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India's sparsely tapped phone market fertile for wireless

Posted: 24 Oct 2003 ?? ?Print Version ?Bookmark and Share

Keywords:gsm? cdma? wireless? telephone?

Global System for Mobile Communications (GSM) and code-division multiple access (CDMA) wireless technologies are facing off in India, where phones have penetrated only about 5 percent of the total available market but where increasing competition, expanded services, falling prices and a more liberalized government telecom policy are said to be generating record growth.

In each of the past three months, the number of GSM subscribers in India has increased by 1 million. CDMA subscribers have increased by the same number for the past two months. GSM subscribers totaled 18 million at the end of September, considerably more than the number of CDMA customers, which industry experts estimated are at one-fifth of GSM subscribers, but rising daily.

The surge in wireless services is largely attributable to the market entrance of the Reliance Group, India's largest private industrial house, known for both its hard-nosed business tactics and reputed political clout. The market hasn't been the same since Reliance, whose group revenue accounts for nearly 3.5 percent of India's GDP, started offering CDMA-based service. That move sparked quick expansion by competitors using the same technology and by GSM operators as well.

India's telecom regulators at one time had specified that all cellular service providers offering long-distance service must use GSM technology only, a rare exception to the government's usual neutrality on technology matters. The government then allowed companies that had been mandated to offer regional services to use CDMA, but only with wireless-local-loop systems.

Indian companies that began offering GSM-based services in the mid-1990s have watched prices for their services drop as the number of users has grown. The Reliance Group and India's other industrial giant, Tatas, are sparring with suppliers using CDMA technology, while companies using GSM include the Bhartis, Idea Cellular, Hutchison Group, BPL, Essar Cellular and the state-owned Bharat Sanchar Nigam Ltd. Because of the government's confusing telecom policy and several seemingly idiosyncratic changes to it, it is hard to say which competitors will dominate the market, or whether GSM or CDMA will find more takers.

Experts see both technologies coexisting in the country. And all observers agree that wireless will become India's preferred mode of communication.

"Motorola doesn't believe that one technology is superior or is better-suited to India," said Pramod Saxena, Motorola Inc.'s country president for continental India. "Consumer adoption won't be based on which technology platform the service provider offers but on the services and applications being offered and the price. Motorola believes that both technologies will coexist in India, as is the case in several countries. India's [phone ownership] density is among the lowest in the world. Clearly, wireless is emerging as the preferred platform for providing communication services in India."

Motorola has won more than $300 million worth of orders from GSM-based operators and a few from CDMA operators as well, Saxena said.

Research firm Gartner India does not speculate on which technology would prevail in India but notes that the issue is "on the regulatory front."

"More to the point [is the need for] clarity in provisioning and a platform for equal footing," said Kobita Desai, senior analyst at Gartner India. "Speed of decision making is crucial because in communications, the cost of lost opportunity is high and almost cannot be salvaged. The objective is to establish a level playing field where there is a good business case and not deprive the end user of the benefits of a technology. Thereafter let market needs, both in terms of benefits to the consumer as well as cost of operation for the operator, dictate the survival of a technology."

The most tangible effect of competition is on pricing, Desai said. "The focus then might gravitate toward issues, and rightfully so, like interoperability between CDMA and GSM. Soon profitability will become a real need, and that is when a technology will be viewed more from the perspective of providing the best cost benefit."

Nortel Networks, another beneficiary of India's expanding telecom landscape, declined to list the contracts it has won. "We are very excited about the opportunities in India. Both GSM and CDMA are on the cusp of tremendous continued growth; there are lots of opportunities for service providers and vendors like us," said Siva Ramamoorthy, manager of strategic wireless Internet programs for Nortel Networks India.

"In the more advanced countries, the development in telecom took place quite early and the networks were built for wireline technologies. But in India, since the telecom networks are relatively new and not very widespread, it would help India leapfrog to implement wireless technologies and expand its networks rapidly and cost-effectively," Ramamoorthy said.

Both technologies are used primarily for voice communication in India today, Ramamoorthy said. "The real difference would come in the next level of telecommunications, when consumers will start demanding data and multimedia services apart from voice from their wireless operators. As data and multimedia services come to the fore in terms of demand, CDMA would have an edge over GSM. It is primarily due to the ease of upgrades on CDMA networks, which is not the case for GSM networks."

For its part, Reliance said it plans to reach out to 90 percent of the population, using wireless-local-loop CDMA technology. Competitors have said they are wary of the conglomerate's clout; indeed, some have already complained to the regulatory authority that Reliance has exceeded its mandated norms by providing long-distance service. Licenses for offering mobile service in India allow companies to serve either specific geographies or long distance, but Reliance appears intent on rendering those guidelines moot.

In a statement, the company said it intends to offer "revolutionary data, video and value-added services at a cost affordable by all" in a wide-ranging rollout-an approach it has used successfully in other industrial sectors.

While GSM operators have enjoyed a several-years-long head start over CDMA, their turf is under aggressive siege from CDMA-based rivals-and the telecom scenario in India continues to present an unsettling picture of confusion and uncertainty. "GSM operators [have been] in the country for 10 years, and still the policy framework has not stabilized," said a representative for Essar Cellular, a GSM operator. "This is unfair to investors, which include small individual shareholders, the source said. And the uncertainty is affecting consumers.

Quality-of-service is also affected at times. A consistent, well laid-out policy framework is thus imperative if the telecom sector is to grow.

"The auction of GSM licenses was in effect an auctioning of spectrum, and GSM operators paid a hefty price," the Essar representative said. Now "CDMA operators have sneaked in, paying a paltry entry fee. "Further, CDMA operators now offer countrywide roaming, again through the backdoor. Originally, they were supposed to be mobile only within a short-distance charge area," the representative added, citing one of the many continuing flip-flops that characterize India's tortuous telecom policy.

- K.C. Krishnadas

EE Times

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