|Topic:||3G in India – it’s not just bandwidth|
|Title:||VP & MD|
Dr. Shantigram Jagannath is the Vice President and Managing Director of Airvana Networks India. Prior to joining Airvana, Dr Jagannath was a Senior Software Architect at Photonex responsible for the architecture, system software and protocols for ultra-long haul optical network systems. Dr Jagannath has authored several papers and has made several presentations and tutorials in the areas of Quality of Service, congestion control and TCP/IP. In Bay Networks, later Nortel Networks, Dr Jagannath was a senior architect in the software group for high-end routers. Dr Jagannath also has eight US Patents to his name for routing protocols, VPN protocols and algorithms for scheduling in high speed fabrics. Dr Jagannath has a B.Tech from the Indian Institute of Technology in Chennai, India, MS from North Carolina State University and a PhD from Columbia University in New York.
3G is coming to India, and operators are busy rolling out last-mile access and backhaul networks. 3G networks are deploying slowly, but 3G compatible handset have been on the market for three years so most business users and high ARPU users already have smartphones that support 3G. These networks are expensive, and ARPUs in India are among the world’s lowest, so operators are looking to value added services and lower cost network technology to reduce costs sufficiently to enable affordable broadband..
Awaiting 3G 3G is coming to India. Operators are working to revolutionise the country’s data connectivity by building the last mile access network to deliver data services to hundreds of millions of subscribers. India currently has nearly 600 million 2G subscribers and adding new ones at a clip of over ten million a month – most of the growth is happening in the rural parts of the country and almost all of it is happening on the existing 2G GSM and CDMA networks. The segment of high-end users, those with significantly high usage and high payment plans, is not where the growth is happening; rather, the subscriber growth is on the lower-end segments, mostly rural and users of pre-paid plans. Despite their remarkable growth in numbers, these subscribers each contribute relatively little to the operators’ revenues and earnings. The relatively smaller number of higher-end subscribers, the top ten per cent, contribute inordinately – nearly 50 per cent – to earnings and revenue. These subscribers will be the first to adopt 3G. Although 3G networks have been slow to deploy, widely available higher-end feature phone and smart phones in India have supported 3G as a standard offering for the last three years. Hence, most business users and high ARPU users already have phones that support 3G. In 2009, FICCI (The Federation of Indian Chambers of Commerce and Industry) estimated the sales of 3G handsets would grow to US$11.2 billion by 2013 with a significant portion of the growth coming from high-end handsets. The phones have been available for a few years; we are just awaiting the rollout of 3G networks in India. Differentiation In India the task of rolling out 3G is very different from what it was in Japan, Europe or in the US. While we can learn from the experiences in those countries, there have been many changes since then. Today we live in a world of social networking, video telephony, peer to peer sharing, mobile applications and gaming, touch-screens with intuitive interfaces, low cost (US$100) affordable smart-phones, dual core CPUs on phones running at 1GHz+ clock speeds, high resolution mobile cameras, and 16Gb+ phone memories. We are also rapidly morphing into a world of tablets and personal home base stations known as femtocells. Amid the 3G excitement and optimism there are a few questions – which, if answered well, will dictate the success of the roll out. The 3G network comes at a huge cost to the service provider: significant spectrum cost already sunk (see figure 1), additional cost to build out the infrastructure for service coverage, cost to upgrade backhaul networks to support 3G, cost of integrating the management and billing systems, not to mention the cost of acquiring and holding on to subscribers. As a result, the service provider is under pressure to fully utilize the capacity and generate as much return on the capital invested as possible – despite the competitive, cost sensitive, environment that leads to significant price erosion. Today the 2G networks’ ARPU lies around Rs 100 – less than a tenth of the ARPU in other parts of the world (except China). As the high end subscribers move to 3G, ARPU for 2G networks is likely to drop even more. How can operators use 3G to drive differentiation and maintain their pricing power? Coverage, quality and service levels are table stakes, necessary for the network to be considered of value for content providers and subscribers alike. Verizon succeeded in the US in differentiating itself on coverage and service, AT&T built its subscriber base on brand and by bringing in fancy handsets, what will be the differentiation in India? Figure 1 – 3G Spectrum Auctions Designing for the load There is increasing penetration of smart phones (Figure 2) and mobile applications, and these bring with them an ever increasing load on the network – both for signalling ( for example – messages between the network and phone for setting up and tear down of connections, and messages that control mobility of the handsets) and data resources. Figure 3 shows the impact of smartphones on signalling loads on the networks – clearly showing Android phones far exceeding the signalling load of email phones like the BlackBerry, and the Android phones are the fastest growing phone segment in sales worldwide. Figure 4 shows the data usage patterns of feature phones and smartphones. Smartphones and the newer touch screen based phones place a much higher load on networks than feature phones and the impact on networks is growing rapidly as more users adopt these devices. Service providers all over the world must upgrade their networks to cope with these trends – they are increasing the signalling horsepower of their radio network infrastructure and building out more bandwidth in their backhaul networks for the data traffic. Equipment vendors understand the new needs and are preparing a next generation products to help service providers to cope with the changes. Service providers in India have an opportunity to do it right as they deploy new networks to provide coverage in underserved or unserved regions – using the most advanced network infrastructure to increase spectrum usage efficiency, build in higher capacity signalling, and use femtocells for enhancing indoor coverage. Figure 4: Comparison of data traffic It’s not just bandwidth Given the proliferation of smart handsets and smart applications, should the operators be satisfied providing a robust pipe, or can they participate in the value being generated? Some of the operators are well ahead and have entered into partnerships with others who have been there, done that – for example, Tata Tele with NTT DoCoMo, there is no other operator in the world who can lay a claim to innovative service platform like DoCoMo can – will Tata Tele be able to replicate that here, and can the other operators follow suit? Voice communication beats everything else as the killer application for mobile technology. The value of voice to both the service provider and the subscriber increases with every new subscriber – with more people using voice, there are more people to communicated with so usage increases; with greater usage operators can find more ways to enhance revenue. Until now, the operators have had a grip-hold on voice as an application and have shared in the growth and slide of its revenues. The Internet on the other hand is a hub and spoke kind of application; providers post content on the network and subscribers can access it. In India the broadband Internet penetration is currently about one per cent. Mobile Internet access would be the first, low hanging fruit, application for 3G. It can lead to significantly higher economic and social activity among those who get connected to the Internet for the first time. The challenge service providers face is to create a platform that enables applications. – This has to be done before 3G becomes just a high bandwidth dumb pipe commodity. Service providers need to differentiate themselves by offering a robust applications platform and distribute advanced services they can monetise. In partnerships with banks, service providers can help develop mobile payment initiatives, tie-ups with micro-finance institutions that leverage the service provider’s reach into the rural areas and other monetary services for subscribers. Mobile phones are already part of the point-of-sale transactions (airline boarding passes, mobile payment solutions) – for authenticating of the parties involved and tying up the transaction in the back-end. 3G optimism Smartphones are increasingly sophisticated; they incorporate high-end processors, advance touch screen features and intuitive user interfaces. Software for smartphones is advancing apace. There are significant advances in operating systems with open interfaces, and application developers are producing countless innovative, high value, applications for mobile platforms. Operators now have access to infrastructure equipment and services from equipment vendors that understand what it takes to roll out 3G. There are advances in network architectures ranging from ultra-scalable macro radio access, which increase the capacity of the macro network, to femtocells that bring the signal directly to heavy users via wireline and consequently offload the wireless network. Small cells significantly reduce the operators’ capital and operating expenses; as their use grows, economies of scale are reducing the prices for the components of the radio access network. The lower prices help operators cut the cost of building out their networks. Some talk about the winner’s curse – the high cost of winning the 3G spectrum auctions. Nevertheless, there is no better time than now to roll out 3G in India and capture the market – the higher costs will force innovation and differentiation in the build out and deployment of services. The 3G vision is not limited to providing greater bandwidth – following close on 2G’s success, 3G can be a catalyst of social and economic change for India’s hundreds of millions of subscribers.