Mobile WiMAX prospects brighten in India

Given India’s enormous population of 1.1 billion, patchy fixed-line infrastructure and a broadband penetration barely above three percent, the country appears well-suited for WiMAX deployment: BSNL and Tata Communications have already announced extensive rollout plans for 802.16d, the fixed WiMAX standard. But regulatory developments over the summer look like giving mobile WiMAX (802.16e) a significant boost as well.

For a start, India’s Department of Telecommunications (DoT) 1st August announcement on the guidelines for the upcoming auctions for 3G and BWA (broadband wireless access) licences – read mobile WiMAX – went some way to lifting the cloud of regulatory uncertainly that has long hung over the country regarding spectrum allocation.

It also confirmed that DoT was willing to auction off more BWA spectrum per licence winner than was previously suggested by either the government or TRAI (Telecom Regulatory Authority of India). A total of 80MHz of spectrum in the 2.3GHz and 2.5GHz frequency bands (40MHz per band) is to be made available for four operators (20MHz each).

Although 20MHz has already been put aside for state operators BSNL and MTNL at 2.5GHz, another three operators are allowed to bid for the remaining 60MHz. Both 2.3GHz and 2.5GHz are standardised frequencies by the WiMAX Forum for 802.16e kit.

In addition, the DoT announced that spectrum blocks in the 3.3-3.6GHz and 700MHz frequency bands would also be auctioned off for BWA use as they become available. Spectrum availability at 3.5GHz (another WiMAX Forum standard) is significant given that India’s fixed WiMAX players have so far been restricted to using the non-standard 3.3-3.4GHz frequency band, which makes WiMAX kit more expensive.

And towards the end of August 2008 the WiMAX camp received another boost in India. The DoT—after taking on board the recommendations made by the Telecom Commission—proposed that the BWA licence holders should be able to offer mobile voice in addition to mobile data.

But it is not all plain sailing for mobile WiMAX protagonists. The reserve price for a BWA licence, as announced on 1st August, is calculated at 25 percent of the 3G reserve price on a per MHz basis. This means the minimum cost of a BWA licence is Rs 60 crore ($13.5m), Rs 30 crore ($6.75m) and Rs 10 crore ($2.25m) for circle categories A, B and C respectively. The minimum cost of a pan-Indian BWA licence, at these rates, is Rs 505 crore ($115m).

This must be a source of frustration for WiMAX supporters given that these prices are about double the amount TRAI was originally recommending. And if the BWA licence holders are to offer voice, DoT proposes that the licence reserve price should be calculated at 50 percent of 3G spectrum on a per MHz basis. That would take the cost of a pan-Indian BWA licence up to a minimum of $230m.

The WiMAX camp can perhaps convincingly argue that if the government is to meets its target of 20 million broadband subscribers by 2010, BWA licence holders shouldn’t be saddled by what they see as unnecessarily high licence fee costs that would force them to raise their retail prices and stop broadband from becoming more of a mass market proposition.

But potential BWA investors, while perhaps having some lingering reservations about India’s BWA regulatory environment, may well be willing to overlook them given the enormous telecom growth potential the country has.

According to figures from Pyramid Research, India ranked a respectable 15th in the world in terms of telecom service revenue during 2007 ($20bn). However, and this is where it gets interesting for investors, India ranks number one for projected service revenue CAGR during the 2007-12 period at 21.7 percent. (Egypt trails a distant second at a 14. 7 percent CAGR during the same period.)

Intel has also recently announced that it is working with PC manufacturers, such as Dell, Acer and Asus, to bring down the cost of WiMAX-ready laptops to around $300 to $400. According to the US chip giant, WiMAX-ready laptops at sub-$400 prices could be available in India before the end of 2008.

There are many reasons for mobile WiMAX supporters in India to be optimistic.