raja will also take time to get well-versed with the telecoms controversies, with several leading players engaged in a bitter turf war.
India’s 2G (second generation) spectrum is saturated and telecoms companies have been eagerly awaiting the unveiling of its 3G (third generation) policy. The Telecommunications Regulatory Authority of India (TRAI) had last year suggested auctioning of 3G spectrum, though many players were opposed to this move.
When mobile phones were introduced in India about 12 years ago, the government had auctioned ‘circles’ (metros or states) to the highest bidders, resulting in unrealistic tariffs. Realising its folly, the government later switched to a revenue share model, enabling cell operators to slash tariffs, and bringing cell phones within the reach of ordinary people.
Many telecommunications companies are worried that auctioning of 3G spectrum would likewise result in prohibitive costs for consumers of these services. The Department of Telecommunications, however, is in favour of auctioning of 3G, as ‘spectrum’ is a scarce commodity, and by auctioning it, the government can rake in over $2 billion.
India plans to launch 3G next year, though the delay in the announcement of the policy is likely to affect the roll-out of services. The TRAI has suggested a base price of over Rs10 billion for a national-level entry, while ‘A’ circle cities would attract a base price of Rs800 million. ‘C’ circle cities and towns would have a base price of Rs150 million.
The government expects international players to also bid for 3G spectrum, which could result in further escalation of the cost of services.
Another reason for the delay in rolling out 3G services is the fact that much of the frequency is currently occupied by the Air Force and the defence services. However, the government is making alternative arrangements for the defence services, and over 40 MHz of spectrum is expected to be freed by July, for both 2G and 3G services.
The delay in firming up the 3G spectrum policy has affected the roll-out of services like WiMax (World Interoperability for Microwave Access), enabling wireless broadband services. There is an acute shortage of frequency in bands like 2.3-2.4 GHz and 2.5 GHz, and in some cities it adds up to a 50 per cent deficit (about 20 MHz).
Cellular operators in India have been urging the government to unveil its WiMax policy at the earliest, to enable the country to take advantage of this new technology. They have sought the release of additional spectrum of 2.5 GHz for WiMax, and larger bandwidth of up to 30 MHz.
The WiMax Forum, an international organisation, has also urged the Indian government to allocate 2.5 GHz spectrum for WiMax services. Failure to do so would severely hurt India’s prospects of continuing to lead in the telecommunications sector. Telecoms operators have been seeking higher spectrum, as the consumer base is burgeoning.
There are also differences between GSM (global system for mobile communications) and CDMA (code division multiple access) operators. Companies like Reliance Telecom (a dominant CDMA player) are also entering the GSM arena, and seeking more bandwidth. But existing GSM operators are loathe to allow any such ‘encroachments.’ There are also differences between nationwide operators and regional players.
GSM accounts for seven out of 10 mobile phones in India, but CDMA operators are fast catching up. According to government figures, there were 4.13 million new GSM connections in April, as against 1.01 million CDMA phones. In April, India saw almost five million new telephone subscribers signing up for services, taking the country’s telephone density to 18.7 per cent.
About a quarter million fixed-line subscribers cancelled their subscriptions in April alone. The total number of phone connections in India added up to 211.7 million, as against 146.2 million in April last year, a massive 45 per cent jump.
Broadband connections also continue to rise, albeit at a much slower pace; there were 2.3 million broadband connections at the end of March 2007. State-owned telecoms giants like BSNL and MTNL, which had ambitious plans for providing massive broadband connectivity, have failed to meet their targets.
Demand for Internet services in smaller cities and towns are, however, overtaking demand in the metros. According to a recent survey by IMRB-IAMAI, smaller cities and towns have seen a nearly 150 per cent, year-on-year growth in Internet connections over the last six years, even as the eight metros are losing their share.
India has 40 million Internet users, and about 25 per cent of them live in the smaller cities and towns. Though most of these connections are currently using the dial-up mode, industry analysts expect a surge in broadband connections in the coming years. The next few years will see a dramatic shift in Internet usage, with a majority of users opting for broadband.
BSNL and MTNL have been rolling out their services across the country, and now provide broadband connectivity in nearly a thousand cities and towns in India. But in the metros there is a waiting period for broadband connections. MTNL alone has over 20,000 people on the waiting list in Mumbai. Other telecom players, including Reliance and Hutch, plan to launch broadband services shortly to meet the growing demand.
ACCESS to cheap broadband services has resulted in millions of Indians utilising the net to avail of a host of services. Many universities, colleges, schools and education boards declare their results on their web sites; with low Internet charges – most cyber-cafes charge between Rs10 and Rs20 for an hour’s surfing – millions of students access their results online.
Airlines of course have seen a majority of passengers opt for e-ticketing. But the biggest transformation is occurring in Indian Railways, which has been a pioneer in adopting computerisation and the Internet.
Hundreds of thousands of passengers book their tickets from cyber-cafes, or from their homes and offices, and e-ticketing (where an official ticket is also not needed) has also become popular.
The Railways are also enhancing access to the Internet at railway stations. Many stations now have cyber-cafes with broadband connectivity. But Railtel, the telecoms subsidiary of Indian Railways, plans to roll-out WiFi and even WiMax services at important railway stations.
Airports like Mumbai and Delhi have already become ‘hotspots’ and passengers can access the net on their laptops. Now it’s the turn of railway stations. Railtel recently entered into an agreement with US-based Pronto Services, to provide WiMax Internet connectivity at 50 railway stations across the country.
While WiFi provides coverage in a small area – of around 100 to 200 metres – WiMax enhances the range to five to 10 km. Railtel will set up towers and fibre optic cable network and Pronto will provide WiMax equipment at the stations. Passengers can pay for these services at the stations.
The New Delhi station is also being made into a ‘hotspot,’ to be followed by other stations. WiFi services will be free, unlike WiMax. Indian Railways also plan to provide WiFi on select trains, and is negotiating with some British companies to implement this.
THE buoyant Indian telecommunications sector is growing at a frenzied pace, but lack of ‘spectrum’ is likely to slowdown growth in the coming years. Many of the telecommunication service providers, who have been rolling out services in a big way, are facing a huge problem because of lack of spectrum capacity.
