Bangalore: In India’s spectrum auction, broadband wireless access hitched on to third generation (3G) telephony as a poor cousin – a seemingly dull sequel of the high-profile 3G spectrum auction last month that brought nearly $15 billion into the government’s kitty.
India’s media spent just a few hours reporting on the $8 bn that came from the spectrum auction bonanza version.2. It marvelled at the unknown Infotel which picked up the 22-circle pan-India licence when no one else did. Then it got terribly distracted by Mukesh Ambani’s proposal to acquire Infotel and his younger sibling Anil’s brotherly withdrawal from the auction.
The more important thing is that wireless broadband can finally happen now and such an access will be a game changer for India. Unlike data cards, this isn’t just for mobile executives. It will drive rapid penetration of fixed-line broadband in areas outside suitable wireline reach. I expect to see this ramping up broadband in India – up from its present, abysmal one percent penetration.
Broadband wireless access, using technologies like WiMAX, allows high-speed internet access, IP telephony, TV services and other voice and data multimedia services. Unlike cellular telephony, it is not primarily designed for high mobility, though it can support it. What it gives you is high-speed broadband access where there is no suitable wireline.
India, despite its over 50-percent mobile phone penetration, has been really challenged on wireless data. The globally well-established wi-fi has had little presence in India: There are few public hot spots outside offices and hotels, which overcharge for wi-fi access, contrary to the global trend of free wi-fi. So the only option for mobile users has been low-speed data cards, now replaced with 3G data modems.
For those who came in late: After picking up nearly Rs.68,000 crore (over $15 billion) for the 3G spectrum auction in May, India closed part two of the spectrum auction – this one for broadband at Rs 38,300 crore ($8.5 billion). Bidding for two slots of 20 MHz each of pan-India spectrum were all the usual suspects, including Airtel, Reliance, Idea Cellular, Aircel, Vodafone and Tata.
Reliance Infocom of Anil Ambani Group mysteriously withdrew from the auction, citing high fees. Vodafone dropped out when the prices “went beyond rational levels”. Aircel won eight circles, and Airtel and Qualcomm got just four each. Mumbai and Delhi, of course, got the highest amounts, of over Rs 2,200 crore (Nearly $500 million) each.
As with 3G, the two government-run firms got broadband wireless spectrum well ahead, with the proviso that they’d match the winning bid in each service area. With 3G and broadband, the spectrum auction licence fees added up to nearly $23.5 bn for the government.
The highlight: A remarkably unknown ‘Infotel Broadband Services’ picked up the sole pan-India licence of all 22 circles. And the Reliance Infocom withdrawal mystery was solved when Reliance Industries announced that it was investing $1 billion in Infotel. How sweet, said the media: Anil withdrew to give Mukesh a chance…the estranged brothers have really made up.
Now how will the players recover the licence costs, along with the equipment and rollout costs? That is the genius expected of Indian operators: In this regime of low average revenue per user (ARPU) market, they have to do it, and still keep their services competitive. India’s short mobile history, since 1995, has shown that they can do it.
What does all this mean for the user in India?
From the licence fees and rollout capex and other costs, one might guess: Overpriced services. But that won’t work. Offerings have to be competitive with wireline broadband and 3G data, so we’re looking at long, long break-evens for the operators. The good thing is that the sole pan-India player is now backed by deep pockets.
So I expect the first effect (by end-2010) to be wider availability of true broadband across cities and towns. Keep in mind that even in New Delhi, a major player like Airtel does not have broadband services everywhere. That will change. And the bar will be raised to 1 Mbps unlimited as the minimum available. Already Airtel’s selling 4 Mbps unlimited wireline broadband for Rs 1,399 and BSNL and others have even cheaper plans. Wireless broadband has to match those prices.
By end-2010, increased competition and availability will force prices down to the Rs.299 level for 1 Mbps unlimited broadband, wireline or wireless. That will take affordable high-speed broadband beyond the cities.
The caveat: Cheap broadband alone will not drive penetration. It’s already there in major cities and penetration is still low there. We need compelling applications. But I’m optimistic about the ramp-up, driven by a host of applications, from government services to entertainment. It’s all gradually coming together now.