INDIA is one of the fastest growing cellphone markets in the world, with over 8.5 million new subscribers being added every month. There are over 250 million mobile phone subscribers in India at present, a shade lower than in the US, which has about 256 million subscribers. But in terms of new additions, India adds more cellphone subscribers every month than either China (the world’s largest) or the US (the second-largest).

According to the Telecommunications Regulatory Authority of India (TRAI), the country would rank as the second largest cellphone market in the world after China, later this month, when the total number of subscribers overtakes that of the US. Yet, just one in four Indians would be having a cellphone, as against one or two cellphones for every citizen in most developed economies.

However, India’s performance in the telecommunications sector has not been that spectacular when one takes into account areas like broadband penetration and roll-out of WiFi (Wide Fidelity), WiMax (Worldwide Interoperability for Microwave Access) or 3G (Third Generation) systems. One of the primary factors for this is the country’s low rate of literacy – a little over 60 per cent for the overall population, and below 48 per cent for females are literate – which has put paid the government’s ambitious plans to spread broadband usage across the nation, especially in rural areas.

Another major factor restraining growth of higher-end telecoms services is the dithering by the government in formulating a policy relating to the roll-out of 3G services. The department of telecommunications (DoT) has still not been able to get the requisite spectrum from the defence services, and a policy of allocating 3G spectrum has been hanging fire.

The government is expected to finalise its policy – relating to both 2.5G and 3G spectrum – this year, but no dates are being mentioned. There are also fears that the government’s policy of auctioning scarce spectrum would lead to high-priced services, affordable only by the affluent. One of the objectives of the government in liberalising the telecommunications policy was to ensure access to sophisticated telecommunications services – including broadband – in rural areas and even the remotest corners of the country.

Last year, the government decided to allocate 30 MHz of bandwidth for 3G (mainly WiMax) services and auction the spectrum; it envisaged a maximum of six licensees. However, following opposition from some players and the TRAI, the DoT recently unveiled plans that would allow new players, including international ones, to bid for 3G spectrum. Even new entrants in the GSM (Global System for Mobile communications) segment will now be allowed to bid for up to 10 MHz of 3G spectrum. The TRAI wanted only existing GSM operators to be allowed to bid for single blocks of 5 MHz spectrum. The new rules allow existing players to also bid for spectrum.

WHILE India may soon overtake the US as the second-largest market for mobile phones, it features at the bottom in a new ranking of 34 major economies in terms of broadband penetration by the Organisation for Economic Co-operation and Development (OECD).

A recent report by international consultancy Gartner also reflected the poor broadband roll-out in India, and the expected continued sluggishness in the segment. According to Gartner, there were just 35,000 WiMax connections in India last year. The medium-term outlook appears to be bleak, mainly because of the shortage in frequencies.

Low computer usage, especially laptops, the high costs of roll-out of WiMax networks and the consequent high costs of broadband connectivity will constrain growth in the sector for a couple of more years. Gartner expects less than seven million WiMax connections by 2011, despite the efforts of the government to encourage its nationwide roll-out. The government wants a speedy roll-out of WiMax to ensure better Internet connectivity in the rural areas.

The Indian government announced an ambitious broadband policy in 2004, and set a target of almost 10 million subscribers by 2007. Unfortunately for its programme, by January this year there were less than 3.5 million broadband subscribers in India, and even state-owned BSNL failed to extend its reach even in many major cities. Just around 80,000 new subscribers are added every quarter in India, as against over 3.3 million in China.

Even in terms of Internet coverage, less than 60 million Indians have access to the net. Except for cities like Mumbai, Bangalore and Delhi, most other parts of India – both urban and rural – are crippled by power shortages round the year. In the absence of regular and quality power, cyber cafes are proving to be an expensive business proposition, and many have shut down operations in recent months.

Political parties in India are well-known for hyping up election-eve slogans; thus yesterday’s ‘roti, kapada aur makaan’ (food, clothing and shelter) has given way to ‘bijli, sadak, paani’ (electricity, road, water). Some have jazzed up the spiel by adding ‘broadband’ at the end of it. However, in the absence of steady supply of ‘bijli’ in most parts of the country, broadband remains a dream for most Indians.

The slow roll-out of WiMax systems has given a boost to WiFi systems, especially as a growing number of handsets in India are now WiFi-enabled. International majors like Intel are also launching better chips and products that ensure longer distance WiFi platforms.

In India, there are about 800 WiFi ‘hot spots’ mainly in the metros and large cities – especially airports, fast food outlets, coffee shops and software parks. Many of the telecommunications operators find long range WiFi systems to be not only more effective, but even economical and are opting for them.

A report by the WiFi alliance – WiFi in India: A key enabler of economic, social and community development – pitches for this technology and predicts that the market for WiFi networking gear and services (excluding laptops, handsets and chipsets) will touch nearly $900 million in India over the next three to four years, up from less than $140 million at present.

Many of the new townships, office complexes and self-contained townships that are coming up in India are WiFi-enabled. The research report estimates that demand for WiFi networking gear and services are expected to grow at a compounded annual growth rate of over 35 per cent.

LEADING telecommunications service providers, however, are planning to roll-out their WiMax services over the next few months. Over half-a-dozen players will be deploying their WiMax services in the 3.5 GHz band, each with a single block of 5 MHz. The government also expects to allocate the 2.5GHz band to some more telecoms service providers over the coming months.

Even as they await the government’s policy on additional spectrum allocation through auctions, the players are planning to deploy WiMax services through their existing spectrum. Tata Teleservices, for instance, plans to roll-out the services across 130 cities, and will be investing over $500 million over the next five years.

It’s CDMA (code division multiple access) system rival Reliance, has also gone in for selective launch of WiMax services in some cities. Leading telecoms major Bharti Airtel meanwhile plans to roll-out its WiMax services across 300 towns. It has already tested 3G applications in cities like Mumbai, Delhi and Bangalore. State-owned giants BSNL and MTNL are also preparing to launch its WiMax services.

The Confederation of Indian Industry (CII), the leading industry lobby, expects over $2.6 billion in investments in the broadband sector this year and over $5.35 billion by 2010. Indeed, once the government allocates the additional spectrum and the telecommunications firms start launching high-end services, international telecoms infrastructure firms are expecting to see a spurt in demand for their services.