4G: Why India will not see mass adoption now

BANGALORE, INDIA: It has been a while since telecom services major Bharti Airtel announced the launch 4G services in the country, in April 2012. Airtel was the first company to do so in India, though Reliance Infotel's is in the pipeline towards the end of the year.

Although it is too early to say much about its adoption per say, let us look at why LTE as such might not be so much in demand today.

LTE, especially TDD LTE, will remain niche

In India, 4G will remain niche, and will continue to be so for at least another 12-18 months, not just because of the low demand for this kind of service and high tariffs, but also because India is among the earliest adopters of the time division duplex (TDD) version of the long term evolution (LTE) technology.

And, "Other than the fact that China Mobile is very gung-ho about TD-LTE, I do not know other operators who are keen on TD-LTE," notes Ashim Roy, country head, Stoke Networks India.

"Nobody is really looking for this. Not just the tariff, even device cost is very high and there are no subsidies on them. So, most of the people will be simply not able to afford it," adds Shiv Putcha, principal analyst, Emerging Markets, Ovum.

While advanced telecom markets such as US and Europe deployed the frequency duplex division (FDD) variant, which explains why most of the leading networking equipment makers are keen on developing FDD devices, markets such as China, India and Japan went for TDD.

"TDD LTE is relatively a new technology. The data dongles and CPE are available from Chinese manufacturers, but handsets (smartphones) that can support TD-LTE are relatively unknown. It is early for Indian market, as TDD LTE is relatively untested in the global market. With the scale in Indian market, the technology could be stretched with capacity issues (network planning) and erroneous network conditions," notes Ravikiran, partner, Waves & Cloud Consultants.

However, Shiv does not see it as a major hindrance for adoption.

"It is a drawback only in the sense that TDD is at least two years behind FDD in terms of maturity of the standard and availability of devices because they started later. Today, if you compare TDD with FDD, the former is very expensive. However, every technology in the beginning will be like this. So, it will take another one year at least for more devices to come out and for the tariff to start coming down."

Too small an addressable market?

As we all know, 4G is meant for the urban population, especially for those who are keen on using internet services on their handhelds, which today stands at less than 10 per cent of the total mobile subscriber base of the country.

"I do not think that is too small. However, the challenge is how will the operators reach them. Think of all the corporate employees with data dongles. That is just the beginning. As the services get more widespread, smartphone users will be using 4G," avers Ashim.

On the other hand, Ravikiran feels that the addressable market is the enterprise customers, who have internet, but only fixed broadband with 2-4 MBps connections.

"They will be a easy conversions as they are looking for more bandwidth at the same price. With internet awareness and the emerging e-commerce wave, a lot of SMB market would also embrace LTE. The consumer market adoption will all depend on the price of the CPE/dongle and the applications that emerge in the VAS ecosystem. IP-based multimedia applications like IPTV, multimedia tablets and net books bundled with data plans can drive adoption," Ravikiran adds.

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Is the network infrastructure in place?

For the technology to succeed we should also have the underlying network in place to support it.

Ashim feels that though it is too early to comment on the 4G network that has been deployed in the country, based on past experience he does not think there is sufficient infrastructure deployed yet.

According to Ravikiran this should be analysed from two different point of views.

"Firstly, the existing operators with LTE licences have the data pipe already existing with the 3G investment. So with the 4G enodeB installations they would be able to utilize the unused bandwidth of 3G networks. They can leverage on the existing billing systems and VAS applications to provide service quickly. However, they do not have the latest core networks that enable IP based networks like IMS which needs o be built fresh. Secondly, new operators need to have all the network in place starting from Radio, Core, OSS/BSS and VAS systems."

Telecom operators are aware of the need for fiber deployment to cater to the future 4G network data usage, however, they do not see a value point for it now.

"All the telecom service providers have their own set of investment regarding fiber deployment and mobile backhaul to sustain data growth. However, the question is who is using it (fiber) and for what purpose. Using fiber for wireless is different from using it for the backbone. A lot of people put a lot of fiber to build the backbone of their infrastructure, however, they do not necessarily use it for wireless," notes Shiv.

A long wait for the mass adoption

Now, you cannot blame these operators either if they charge you so much, after all they spent millions in order to get the 4G licence. 4G will remain very niche segment for the next two years, mainly with the enterprise segment that are data hungry.

"The device availability and the scale will keep the price high making it inaccessible for most segments. The focus will be on getting 3G to penetrate and take ROI from most operators. The game changer could be new operator like Reliance, as they have no backlog of investments in 2G and 3G," notes Ravikiran

"We only have Airtel pricing at this moment. so the key thing to look is what Infotel does and since it is their primary service, unlike Airtel which has GSM, 3G, 4G, is a bonus, they do not position it as their mass market service. Whereas for Infotel that is their primary service and they will make their best to make it mass market so I would expect Infotel's prices to be much more competitive. Shiv Putcha.

What needs to be done?

Fiber for wireless will not be the first priority for telecom providers since they know the demand is less, how so ever, they will have to look into it if they serious about being a 4G service provider.

"It is a catch 22 situation. Insufficient infrastructure deployment results in unhappy customers and that in turn leads to lesser number of subscribers signing up for the services. 3G is a case in point. Not one service provider will disclose the number of subscribers they have. The recent discount by some of the service providers for 3G is a clear indication that consumers feel that there is not much value to the 3G service. Most people I have spoken with have started discontinuing the 3G plan and moving back to 2G plan because of problem with connectivity. If the purpose of 4G deployment is to improve data service then laptop dongles are the way to go," notes Ashim.

"If people start using a data card, USB dongle of 4G they will start to use a lot of data. And in order to support this kind data, the back haul that most people have right now is not sufficient. So service providers have to lay additional fiber, however, that means they have to invest quite a bit of money and run fiber to individual towers, or at least to the nodes. Yes, they are upgrading their infrastructure, but is going to happen in a phased manner. They have only put it is the urban ares or high traffic areas," avers Shiv.

So, 4G is still miles away in terms of adoption but definitely has a user case, and better than tht of 3G's, down the line.