India’s Upcoming WiMAX Auction

Introduction

India’s IT/ Telecommunications Minister, Andimuthu Raja, has stated that the

government will start the auction of licenses for high-speed wireless
services within the next three months.   Many feared that the long
delayed auctions might not start until sometime in 2010, so this could be good
news.   In November 2008, India’s Telecommunications ministry picked
NM Rothschild & Sons Ltd.  as the independent auctioneer to help it sell
the permits and aimed to complete the process by early 2009, but that never
happened.

The auction to operate 3G mobile-phone services and fixed wireless broadband
(WiMAX) services will earn India about 250 billion rupees (US$5.1B), Raja said.  
The starting price for each slot of 3G spectrum is 35 billion Indian Rupees
(US$716M), lower than the (US$827M) price previously signaled by the government
but higher than the original (US$413M) price suggested.   "Since the
number of slots are only four, the auction price will be more," Raja said.  

Three available blocks of spectrum in the 2.3 and 2.5GHz band will be auctioned
separately for fixed broadband wireless access services.   The so
called "WiMAX auction" will be held after the 3G auctions are completed and are
expected to follow a similar process.   The government ministers also
set a base price of 17.5 billion rupees for permits to operate fixed broadband
wireless (WiMAX) services.

As noted above, the 3G and WiMAX spectrum auctions had been scheduled to take
place in January this year, but were subject to repeated delays that have
allowed government controlled operators BSNL and MTNL to deploy 3G services
ahead of privately owned rival carriers.   Those operators had already
received licenses for one of the five blocks of spectrum to be allocated for
wireless broadband (more in the next section of this article).

It was hoped that early auctions of 3G and WiMAX licenses would result in a
growing market for mobile Internet in India, which has much potential and
promise.   India is now the second largest wireless market in the
world, but almost all of it comes from cellular voice and SMS (rather than from
wireless Internet access).   India’s cellular operators added 11.59
million subscribers in May, taking the country’s total to 415.25 million,
according to the latest figures from Telecom Regulatory Authority of India
(TRAI).  

Spectrum Auction Logistics & Details

The government intends to allocate 4 blocks of unpaired 20MHz spectrum in each
of the 22 service areas (see map below), with 2 blocks in the 2.3GHz band and 2
blocks in the 2.5GHz band.   One block in the 2.5GHz band will be
reserved for MTNL (in Delhi and Mumbai) and BSNL (in all other service areas)
and the remaining 3 blocks will be put up for auction.

The India Telecommunications Ministry had restricted the sale of radio bandwidth
to five blocks (or slots), of which one has already been allotted to state-run
Bharat Sanchar Nigam Ltd.  (BSNL) and Mahanagar Telephone Nigam Ltd.  
(MTNL), ahead of the proposed auctions.   So that leaves four blocks
left.   While BSNL operates in 20 of the country’s 22 telecom service
areas, MTNL provides service in the remaining two.   The two companies
will be paying the government the highest bid amount resulting from the auction
process.   The government also announced that blocks in the 700 MHz
and 3.3-3.6 GHz bands will be auctioned as they become available to offer Fixed
WiMAX and rural wireless broadband segments to consumers.  

Source: Government of India, Ministry of Communications & Information
Technology

The terms and conditions for the Auction of 3G and BWA Spectrum in India is

specified in this 130 page memorandum.   Note that in this
document, BWA spectrum auctions for 2.3 MHz and 2.5 MHz spectrum is likely to be
used for WiMAX services.

WiMAX in India  – Claims & Counter-Claims

If you perceive the following two news reports -published on the same day
-contradictory, then you don’t understand India.   It is a country
that its full of contradictions and, in this case, different interpretations of
the same government announcements.

1.  WiMAX in 150 Indian Cities within 90 days

EE Times – India reports that approximately 150 cities in India would have
wireless broadband service through WiMAX in just 90 days, once the 20MHz
spectrum is allotted to four operators in each geographical circle. 
Observers at the WiMAX India 2009 conference believe that a WiMAX network
operator could serve many subscribers with good quality service.  However,
much would depend upon early implementation of the proposed auction of the
spectrum reserved for BWA. 

"India is ready for broadband experience" said C.S. Rao, chairman of WiMAX Forum
India.  "Wireless is the key to broadband," he said.  Not all
participants were so sanguine.  Commenting on the poor broadband
penetration despite huge WiMAX potential, Bharti Airtel group Chief Technology
Officer Jagbir Singh said that "price points are not good while scalability is
an issue."  He and several other experts at the conference called for the
government to expedite the spectrum auction in order to accelerate WiMAX-based
broadband penetration in India.

2.   WiMAX bidders may not get spectrum in a hurry
The successful WiMAX bidders are unlikely to get spectrum immediately after
the auction as the government may offer only a ‘conditional license’.  
"The WiMax spectrum is not immediately available.   We may offer
conditional license to the successful bidders, and that the spectrum would be
given after six months or whenever it is be available," department of telecom
(DoT) secretary Siddhartha Behura told reporters on the sidelines of an event
organized by the internet service providers association of India (Ispai).  
On August 27th, the

India government announced that the auction for 3G and WiMax spectrum is
likely to happen in the next three months.   Behura said that the
auction for 3G and WiMax would be conducted simultaneously with a lag of 15 days
(We take this to mean that the WiMAX auction would start 15 days after the 3G
auction ends).

Comments & Concerns

We have written on WiMAX in India extensively in the last three years- holding
our breath, waiting for the auctions to take place.   Only after the
spectrum is acquired can the wireless operators begin to build out their
networks.  When will that be?  No date has been set for the auction to
start.  So our first concern is that precious time has already been lost on
the path to mobile Internet and fixed BWA.   Will India’s WiMAX
potential be squandered?

A second concern is that the number of projected India WiMAX subscribers is too
high.   The WiMAX Forum forecasts that India will have 19 million
WiMAX subscribers by 2012, or 20% of the world’s WiMAX user base.  The
Economic Times of India, citing a study by US market research firm Strategy
Analytics,

reports that India will become the largest WiMAX market in the Asia-Pacific by
2013.   That study predicts India’s WiMAX subscriber base to reach
14 million by Year 2013 and grow annually at nearly 130%.   The study
also projects initial investment in WiMAX ventures will top $500M in India.

Gartner Group is much more conservative, forecasting that India will have 6.9
million mobile and fixed WiMAX connections by the end of 2011.   On
March 21, 2008, we heard directly from Andimuthu Raja at meeting that took place
at the India Community Center in Milpitas, CA.   At that time, Raja
stated that only he expected only 10M WiMAX subscribers by 2011.   We
thought that was quite disappointing for a country that has over 1 billion
residents.  But how can India be a leading WiMAX country with such a small
number of subscribers?

The third and perhaps most important concern is that true mobile WiMAX
will not happen in India, despite Intel’s efforts to promote the technology and
furnish low cost netbooks.   At the end of 2008, India’s mobile
service providers boasted nearly 347 million connections, a year-on-year
increase of nearly 50 percent.   The government expects the subscriber
base for combined wireless and wireline connections to touch 600 million by the
end of 2012, from 404 million at the end of April, this year.   But
the mobile WiMAX component may likely to be much smaller – with WiMAX
used for fixed wireless broadband Internet access by business and some
residential customers.   Most companies in India plan to use 3G
services for mobile Internet and WiMAX for fixed broadband access.