A Look into the Future

With technologies like NFC, BYOD, Cloud slated for a big leap in 2012, the year holds huge promises

With the current year nearing an end, the technology industry, much like the human beings, tends to reassess the past and get itself ready to embrace the new year with new innovations that promise to make life easier. And not just new developments in the technology space, it also analyzes the mistakes or shortcomings of the technologies of the previous year and makes some resolutions to rectify the issues and move forward. As the year 2011 is closing in, hopes afloat on various technology and corresponding business aspects of the Indian telecommunications industry, VOICE&DATA analyzes the market by feeling the nerves of the technology space to come up with the top 10 forecasts. These predictions spanning across stakeholders

in the telecom industry also explains why the forecasts, even if not spot on, have the merit to be taken seriously by the industry.

New Telecom Policy 2011

The new year 2012 could not have brought a better gift for the Indian telecom industry than a new set of policy guidelines, afresh with new ideas and equipped with measures, which promises to iron out many wrinkles that have been bothering the industry for so long. The NTP 2011 Draft Policy, expected to be on the roll in January 2012, stresses on 6 hot areas: Broadband, manufacturing, spectrum, licensing, grievance redressal, and cloud computing. If drafted properly, the New Telecom Policy 2011 (NTP 2011) will shape the future of telecom in the present decade. Also, it will help once again in making telecom the shining star of the Indian growth story, contributing a sizable share to the Indian economy. With respect to broadband, the policy talks about providing an affordable and reliable broadband on demand by 2015. The new policy has set a target of 175 mn broadband connections by 2017 and 600 mn connections by 2020.

It has also revised broadband download speed from 256 Kbps to 512 Kbps and subsequently to 2 Mbps by 2015, and 100 Mbps thereafter. So the first step towards that direction is expected to be taken in 2012. However to ensure that the mobile broadband takes off, the government should also specify timelines for 100 Mbps bandwidth. High bandwidth will result in applications like tele-education, telehealth, e-agriculture, and e-government services to flourish as these applications will require high bandwidth.

The draft policy on manufacturing aims to meet 80% of the Indian telecom sector’s demands through domestic manufacturing with a value addition of 65% by the year 2020. One has to see how this will translate into a reality, as it would be a gigantic task for the Government of India and needs to be tackled at all levels to have value addition of 65% by the year 2020. Plans are also to create a corpus fund for promoting indigenous R&D, intellectual property right (IPR), and entrepreneurship. And, this is a welcome step, but the policy does not specify the quantum of fund to promote local manufacturing and entrepreneurship, which is an important ingredient and will act as a catalyst to promote indigenous manufacturing.

The draft policy also talks about making available adequate globally harmonized spectrum in the bands of 450 MHZ, 1,800 MHZ, 1,910 MHZ, 2.1 GHZ, 2.3 GHZ, 2.5 GHZ, 3.5 GHZ, and bands identified by ITU for commercial mobile services. In all the above spectra, the government has not specified the timeframe for allocation of spectrum. Besides, among other proposals, the policy envisages the abolition of roaming charges in the country, meaning that the mobile phone users can treat the whole country as their local network and make calls as per their existing tariff plans.

Once the policy is in place, provided it has all the answers for the issues that the industry is facing, the juggernaut of the telecom success story would again start rolling on.

M&A Guidelines

The NTP 2011 is expected to bring clarity on merger and acquisition guidelines for the telecom industry. The telecom operators may adopt a circle-wise acquisition strategy, as the licenses have been awarded by circle. Industry experts believe that there would be 6-7 telecom operators in each circle by the end 2012, while the rest would be acquired.

The current set of players are running out of options to grow profitably and have already sought to build synergies through sharing of networks and backhaul infrastructure. This was evident in tie-ups that resulted in the formation of tower firms such as Infratel. Bharti airtel in its feedback to the government on new policy says that in order to facilitate consolidation the M&A guidelines should be liberal, forward-looking, equitable, and non-discriminatory.

The leading 6-7 players would stay on to battle it out for the telecom subscribers and services revenues. However the merger and acquisition (M&A) guidelines are expected to stipulate that the merged entity in any circle should not have market share in excess of 60% in terms of subscriber base and gross revenues. In such cases, both the Department of Telecommunications (DOT) and Telecom Regulatory Authority of India (Trai) would have to approve the proposed merger. In case the combined market shares of any 2 entities is less than 35%, then the DOT alone may grant approval to the merger, provided the resultant entity does not hold more than 25% of the total spectrum for the service area.

Will Mobile Broadband See the Light of Day?

Mobile broadband is expected to see the light of the day in 2012, though it was rolled out during the previous year. With less than 2% household broadband penetration and less than 3% household PC penetration, India’s internet market is grossly underutilized. The number of broadband connections stood at 12.35 mn at the end of June 2011. Introduction of 3G was to make broadband ubiquitous, high quality, and affordable to all. Also high bandwidth of 3G networks, which is one of its characteristics, will lead to the creation of new services that will attract customers. For this, 3G-compatible equipments are required; hence 3G handset sales will grow to circa 135 mn in 2015.

“We see a strong uptake for 3G services and expansion of telecom services across the length and breadth of the country,” says Samaresh Parida, director,

strategy, Vodafone India. He also says that with the introduction of 3G services, data will be an exciting space to watch out for, as after voice based service data is the next big thing that is coming up in the telecom industry.

Operators are expected to invest around $121 bn in 3G infrastructure over the next 5 years. The number of 3G subscribers in India is projected to cross 107 mn mark by 2015, where the rural subscribers will comprise 24% of the overall 3G subscriber base. We expect the 3G services to stabilize and mature over 2012 and drive growth in the VAS market.

By June 2011, there were 20.33 mn internet subscribers in India, out of which 60.7% were broadband subscribers. Digital Subscriber Line (DSL) is the most preferred technology used by the service providers to provide broadband services, and it constitutes 85.72% of the total broadband subscriber base, whereas wireless broadband accounts for just 2.78%. However in 2010, the Government of India granted broadband wireless access licenses to 6 operators, viz. Reliance Infotel, Qualcomm, Aircel, Bharti airtel, Tikona, Augere, and MTNL/BSNL. Most of these are at various stages of deploying WIMAX/LTE TDD networks for wireless broadband access. It is expected that the services would go live during 2012, though the network rollout took place in the latter part of 2011 and services going to live through 2012. Wireless broadband may see some traction in the markets riding on these developments.

Trai and DOT have also started the process for 4G LTE advanced deployments through consultation papers published for the industry review.

Business of Cloud Computing

In India, every operator today is either seriously contemplating or has already ventured into the business of cloud computing. Presently, cloud computing is the fastest growing component of data center services, accounting for more than 11% of the business, but touted to contribute more than 33% by 2015. The activity in the market is growing hot, with Huawei launching 2 new-generation cloud handsets; Mcafee and ZTE coming up with its cloud security solutions; Tata introducing cloud services for the SMB market; Mahindra Satyam and Autodesk launching a dozen web based capabilities on cloud, products, and services that enable customers to enhance their desktops with mobility, new viewing, sharing capabilities, and more computing power. This is only the tip of the iceberg, as more and more players are about to enter the arena.

In the next 5-6 years, cloud computing is likely to create 350,000 jobs in India, as India will prepare itself to play a key role in the global cloud based IT applications. Cisco has estimated in its global cloud index (2010-2015) that the global cloud computing traffic will grow 12 times from the existing 130 EB, to reach a total of 1.6 ZB by the year 2015, with a 66% compound annual growth rate (CAGR). In the current economy, businesses look to sweat every asset at their disposal and more and more will look to leverage their data center environments to offer cloud services as an additional revenue stream. Those companies wishing to address this burgeoning market will need to have the right data center architecture in place—a highly virtualized fabric based network topology, delivering reliability and performance to meet strict Slas—to respond to customer demands; and I predict that we will see some high-profile casualties as a result of providers trying to make a fast buck.

Robust Backbone Network: To Address the Data Deluge

Today’s world of communication is all about mobility. We have reached a second phase of this mobility, ie, the ‘data’ transmission, the first phase being ‘voice’ market. During the first phase of mobile communications, networks had been built for voice flow but of late there is a quick transition to data transmission; hence the need of the hour is to strengthen mobile backhaul networks to deliver third- and fourth-generation services. Upgradation is a must also because of the complexity on networks due to increasing subscriber base, variations in type of traffic transported across network, and the demand for quality of service.

So having a robust backbone network would be the top priority for most of the telcos. According to a recent report by Juniper Research, the mobile operators globally will have to shell out nearly $840 bn over the next 5 years to upgrade backhaul networks to address data deluge. The report stressed that when the existing backhaul infrastructure is incapable of supporting growth in consumption and radio network upgrades are not enough, then it has to be augmented and operators ought to simultaneously manage the upgrade of their backhaul networks. The report said that in India alone, microwave would account for 87% of capacity in 5 years.

Advanced backhaul technologies guarantee bandwidth constraints and enhance spectral efficiency of the wireless interface. Unlike TDM based transport technologies, upgrading to Ethernet enables the operators to leverage on statistical multiplexing. This feature is