NEW DELHI--Not long ago, the telecom industry was the beacon of India's economic progress. While still a hot topic of discussion today, much of it unfortunately has shifted to talk of scams, the shrinking profitability of operators and services that are failing to take off.
On Feb. 2, India's apex court delivered the landmark judgement quashing all 122 2G licenses issued in 2008 during tenure of then-minister of communications and IT, A. Raja, who was allegedly involved in irregularities found in the allocation of 2G spectrum.
The scandal, however, had no implications on the auction for 3G licences which was deemed fair and transparent, fetching the government INR 677.2 billion (US$13.8 billion) in May 2010.
Telecom players began launching 3G services in late-2010, but consumers complained of patchy connections and slow speeds. A year on, 3G has yet to take off in India.
Kamlesh Bhatia, research director at Gartner, said: "There is nothing wrong with 3G as a technology. The problem was the spectrum, which was very limited." Noting that the incumbents got only 5MHZ of spectrum, as opposed to 20 MHZ in other countries, he added: "The spectrum does not support that kind of traffic."
Several subscribers discontinued their 3G service, inhibiting the telcos' ability to recover the investments they made in acquiring the license. "For 3G to be successful, we need to free up more spectrum," Bhatia urged.
The industry is now pinning its hopes on 4G.
In July 2010, six operators were awarded 20MHz spectrum to be used for BWA services deployment. To date, however, there has been no major commercial launch.
"Almost every player is waiting for an early launch of TD-LTE technology to see what they should do with 3G and innovations around 3G," Bhatia said.
Rakesh Vij, Aricent's vice president of business development for wireless and convergence, told ZDNet Asia there was "a very high probability" that LTE might be rolled out in India in the first half of 2012.
Aricent provides product lifecycle services including design and testing targeted at LTE equipment manufacturers.
Regulatory uncertainties harmful to industry
Regulatory changes have also hurt the local industry. In order to offer 3G data roaming services, and boost revenues, telecom companies inked agreements with other players.
The Indian government, however, put a stop to this in December 2011 when the telecom department decreed these bilateral agreements illegal. Three operators--Bharti Airtel, Vodafone India and Idea Cellular--which had signed 3G roaming pacts were barred from offering customers high-speed Internet services in areas where they were not licensed to operate, as determined in the 2010 auction.
The Telecom Regulatory Authority of India (TRAI) had proposed awarding technology-neutral pan-India permits, but these would not be bundled with spectrum or airwaves and operators would have to buy radio frequencies by participating in auctions.
At present, a pan-India permit comes bundled with 4.4MHz of startup GSM spectrum or 2.5MHz of CDMA airwaves in all the 22 regions. As of today, telecom companies need separate licences for each type of service. The TRAI recommendations will be part of the new telecoms policy that is expected to be unveiled in mid-2012.
"The purpose of the pan-India mobile permit is to simplify telecom licensing," Kasturi Bhattacharjee, telecom consulting leader at PwC India, said in a phone interview. There are so many different licenses, such as GSM, CDMA, 3G, BWA, Internet, direct-to-home and radio. With convergence in technology, the various licenses make little sense.
"The licensing policy and regulatory regime have to move in accordance with the convergence process," Bhattacharjee said.
BWA licensees, which did not have an option to offer voice over LTE, could be the biggest beneficiaries of this technology-neutral proposal.
"The BWA players can get a pan-India permit and buy spectrum for alternate technology, and have a fully convergence service for voice and data," Bhatia said.
Future belongs to LTE
Most BWA players are currently in talks with other relevant players to roll their TD-LTE networks. These operators have been collaborating globally with leading telecom equipment manufacturers to develop LTE offerings.
Bhatia added that TD-LTE trials have been going on for a while.
According to reports, many leading international equipment vendors such as Huawei are conducting LTE deployment trials with major BWA vendors such as Reliance and Aircel.
Ericsson won a LTE deployment contract in India covering Madhya Pradesh and Chhattisgarh from Augere, which operates under the ZOOSH brand.
"Once the technology is launched, it takes four to six months to deliver the intended outcome," Bhatia said. "The service providers would need to finetune the network."
"Eventually, LTE will take over DSL and dialup. Consumers who undertake heavy transactions will move to LTE, such as SMEs, metro-level networks, taxi networks, police network, and so on," the Gartner analyst said. "4G will also replace the data card; it will be used more by the enterprises."
More importantly, she added that 4G services were expected to be more price-competitive than 3G since BWA players paid a lower price for the 20MHz spectrum they received in July 2010.
Vij said: "The telecom market in India is highly competitive with a very low ARPU (average revenue per user) for the operators. LTE will help the operators address these challenges through smart policy and QoS (quality of sService) control solutions."
According to the Aricent executive, technologies such as self-organizing networks also help in automating network deployment and maintenance, which helps in significantly bringing down both the operating and the capital expenditure.
"Thus, LTE is the technology of choice not just from the subscribers' perspective, as it provides them with much higher bandwidth and data speeds, but also from the operators' point of view because it will help them maximize revenue and minimize risk," he added.
Too early to write off 3G?
Elaborating on the growth potential of LTE, Vij said: "LTE deployment has already taken place in 29 countries, and with detailed specifications developed by 3GPP; operators in India can easily shorten the learning curve and launch LTE earlier than expected."
Concurred Bhatia: "One expects emerging markets to leapfrog technology. The launch of TD-LTE may be one such instance."
Does that mean it is time to write off 3G in India? PwC's Bhattacharjee does not believe so. "We can't write off 3G," she said, noting that these were different technologies. "4G is not simply a progression from 3G."
Bhatia added that there is a lot that service providers, content developers and the regulator can do to ensure wider adoption of 3G. "The biggest constraint is transparency," she said.
Bhattacharjee believes 3G will take off with the launch of new applications and bundling of applications. "In my view, there will be two sets of consumers in the future: data users, who will opt for 4G services; and small, casual users who will use 3G.
Swati Prasad is a freelance IT writer based in India.