"we Don't See A Huge Mobile Wimax Market In India" - Says Bsnl's Partner

[Arun 795]

The Hindu Business Line

Monday, Jul 13, 2009

WiMAX-based broadband services are expected to boost India's broadband penetration. While the private operators are awaiting auction of spectrum by the Government to roll out the technology, SOMA Networks is the first company in India to have deployed WiMax through a franchisee model partnership with state-owned Bharat Sanchar Nigam Ltd. eWorld caught up with Yatish Pathak, Founder & CEO, SOMA Networks, to understand the future of this technology in India. Excerpts from the chat:

Is WiMAX suited best for mobile broadband or for broadband to home?

One of the reasons that SOMA Networks chose to use WiMAX 802.16e-2005 technology, also called Mobile WiMAX, is that it supports mobile broadband as well as has the capability to provide wireless broadband to homes and offices. However, its application depends on the context and availability of competing technologies. In an emerging market such as India with vast areas under-served due to lack of wired infrastructure or due to sub-optimal DSL connections (slow speeds), the best use of WiMAX today is to deliver broadband to the homes and businesses that have no broadband, or poor broadband connectivity.

Using WiMAX as a mobile broadband application is better suited for developed, more mature markets that have high data consumption. Classic examples are Tokyo and Korea.

Given that Indian operators will not get more than 5Mhz spectrum for 3G, do you think that there will be more takers for WiMAX for providing mobile broadband services?

It is an interesting possibility. Instead of few operators getting enough spectrum to run 3G, we have more operators getting lesser spectrum and given that they will dedicate most of its capacity to voice which is their cash-cow, they will be left with very little capacity for data. As a result, some of them will look at WiMAX to provide mobile broadband services.

If an operator decides to use WiMAX to target the laptop user market, then it will simply be a service such as EV-DO, but with higher data rates. However, if the operator decides to use WiMAX for mobile data on cell-phones, then such a service would require it to invest in and run two separate networks - an FDD network for 3G and a TDD network for WiMAX. Besides, the service will require dual mode phones (GSM + WiMAX) that will support both FDD and TDD. The support for two different types of radios will make the handsets cost-prohibitive for Indian consumers, until there is service acceptance and we see economies of scale.

So you reckon that most of the existing GSM players will not use WiMax for mobile broadband?

Given the huge investments made by all the large Indian operators in GSM it would be fair to assume that they will continue to evolve their network towards LTE to address the mobile broadband need of consumers over time and as the business case becomes stronger. It is more likely that they will opt for WiMAX deployments in select high traffic business districts/cities to address enterprise customers as has been the trend amongst several big global operators as well.

Even in India, Reliance and Tatas have deployed WiMAX technology for broadband selectively and their initial emphasis is not on mobility, but fixed WiMAX.

So while mobile WiMAX for broadband services will certainly happen, its end consumer audience will be limited due to the costs involved and limited roaming capabilities.

SOMA is focussing only on the home broadband segment. Is this because its technology does not allow it to go mobile or is this because you think that there is a business case only in the home segment?

Broadband to the Home (BTTH) does not necessarily mean just the home market. BTTH is a misnomer in a way; I prefer to call it Wireless DSL as it refers to broadband data service that optimises the use of bandwidth link to wirelessly deliver a megabit-rate experience within the comforts of a fixed location, such as home or office.

Initially Soma's emphasis will be on Wireless DSL to scale up its rollouts in line with the much larger and more immediate market demand and with the commitment of its partner, BSNL that also has a social obligation to meet some of the national objectives of providing broadband connectivity to the people of India.

Our technology, used for rollouts in India for BSNL, supports mobility even today. However, it is BSNL's prerogative to make a decision depending on its business model and strategy on when it wants to extend the mobility features to consumers.

Has everyone focusing on the mobile broadband segment on WiMax platform got it wrong?

Going for mobility from day one is a very ambitious plan and requires massive investments. Take a look at Clearwire. They've already indicated that they will need more money to reach the 2010 goal of providing coverage to a population of 120 million across 80 cities.

Also, this doesn't include the current valuation of $4.5 billion for the spectrum assets.

The population we cover in the three circles of Gujarat, Maharashtra and Andhra Pradesh is 240 million. And even assuming that the broadband penetration goes up from the 0.5 per cent it is today, to 3 per cent over the next three years, we are still talking of very small volumes to justify that kind of investment, given the lower ARPU numbers in India.

In my opinion, a prudent approach is to focus on Wireless DSL market where there is a huge pent-up demand. This helps us deploy in a scalable manner without making billion dollar investments before any revenue starts accruing. By phasing the rollouts, we lower costs and risks to achieve rapid RoI and then scale up the investments to stitch the coverage areas to offer mobility. By then, consumers would have graduated a notch higher in their usage of broadband to demand mobility.

Isn't there a danger of SOMA losing a huge potential market in the mobile segment? Will it get into the mobile broadband space in two-three years?

Currently, we don't see a huge mobile WiMAX market. If the mobility business case for WiMAX was so compelling, then the likes of Verizon, AT&T, Vodafone, and others would make a beeline to roll out WiMAX.

That said, the mobile segment has two sets of consumers. Those who will use mobile broadband with laptops, and those who will use mobile broadband with phones. In the case of the former, our technology supports that even today and it is a matter of sizeable network coverage for it to make sense for the user. In the case of the latter, it will require WiMAX-enabled phones, and the devices industry will have its own cycle of 12-18 months before you will see a critical mass of such devices in the market.

As and when the mobile market for WiMAX evolves, we will participate in it.

You mentioned that no mobile operator in the world has ventured into WiMax space. Why does it make business sense for SOMA to enter into this segment and not for a large integrated player such as Airtel?

If a major mobile operator were to enter the space, they would think in terms of pan-India coverage, mobility and roaming, as that would provide them the business synergy. And having invested in 3G, this is a duplication of investment.

Those like SOMA, Tatas and Reliance, see WiMAX as a DSL alternative, have started with areas that have a huge pent-up demand to provide quick RoI, and are clearly making their foray into this segment. According to the May 2009 report of Juniper Research, WiMAX will take 12 per cent of DSL subscribers by 2013.

What is the status of your rollout in the three circles? What kind of services are you planning to roll out? What kind of devices are you bringing? What price points are you planning for your services and the device?

We have launched commercial services in all the three circles. We are now working on expanding the BSNL WiMAX network to areas with high demand density and where rollout is a national imperative to support the broadband mandate. Our service supports all the computing devices in the market with an Ethernet port to connect to the CPE provided with the service.

We believe PC penetration is very important to improve the broadband penetration. We have conducted extensive research to understand issues around PC penetration and DSL level service optimization over wireless. We will soon launch a device that addresses these issues making broadband more affordable and enriching end user experience. Price points for the service are decided by BSNL.