WiMax, the profit maximizer

BANGALORE: If 2005 is remembered as the year in which broadband was introduced in India, then 2007 will go down as the year in which Worldwide Interoperability for Microwave Access or WiMax made its presence in the country. The current year has witnessed a string of rollouts triggered off by several big guns in the industry led by BSNL, Aircel, VSNL, Bharti Airtel, Reliance, and Sify.

Indian mobile operators have set their sight on higher income avenues from enterprise services such as data carriage, storage, and management of total telecom infrastructure for companies. The data carriage services business, primarily through broadband, as well as storage services, has around 40% operating profit margins, which is 10% higher than the margins from mobile services. No doubt then that WiMax is making business sense for ISPs and integrated players.

While the debate over spectrum allocation continues to heat up most seminars and podiums on wireless topics, ISPs are moving along with WiMax. Several ISPs and cellular operators are already using WiMax to connect their towers (often referred to as a backhaul), and provide last mile connectivity for their enterprise customers on fixed wireless.

"WiMax deployment could be much faster with the availability of spectrum. But, operators are now realizing that they need not wait for the spectrum," says Manish Gupta, VP, Marketing and Alliances, Aperto Networks. According to him, business models around WiMax can yield return on investment within 12-18 months. "Different markets can show different RoIs. The operators can be assured of easy upgrading from fixed WiMax to mobile WiMax."

Revenue's avenues

"The two key advantages are faster customer provisioning and, more importantly, the one time fee for last mile compared to much higher annual recurring fees on terrestrial networks. Further, for multiple E1s, the costs multiply, while with our WiMax services customers can easily go up to 8 mbps (4xE1) without the need for additional links and equipment," he adds.

Among the early birds, Aircel was the first operator to launch WiMax for broadband services for its customers, particularly enterprise customers. It has so far invested over $1 bn in providing WiMax infrastructure. The company has entered into a tie-up with Intel for advice on WiMax standards that can be adopted in the future. Ram Shinde, senior VP, Aircel Business Solutions (ABS), a wholly owned subsidiary of Unified Aircel, informed that the company is also exploring a tie-up with Nokia for making mobile handsets with WiMax technology.

Heralding 2007 as the broadband year, BSNL is expanding its WiMax pilot project, initially being executed at ten urban and rural centers to other locations across the country. It will enable Wi-Fi access with 300 new hotspots at airports, malls, and hotels in twenty cities.

BSNL has plans to introduce WiMax services in the country. It will be floating a tender for procurement of WiMax systems based on IEEE 802.16e-2005 standard. Mobility feature will be supported by these systems in future. BSNL has plans to provide WiMax services through franchisees. It is also planning to roll out broadband services in talukas and villages, with an initial rollout planned for the three circles of Haryana, Tamil Nadu, and Karnataka. It would set up soft-switch infrastructure to leverage on VoIP traffic under a revenue share arrangement and invite expressions of interest (EoIs) from IT infrastructure companies for the same.

VSNL plans to extend its WiMax network to around 120 cities across India for enterprise customers and in five cities for retail customers by the end of this financial year. VSNL also provides services in the Wi-Fi space, with nearly 300 public hotspots in India.

Bharti Airtel has already deployed fixed WiMax in eleven cities-Ahmedabad, Mumbai, Pune, Hyderabad, Bangalore, Cochin, Trivandrum, Kolkata, Jallandhar, Chandigarh, and Kolhapur. According to sources, the company had plans to roll out 600 WiMax outlets in rural India by the end of the financial year.

Sify has successfully deployed more than 14,000 radio links as customer last miles and is aggressively using wireless products. Sify has plans to expand the network coverage to rural India. "We will be leveraging both fixed WiMax as well as mobile WiMax to expand the coverage areas," says Bhaskar S, CTO, Sify.

Sify has successfully deployed more than 14,000 radio links as customer last miles and is aggressively using wireless products. Sify has plans to expand the network coverage to rural India. "We will be leveraging both fixed WiMax as well as mobile WiMax to expand the coverage areas," says Bhaskar S, CTO, Sify.

He, however, laments the delay in spectrum allocation. The government is yet to come out with a spectrum allocation policy for WiMax, which can delay rollout plans. "Shifting of existing satellite based operations in the band 3.4–3.7 GHz is getting delayed and trials are in progress to assess the possibility of co-existence between terrestrial broadband services and satellite-based services as per the latest communication from the Ministry of IT and Communication," adds Bhaskar.

Reliance is also catering to the enterprise, especially small to medium sized businesses, for the data business offering wireless broadband service. It launched a premier Internet package over WiMax broadband wireless network while activating the network in Pune and Bangalore to provide full city coverage.

Prakash Bajpai, president, Home and Enterprise Business, Reliance Communications, says, "We anticipate monthly subscriptions from our broadband wireless service for SMBs segment to yield a minimum of Rs 1,000-10,000 per subscriber a month, ie, $25-250 per subscriber per month, depending on the package. We are targeting around 100,000 broadband wireless subscribers across selected cities in the first year." The company plans to expand from two cities (Pune and Bangalore) to at least twelve cities by the end of 2007.

Net4 (Trak Online) is another stand-alone ISP that has taken the WiMax route to expand operations. Currently, it provides fixed WiMax services in Mumbai, Delhi, Chennai, and Bangalore, and plans to increase its reach in phases over the next eighteen months to cover eleven major business cities in India.

Jasjit Singh, MD and CEO, Net4, explains the company's strategy on choosing WiMax, "We are focused on providing IP communications solutions to business and hence are initially concentrating on Fixed/Nomadic WiMax services. We see bundling bandwidth and VoIP services as a key market driver for business customers." At present, the CPEs are fixed. However, by the end of the year, Net4 shall be providing nomadic services also to serve certain industry specific small and medium enterprise with slightly varied needs.

More with mobility

So far, only state-owned BSNL has plans to set up a mobile WiMax network in India. As cities like Pune and Bangalore are getting unwired, there are aggressive plans to introduce mobile WiMax there. According to MN Vidyashankar, secretary, Department of Information Technology, Bangalore will be ahead of Pune in mobile WiMax. So far, Pune has overtaken Bangalore in offering fixed WiMax connections.

Encouraging signs are already visible. The devices currently being designed by the five companies-Motorola, Intel, Samsung, Nokia, and LG-will be customized for running on WiMax-CDMA dual network. These devices can be shipped to India too, provided there are enough orders placed in time.

Motorola is one of the only three big consumer electronics companies building WiMax hand-held devices ground up from the chip level. Samsung and Intel are also engaged in developing the chips, the other two big brands, Nokia Oyj and LG Electronics are expected to use third party chipsets.

Navini Networks, a leading provider of Mobile WiMax solutions, has recently signed a VAS agreement with GTL, India's largest network services provider to the world to provide services and solutions to telecom operators deploying Navini's Mobile WiMax solutions. Intel is confident that by 2008, it will roll out notebooks that will have the WiMax Silicon Chip inside allowing for anytime-anywhere connectivity.

During his recent visit to India, Mike Zafirovski, the president and chief executive officer of Nortel, reiterated Nortel's aims to be the tier-1 WiMax player in India. It is currently carrying out pilots with all leading telecom companies on WiMax deployment. "We are talking to most of the service providers in India for our WiMax solutions. Nortel is the only WiMax vendor with extensive experience across all other wireless technologies including CDMA, GSM, GSM-R, Wireless Mesh, and WLAN, with more than 300 wireless networks deployed in over seventy countries by the carrier service providers," adds Ravi Chauhan, MD, Nortel India.

Bhaskar is positive about mobile WiMax. "It has the potential to do almost everything that traditional cellular systems do, but at far lower cost and with higher data rates. But, mobile WiMax is yet to mature as a technology and, hence, wide spread acceptance will take some time." He further adds that timing, pricing, and scale will be critical to the success of WiMax, and service providers must prove that WiMax can deliver much more than basic broadband.

However, with the 802.16e standard yet to mature and capture the mindshare, operators carry on with the wait and watch approach. "While they do that, they will certainly not hold on to rolling out HSPDA- or CDMA-based mobile broadband networks, and that is what we are already seeing in many telecom markets," says Singh. "In the medium to long term though it would be a combination of networks from the integrated telcos and pure play WiMAX from other players," Jasjit adds.

Call for growth

And, there are statistics already supporting the claim. As per a market study entitled "India Wireless Broadband and WiMax Market Analysis and Forecasts 2006-2012" by Tonse Teelcom and Maravedis, India will have 13 mn WiMax subscribers by 2012. "However, shortage of spectrum is a serious obstacle for massive adoption of broadband wireless and WiMax in India. For WiMax to prosper in India, license holders will need at least 20 MHz of spectrum while they currently hold 12 MHz or less. 20 MHz is a minimum to support wide scale deployments and hence a profitable business case," warns Sridhar, co-author of the report and CEO of Tonse Telecom.

Undoubtedly, the market opportunity is vast, and cash registers have begun to ring. However, the critical factor will be how much spectrum is good enough for the moolah to keep pouring in.

"More has been done this year for broadband than previous years," says Gupta. Aperto Networks, like many other WiMax equipment providers, is very optimistic about India's WiMax potential. "Currently India contributes 10% to the overall revenue for Aperto, but we clearly see this figure doubling in the next 12-18 months," he adds. He, however, adds that subsidy on WiMax CPE could trigger off a further surge in growth.

WiMax, though deployed by over fifty operators and ISPs globally, is yet to make its mark in the mobile consumer domain owing to the non-availability of hand-held devices that support the so-called fourth generation communication protocol.

WiMax is a disruptive technology ideally suited for last mile wireless connectivity at higher bandwidths. For a country like India, where there is little planned municipal infrastructure and widespread habitation to cover, WiMax is a real alternative to copper pipes. Jasjit singh, MD and CEO, Net4 elaborates on the cost advantage for both customers and ISPs.