Will India Dial into 4G in 2014?

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It is almost four years since the government licensed Broadband Wireless Access (BWA) in India, yet it feels as though almost nothing much has happened. The BWA auctions came right after the nation’s famed 3G auctions; together, they created a stir in the Indian telecom market around the coming data revolution which would channel our economy and its citizens into
a new era of social and economic empowerment.

Yet, apart from rollouts in a small number of Indian cities, BWA does not seem to have created much visible impact.

While over 200 4G deployments have taken place worldwide, BWA has not yet taken off in India. Why? Let us consider three factors: The demand for high-speed data in India, what has been done so far, and the options to scale up 4G going forward.

Does demand for 4G exist in India?
Gauging the future demand for high-speed mobile data is difficult in any virgin market because, typically, people do not express demand for something that doesn’t exist: If 100 mbps mobile data speed is not available, nobody is likely to ask for it. However, it is evident that the latent demand for super-high-speed mobile data exists, and can be described in terms of three layers of potential:

• Indian metros have well-connected households and enterprises which already consume high-speed data. They are serviced through fibre connections, DSL or, in the case of households watching TV, cable or DTH satellite. Today, we have 15 million broadband DSL connections and 55 million DTH subscribers in the country. Technically, all these connections could be serviced through LTE (long term evolution, also known as 4G); and economically, that option would be appealing if the price points were reasonable compared to the current alternatives. To that extent, the demand for existing high-speed fixed or satellite-enabled services represents a large part of the latent requirement for LTE.
• In addition, some users would be willing to pay for the benefit of such high-speed connectivity while on the move; this would mean adding the demand for a mobile service over and above the potential demand for LTE services while stationary at home or office. The users would typically be subscribers who already use 3G, but would be willing to pay for assured, higher speed access in order to use social networks, photo/video sharing, and live content streaming while on the move.
• High-definition (HD) voice could also be introduced in India with LTE through what is known as Voice over LTE, or VoLTE. HD allows users to intonate their voice with more emotion and variety over the phone, rather like HD TV enables sharper picture quality. Most of us are aware of how difficult it is to convey emotion over a call because voice quality is so basic, even patchy. HD voice, now launched by a few operators in Europe and North America, overcomes this drawback.
• If the Indian government lends its support to LTE as a route to bridge the digital divide in rural areas as part of its national broadband policy, we could see accelerated adoption of 4G. Such a policy stance may be possible as it is unlikely that fixed line connectivity will ever reach the penetration levels required to provide mass access outside urban areas.

Super-high-speed wireless connectivity at home and on the move offers something distinct to both fixed-line and 3G mobile-connectivity. By being more efficient in the use of channel capacity, LTE could be an economically viable option.
 
Globally, the 200 commercial LTE networks deployed are spread across 80 countries; there are new launches happening weekly. With around 125 million users, of which 50 million are in Asia, LTE is scaling up rapidly, with 2 billion users projected by 2018. Most of the scale is being seen in FDD (Frequency Division Duplex) networks, with relatively few in TDD (Time Division Duplex). A notable exception is China which is seeing large-scale deployment in TDD in the, 1,900 MHz band.

4 reasons why 4G hasn’t scale up in India

• Challenges for deploying 2300 MHz TD-LTE: The spectrum band licensed for BWA in India (TD-LTE on 2,300 MHz) has only been deployed in around 20 countries including Hong Kong, Australia and South Africa; the band lacks ecosystem support, device choices and network scale. Of the overall 1,000 devices launched by manufacturers for LTE, only 100 are suitable for the mode licensed in India. As a result, Indian operators have had to consider offering LTE services to a Wi-Fi router which in turn connects Wi-Fi-ready devices. The band is also weaker in offering in-building coverage compared to other modes of LTE.
•  Better backhaul: Backhaul connections currently lack the coverage and quality required to render 4G services effective. Without the backhaul service to carry data at the same speed, the benefit of the 100 mbps connectivity offered by 4G cannot be realised by the end user. Over the last few years, Indian operators have invested heavily in rolling out fibre; we are now beginning to see scale and agreements falling into place.
• Combining data with voice: The advantage of offering super-high-speed data connectivity bundled with mobile voice is that the 4G service needn’t have to compete directly with fixed alternatives on price alone. Telecom regulations now allow an entity to hold a universal access licence to offer mobile voice. So, provided the BWA player has access to voice spectrum, it can now bundle high speed data and voice together.
• Capital constraints: A number of operators have put priority on deploying 3G first, due to capital and management constraints. And, in general, India’s capex to sales ratio has come down to 12-14 percent, while it is 22-25 percent for other emerging Asian countries such as China.  

Emerging Options
With these challenges in mind, options are now emerging for Indian operators to move ahead in LTE deployment. We see three options:

• Buy 1,800 MHz spectrum in the upcoming auctions and use it to deploy VoLTE as well as high-speed data services which will scale up over time as devices come into the hands of Indian users.
• Acquire existing players, if required, to provide adequate 2G/3G network coverage with LTE. This will be made possible if the telecom industry M&A guidelines are passed by the Cabinet.
• Wait for 700 MHz spectrum auctions, which may take another two-three years, and launch a superior LTE network before 2020. The waiting time could be used to build superior backhaul.

In the long term, LTE has the potential to become a game changer in India since the technology allows the mobile to approach fibre speeds without the inherently costly investments required in laying fixed line infrastructure all over the country. But don’t expect to see 4G end-user numbers scale up in 2014. This is likely to be the year where the industry settles its position on the spectrum bands preferred for 4G and on the investment required for building better backhaul to get ready to scale.

Sources:  Global LTE Market update by GSMA Sept 13; TRAI; BAML Wireless Matrix




Jargon-buster: LTE, TDD, FDD & BWA
LTE stands for ‘Long-Term Evolution’ and is often referred to as 4G. It is a collection of mobile technologies which provide high-speed mobile data access to the tune of 100 mbps. This compares to a range of 7.2 mbps to 21 mbps for 3G/3.5G, and to 512 kbps for 2G. LTE takes mobile connectivity speeds into the realm of what is achieved by fibre and, for this reason, is correctly regarded as (r)evolutionary.

LTE can work in any mobile spectrum band, including the ones licensed in India such as 850 MHz, 1,800 MHz and 2,300 MHz. There are two alternate modes for LTE, which are Time Division Duplexing (TDD) and Frequency Division Duplexing (FDD). FDD offers a separate uplink and downlink channel, which means it works well for voice but can be inefficient for data, as spectrum dedicated to a channel can remain unused. This is especially the case as most people download a lot more than they upload. On the other hand, TDD offers a single channel to be used both for uplink and downlink—which means it works efficiently for data and can also be used for voice.

Due to legacy and reuse of existing FDD spectrum with various operators worldwide, FDD LTE is most deployed. BWA is a collective term coined to refer to LTE at a time when such modes of deployment were still under development.


What is China doing?
The year 2014 will see the biggest deployment so far of TD-LTE in China by the market-leading operator China Mobile, which has awarded contracts worth $3.2 billion to deploy 150,000 LTE cell sites nationwide. It has also reached an agreement with Apple to provide iPhones compatible with its LTE network. China Mobile will primarily use frequency in the 1,900 MHz band.