Telecom sector into yet another round of turf battle

On May 28, the Telecom Regulatory Authority of India (TRAI) called all
the telecom operators for an urgent meeting to discuss an important
issue that threatens to take the sector into yet another round of turf
battle

The issue that has split the industry is whether the Government should
price spectrum for broadband wireless access services using
technologies such as WiMax differently or should it be treated on a
par with pricing decided for third generation mobile spectrum.


While existing GSM operators, Ericsson, Nokia, Qualcomm and others who
are promoting 3G technologies want the pricing to be the same for all
types of wireless technologies, companies such as Reliance
Communications, Tata Teleservices, Intel and Motorola want WiMax
spectrum to be priced lower.



Rethink spurred by ITU move

The telecom regulator had earlier recommended a differential pricing
for the two types of wireless access technologies but then decided to
review its decision in the light of developments at the International
Telecommunications Union — the global telecom standards and regulatory
body.

When TRAI had made its initial recommendations in 2006, WiMax was
still an evolving technology and was not considered as next
generation. Therefore, in its earlier suggestion, TRAI said that the
base price for WiMax should be lower.

So while the reserve price for third generation technologies such as
WCDMA and EVDO may be pegged at a maximum of Rs 80 crore for each
service area (Circle), for WiMax, the regulator had suggested a
maximum of Rs 10 crore. However, in 2007, the ITU decided to consider
WiMax as a third generation mobile technology, which got the Indian
regulator to rethink on its earlier recommendations.

For and against

But companies such as Intel, which is betting big on WiMax, say that
there is no reason for a rethink and TRAI should stick to its earlier
position. "There should not be any comparison between 3G and WiMax.
While 3G is essentially a voice-based technology that also does data,
WiMax is best suited for data at present. India is lagging way behind
other countries in terms of broadband penetration and we believe that
WiMax will enable much faster rollouts.

Government should keep the entry cost low to enable cheaper and faster
broadband access to consumers," says R Sivakumar, Managing Director
(South Asia), Intel.

On the other hand, Qualcomm, which is expecting major revenue in the
form of royalties from 3G technologies, is opposed to the idea of
differential treatment.

"We do not believe that there should be significant differences in the
reserve prices between frequency bands. Given that the propagation
characteristics of these bands (for WiMax) are not significantly
different from 2.1 Ghz (used for 3G mobile service) and the lack of
sound economic rationale for introducing such a difference in the
reserve price, Qualcomm believes that price of spectrum should be on a
par with that of the 3G reserve price fixed by TRAI.

This approach will ensure a level playing condition and encourage the
deployment of spectrally efficient and cost-effective technologies,"
says Kanwalinder Singh, President, Qualcomm India.

The entry of Wimax has also realigned the equation between global
technology providers. Nokia, which is considered a global rival to
Qualcomm, this time is in agreement with the US-based company's views.
"The proposed differential pricing by subsidisation in spectrum
allocations for broadband services may bring increased broadband
penetration in the short term but will create problems and
complexities in the long term, specially related to utilisation of
spectrum. We believe that a uniform spectrum pricing policy for the
systems rendering same services should be implemented," says a note
from Nokia to TRAI.

A lot at stake

The difference of opinion between the equipment vendors is not merely
academic. The stakes are, in fact, very high. Companies such as Intel
and Motorola are making huge investments in developing products based
on WiMax technology around the world. Intel is also investing billions
of dollars to fund operators who want to roll out a wireless network
using WiMax.

But Intel's main concern is that, as of today, devices and network
equipment for rival 3G technologies are much cheaper due to the global
scale and volume. While WiMax is just beginning to take off globally,
3G has been deployed in a number of countries. A 3G-enabled handset,
for instance, is available today for less than Rs 10,000.

Though Intel is confident that it will be able to bring down costs for
WiMax devices gradually, a lower entry charge, in the form of spectrum
price, compared to 3G, would help it to position the technology as an
attractive proposition, especially to the new players in the Indian
cellular segment. Clearly, a massive uptake in India is crucial to
Intel's global plans for WiMax.

On the other hand, Qualcomm, Ericsson and Nokia know that 3G has an
edge in terms of the pricing for the end consumer and they don't want
to give any room that will allow WiMax operators to cushion that
advantage in the form of lower entry cost.

Operators' stance

Obviously the issue has also divided the telecom operators depending
on who has bigger plans for deploying WiMax. Reliance Communication,
Tata Teleservices and Maxis-backed Aircel are playing the
affordability/rural card and have demanded that TRAI stick to its
earlier recommendation of fixing lower reserve price for WiMax.

"The government's main objective is proliferation of affordable
broadband services. For this purpose the regulatory costs in
provisioning of broadband services should be kept at bare minimum.
Linking broadband wireless access (BWA) to 3G service for determining
levies or allocating spectrum on similar terms is not appropriate. In
case allocation BWA and 3G are considered at par and spectrum is
allocated at same terms then BWA service shall never be able to take
off," says an RCOM executive.

Dismal broadband scene

To be fair, penetration of broadband services till now has been
dismal. Only 4 million subscribers have taken a broadband connection
compared to a target of 10 million by 2007. The primary reason for the
poor penetration is the limited number of fixed line telephones.
Therefore, to meet the Broadband Policy objectives and targets, heavy
deployment of wireless access services will be needed. Technologies
like WiMax can be used to increase broadband penetration in the
country.

While GSM operators agree on the need for wireless broadband
technologies, they allege that the affordability plank is being used
by the WiMax camp to get freebies from the Government.

"This is similar to the way they brought in CDMA technology in 1999.
They claimed concessions saying that CDMA will be used for providing
fixed wireless telephones to provide affordable services to the poor
man. But a few years later, all of the CDMA operators became full-
fledged mobile service providers. Now they are saying that WiMax will
be used for providing wireless broadband to the villages when everyone
knows that the technology will be capable of doing exactly what a 3G
technology can do," says a GSM representative.

The Association of Unified Telecom Service Providers of India (AUSPI),
representing RCOM and Tata Tele, charges GSM operators with blocking
competition. "WiMax technology, as of today, can be used only for
providing wireless broadband access.
Though voice may be possible someday why should we be asked to pay a
higher fee for something that may or may not happen in the future? GSM
lobby is always trying to block competition," says S C Khanna,
Secretary General, AUSPI.

The TRAI is expected to give its final views on the issue shortly.
However since the stakes are high, a decision either way will be
contested. That means consumers will have to wait longer to get access
to high-speed wireless Internet access.

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