Broadband Market

Broadband services were launched in India in 2005. ADSL services now cover 300
towns with a combined 1.5 million connections, while broadband wireless subscriber
figures are still negligible.

While low broadband penetration is a clear opportunity for BWA/WiMAX, the market
take off will require sufficient spectrum, very low cost CPE and affordable end-to-end
connectivity, including the computing platform. A country where broadband's average
revenue per user (ARPU) is estimated at US$8-10 requires very low equipment cost. In
fact, Huawei is already delivering DSL modems at US$13 to Indian operators.

The Indian telecom sector operates in a volume-driven market. If the broadband market
in India grows to meet the government's revised targets, it might spur one of the world's
largest broadband wireless markets. For example, target broadband connections have
been currently revised to 9 million subscribers by 2007 and 20 million by 2010. Quite
likely the majority of these will be wireless broadband connections because of the poor
wireline infrastructure in place.

 

BWA/WiMAX Regulation

 

Enough operators are complaining about lack of adequate radio spectrum, that the
government is considering the release of some of the spectrum held by the departments
of Space and Defense. Currently, license holders in the 3.3-3.4 GHz band have on
average, a spectrum of 2x6 MHz to deploy broadband services, even though an
analysis shows that 20 MHz is the minimum to support wide scale deployments and
hence a profitable business case.

At the end of June 2006, the Telecom Regulatory Authority of India (TRAI) initiated a
public consultation on "Allocation and pricing of spectrum for 3G services and
broadband wireless access" including WiMAX. This consultation, in which the WiMAX
Forum is keen to participate, will probably take until the end of 2006 to produce
recommendations.

Further pressure on available bandwidth is coming from operators who require
allocations of the 3G/UMTS spectrum. BWA/WiMAX technologies require specific
frequency bands to be opened up in the 3.5 GHz band (an internationally approved
standard), which is currently allocated to the Department of Space for INSAT downlink.
Regulators and policy makers are deciding the best way to manage the spectrum.

 

BWA/WiMAX Activity

 

Bharti TeleVentures, Reliance, SIFY, BSNL and VSNL (Tata Group) have all acquired
licenses in 3.3 GHz range and are in various stages of trials. VSNL has announced
Phase 1 pre-WiMAX deployment of Aperto gear in 60 locations, extending to 200
locations within the year. Although there is clearly insufficient spectrum to offer DSL-like
service, several operators have indicated that there is still a huge market for 64 and 128
kb/s connections, which should alleviate the lack of spectrum.

Other active players include utilities and several branches of the Indian government.

Intel is making significant progress in working closely with the Indian Government in
bringing the latter's rural broadband goals to reality. The innovative "village
entrepreneur" model, together with a net-enabled community info-kiosk, is an ideal way
to reach the many who are not yet connected. While Motorola is strengthening its
presence in the hinterlands through its extensive BWA projects for state governments,
Alcatel has set up a joint venture with the C-Dot (the R&D arm of the DoT) to focus on
exclusive BWA/WiMAX solutions that are tailor made for India at price points the Indian
consumer is comfortable paying.

 

Anticipated Developments

 

Several key events should influence the Indian BWA/WiMAX environment in the months
ahead. While most operators have only conducted limited trials of vendor products, we
expect larger deployments to begin in January 2007, provided that the needed additional
spectrum is made available as envisioned.

The mobile industry, already faced with a steep decrease in voice ARPU, is expanding
its reach by offering voice services in rural areas and high-margin data services in urban
areas in order try to increase revenues. Mobile TV, IPTV and other broadband
applications are under trial at Reliance, Bharti and MTNL. The increased level of
eCommerce activity - mainly through travel bookings, discount airfares, holiday
destination packages, job hunting and matrimonial services - is creating a huge
demand for always-on broadband services that is expected to take the current Internet
user population to 100 million before 2007.

Government-led initiatives with strong technology partners such as Intel, Motorola and
Alcatel will trigger successful applications such as the Railtel cyber-cafe network along
the entire rail route of the nation. Local technology-product companies with
differentiated products engineered in India will have an opportunity to deploy in large
domestic networks, learn from the experience and go global. Thus, they could form the
first-generation Indian telecom product companies to address global markets.

The mobile-content industry in India is on the threshold of great change, as television,
production houses and content aggregators are working frantically to define the new
frontier in the Indian content business. Mobile operators and ISPs that have strong
alliances with content developers will be able to define the content-licensing model,
which is at the heart of the broadband business. This will pose a new challenge for
Indian service providers.

Although the Indian broadband arena is emerging, it clearly offers huge potential for
those that can demonstrate perseverance, patience and commitment.

 

Market Forecasts

 

In 2005, the BWA equipment market opportunity was a mere US$6 million, dominated
by small deployments for backhaul applications to enterprises with outdoor equipment.
However, we believe that with the upcoming spectrum opening, the
certification of new equipment and lower-cost CPEs, the annual 3.3 and 3.5 GHz
equipment opportunity will increase from US$4 million in 2005 to US$256 million in
2012.

This report projects an accumulated 18 million BWA subscribers by 2012,
counting both residential and business segments. WiMAX subscribers should represent
two-thirds of this figure. Approximately 60% of the WiMAX subscribers will be mobile
customers who are predominately residential, while fixed WiMAX will continue to be
driven by large corporations and, to a lesser extent, by SME customers.

Methodology & Assumptions

The research was conducted through two main channels:

Secondary Sources

We always strive to provide our clients with a new and unique perspective of the
industry based on our own research. To ensure that we add value to the information
already available to stakeholders in the industry, we reviewed most of the market
research available on broadband wireless access in India, including:

• ITU Statistical Yearbook, 2005
• The World Bank Development Indicators, 2005
• Numerous articles
• Indian ISP Association
  

• All service providers listed in the report
• The regulatory authorities
• National account managers and other key representatives of equipment vendors
  active in the Indian market