Is India Ready for 4G?

In the highly competitive Indian telecom market the survival of service providers depends on their ability to come up with innovative and good quality services at regular time intervals. Today the customer wants more customized services at a faster rate, with low latency and at a much cheaper rate. Telecom companies are continuously upgrading themselves with the latest technologies in order to match the ever changing expectations of the consumers. From 1G to 2G, 2G to 2.5G, 2.5G to 2.75 and now from 2.75 G to 3G several changes have been made in the network architecture and air interface technologies.

But in a nutshell the biggest question is whether the telecom companies are getting sufficient rewards for their actions. On the recently held 3G auction telcos spent almost 67,000 Cr to acquire 3G licenses which act as chokers to their balance sheet. It is expected that it will take at least 4-5 years to start making profits out of 3G. Even after almost one year of allocation of 3G spectrum the subscriber base count has just reached 11 million and the overall situation is looking very scary from the service provider’s point of view.

Allocating the BWA spectrum along with the 3G spectrum has lead to another debate in the market i.e. whether 4G will also be deployed soon and, if it happens then how will the operator recover their money out of the 3G, since consumers would prefer to switch directly to 4G from 2G. BWA spectrum has already cost around $5.5 billion to the telecom players and it is expected that telecom operators will need to invest $1 billion further in order to deploy the 4G infrastructure. So how will the operators survive in the future?

Some Analysts believe that 3G and 4G can go hand in hand as 3G is primarily for the voice services whereas 4G will be used for data services. Once 4G will be deployed then it may help the service providers to increase their declining ARPU’s with the help of data services.

There are many other factors too that are driving the operators for adoption of 4G technology such as-

         1.    Need for Converged Networks and Converged Services

         2.  Software Independency

         3.  Low latency Services

         4.  More Customized applications & Application Ecosystem

         5.  Interoperability of Network elements

Analysts believe that these factors will lead to Capex reduction (infrastructure sharing , leasing etc) and will optimize network operation cost with better utilization of spectrum and increased monetization of end to end service and with the help of these two factors operators will get healthy return on their investment.

So Even if operators show readiness in adoption of 4G services, question lies whether the entire Telecom Ecosystem is ready for that?

Early adoption of 4G will lead to several risk factors that may hamper the success of 4G in Indian context. Some key factors are:

1. Availability of Infrastructure – Most of the operators are still doubtful whether they should go for Wimax or LTE. If operators go for LTE, as is expected, then there could be a possibility of demand supply mismatch since the Equipment Manufacturers are not yet ready with the desired infrastructure requirements.
2. Availability of 4G Devices/Handset – It took almost one year for the market to mature in terms of 3G handsets. It is highly expected that the same will happen in case of 4G. Thus in semi urban and rural areas high price of 4G devices in the initial stages could hinge the success of 4G technology.
3. Content Availability – Success of 4G will depend upon the data services and availability of high quality content. Therefore it is highly required for the content providers, content aggregator and technology enabler to start work in advance to leverage the full opportunities that will open up due to 4G. As the present content is not sufficient to fulfill the demands of bandwidth hungry 4G applications.

Thus it can be said that the success of 4G is not just dependent on service providers but also on the entire ecosystem that includes customers, infrastructure manufacturers, device manufacturers, content providers etc and until all of them are not ready there is no point in offering 4G services. The Success of 4G will depend upon how ecosystem challenges and faces the problem in front of them. An effective strategy backed with sufficient planning and proper implementation would lead to effective deployment of 4G technology.

Written by : PIYUSH GUPTA

                     MBA - TM (II)

                               SITM