WiMAX Cloud in Indian Sky——Analysis on Indian WiMAX Market Opportunities and Operation Model

According to IWS, India had a population of 1.16 billion by the end of July 2009. Its GDP was increased by 7.3% in 2008. India not only has a huge population but also has the telecommunication market with the fastest growth rate worldwide.

Indian telecom market is attractive not merely because of its high growth rate, but the coming auction of 3G and WiMAX licenses. Though the auction has been delayed for many times, the operators still show much interest. At the same time, almost all the industries have been adversely affected by the economy recession, but Indian government doubled the auction price of the 3G and WiMAX licenses. Is there any chance for 3G and WiMAX in Indian telecom market?

It is amazing that Indian mobile voice market grows with as many as 15 million new users per month in 2009. By the end of September, the total number of telecom subscribers exceeds 500 million, including 470 million mobile subscribers and 38 million fixed-line subscribers. In India, there are more than 10 GSM operators and 6 CDMA operators. The wireless voice market is mainly shared by several major operators such as Airtel, Reliance, BSNL, Vodafone, TATA, and Idea. Due to the large number of operators, the competition is extremely intense. Now, there is a fierce price war in Indian mobile voice market, and the call cost comes down to the bottom. Reliance has recently announced that it will reduce the voice tariffs to 1 cent per minute, and some operators even reduce the voice tariffs to 0.01 rupees per second, just a little more than 0.01 cents per minute. In such a fiercely competitive market, operators without a large user scale can hardly make profit in the limited market.

Compared to the fiercely competitive mobile voice market, Indian broadband market should be in the starting period. By the end of September 2009, Indian broadband subscribers are only 7.22 million with a penetration of only 0.6%. It stays a low position as compared with other developing or developed countries as shown in the above figure. The main reasons are as follows:

　　　　　　　　　 (1) Lack of access sources: Copper cable resources are scarce. The Cable TV cannot guarantee the quality of infrastructure.

　　　　　　　　　 (2) Immature backbone network and high Internet broadband price

　　　　　　　　　 (3) Political reasons: high taxes of ISP, which lowers ISPs’ interest

But with the popularity of PC and development of online games and online video business, the high-speed development of broadband is coming around the corner. According to the ARPU of dial-up internet access, broadband charge does not decrease as the voice service, but maintains a certain high price, indicating a potential and valuable broadband market.

How to seize the opportunities in broadband market? Compared to fixed-line broadband technologies such as ADSL, wireless broadband technology provided by WiMAX can be deployed faster and be much more flexible in both nomadic and fixed situation and it is suitable for Indian situation which is in lack of copper cables. In addition,  each Circle is assigned at most 5 3G licenses. MTNL and BSNL got one of the five. Some operators are not awarded any license. Even though these operators get a license, they will not be able to develop wireless broadband service due to the limited 2x5MHz spectrum of 3G license. Therefore, it is a very nice choice to develop wireless data by using the 20 MHz-spectrum of 2.3GHz WiMAX licenses in India.

Operation mode contains a number of key factors, such as revenue model, targeted customers, coverage strategy, service model, terminal and pricing strategy and so on. For WiMAX, as an emerging technology, the targeted customers are based on the market demand and supply. The coverage strategy is related to the targeted customers and operators’ strength. The revenue model of WiMAX is similar to the data model of 3G, but it has higher data throughput and service bearing capacity. WiMAX is able to provide wireless broadband services. The terminal and pricing strategy is mainly based on operator’s development goals and targeted customers. Considering the close relevance between revenue model and the service model, operators can combine these service models according to their revenue model, so that they can promote business and develop potential customers and get a greater profit.

From the Indian market perspective, India features high-speed growth of mobile voice but insufficient broadband supply. Its overall consumption level still stays at the developing stage. Thus, from the perspective of WiMAX development in India can be divided into two phases:

Phase I: Launching networks rapidly in hotspots and developing wireless broadband access services to seize the broadband market share

Revenue model: mainly from the monthly broadband revenue

Targeted customers: SME and household

Coverage strategy: to cover major A-class regions, that is, covering the hotspots of target urban areas such as CBD first and then gradually extending to the other places of the urban areas mainly by using outdoor coverage solution

Business strategy: to provide simple broadband access services

Terminal strategy: to promote WiMAX-enabled netbooks, WiMAX outdoor modem, data cards and USB

Pricing strategy: to ensure that the broadband access service has higher cost advantage over other access services

Phase II: Promoting VoIP service, mobile broadband multimedia services, M2M sevice, etc.

Revenue model: besides the stable revenue from simple broadband access, to obtain business income in the following ways:

　　　　　　　　　 (1) Sharing income with CP/SP

　　　　　　　　　 (2) Obtaining pipe revenue by renting their networks to MVNOs

　　　　　　　　　 (3) Obtaining service income by self developing and providing services to customers

Targeted customer groups: enterprise and SME, household, high-end business personnel

Coverage strategy: to cover main A-class and B-class cities and to achieve seamless coverage of the city by using the combination of indoor and outdoor coverage solutions

Business strategy: besides simple wireless broadband access, to promote VoIP, VPN, M2M and other services for enterprises; to provide VoIP, music, video download and TV business for families; to develop high-end business group market by developing mobile handset content services such as e-mail, video telephony, mobile office, online games and other services

Terminal strategy: WiMAX indoor modem, data cards, USB, all kinds of WiMAX-enabled terminals and handsets

Pricing strategy: For broadband access, retain the price advantage compared to other technologies. For new businesses, evaluate their possible profit and give a proper price. It is possible to provide various service suites to bundle customers.

According to operators’ positions and interests in the development of WiMAX, the development of India’s WiMAX operation mode can be divided into the following camps:

The first camp: BSNL and MTNL

BSNL and MTNL are state-owned operators and have a priority for spectrum acquisition. They have initiated invitation for tender. As the largest fixed line operators, they have a large number of copper cables and enterprise customers. At the first phase, they can provide fixed-line voice, fixed-line broadband and wireless broadband to win the broadband market by virtue of their good relationship with enterprises. At the second phase, they can provide a package of value-added data services for high-end business personnel while developing and providing M2M service to the enterprises.

The second camp: TCL, Airtel and Reliance

These operators are relatively mature in the Indian market with operation experience, market competitiveness and definite target for the development of WiMAX. They have a large number of voice subscribers. At the first phase, they can promote broadband service using the operation mode of mobile voice and wireless broadband to win the broadband market. At the second phase, they can provide various mobile multimedia services for high-end customers by cooperating with service providers or content providers or renting their networks to some middle-to-small operators.

The third camp: Vodafone, IDEA, Aircel, and other operators

These operators have certain interests in the development of WiMAX, but have no plan to roll out WiMAX networks on a large scale. At the first phase, they can attend the auction of WiMAX licenses in their advantageous cities to roll out WiMAX wireless broadband service and thus win part of broadband market share. At the second phase, they can rent WiMAX networks from other operators to develop their broadband service, thus acquiring part of broadband market share.

At present, the development of broadband in India is still relatively slow, and broadband industry is actively supported by Indian Government, so the development of broadband in India telecom industry will be another new revenue stream. WiMAX licenses will soon be issued for wireless broadband access, which will solve the lack of supply for broadband access in India quickly and will bring a stable income to Indian WiMAX operators. At the same time, due to India’s huge population and demand for communication, the issue of WiMAX licenses will drive the rapid development of the WiMAX industry, and promote various types of WiMAX services, terminal maturity, and thus speed up the development of India’s WiMAX operation model by helping the operators to transform from merely providing broadband access to providing services.