Mukesh Ambani’s bet? Wireless boom redux

Reliance Industries (RIL) will adapt a mass-based, Wimax-LTE (Long Term Evolution, the fourth-generation mobile technology invented by Qualcomm Inc of the US) strategy to roll out its ambitious wireless broadband services in the country, the company said in an investor briefing on Saturday.

From around 8 million at present, RIL expects wireless broadband subscribers to rise to 130 million 3-4 years.

The Mukesh Ambani firm plans to invest around Rs 18,000-20,000 crore over the next one year to roll out its services. It will start off by deploying Wimax — the more mature of the two technologies — and graduate services on to LTE when the technology matures, in around two years.

“The Indian broadband landscape of 2010 is similar to the cellular voice landscape of 1995. India ranks almost at the bottom with under 1% penetration,” RIL said. “In 1995, India had a cellular (voice) subscriber base of only 75,000. Today, this figure is almost 600 million — a phenomenal growth of 8,000 times. India is second only to China in terms of subscriber base.”

RIL accepts that a part of the broadband needs may be met by the traditional cellular firms through their 3G services, but said they are doubly handicapped — none of them covers more than 40% of India’s population and they rely on the older and inefficient technology called 3G-HSPA.

Ironically, Mukesh’s closest competitors are not the winners of the recent 3G auction, but existing CDMA operators such as Reliance Communications, Tata Teleservices and Shyam Sistema of the MTS brand.    

None of the GSM operators, including Bharti, Vodafone and Idea, has a nationwide wireless broadband network as they cherrypicked their wins in the recent 3G auctions.

RIL, therefore, expects the pan-India presence to be a major competitive advantage. “None of the private operators has spectrum assets that would match the capacity of pan India… 20 MHz broadband wireless spectrum,” RIL told analysts.

Meanwhile, there was speculation RIL may choose to roll out its services with the aid of Anil Ambani group’s telecom assets, including the latter’s towers and core optic fibre network, which was set up as a pet project of Mukesh Ambani’s ten years ago.

RIL dismissed speculation it will be catering to a niche audience, pitching its services as more ‘mass’ than any in existence today.
Among the services that it sees within the realm of 4G are high-speed wireless gaming, high quality video conferencing, cheap video-on-demand etc, lending an unmistakably populist flavour to its broadband ambitions.

RIL further rubbed in its superior technological position, which will result in operating expenses that are a fraction of its competitors like Reliance, starting with the spectrum cost. It pointed out that it paid just 6 US cents (Rs 2.90) per user per megahertz for acquiring its spectrum compared with 32 cents paid on an average by the 3G winners.

Not only was the spectrum acquired cheaper than others, each unit of RIL’s spectrum would also serve many times the number of consumers than would be served by the same amount of 3G spectrum.

“HSPA carries 2.88 bits per hertz, whereas Wimax carries 5.6 bits and (the future) LTE would carry 16.32 bits per hertz,” RIL said.

A doubling of the carrying capacity of spectrum results in either halving of the infrastructure cost or doubling of the number of customers that can be supported using the same infrastructure.
Besides the increased efficiency, RIL also has a natural cost-cum-scale advantage as it has 3 to 8 times as much broadband wireless spectrum as the 3G and CDMA players.

In addition to being more expensive, older technologies also don’t support very high speeds of data transfer of the sort required for activities such as live TV link-ups.

EVDO (short for Evolution Data Optimised) , the technology used by all other nationwide wireless broadband service providers, supports a theoretical maximum of  download speed of 9 megabits per second (Mbps) per user, while the year-end revisions of Wimax and LTE would enable them to support per-user rates of 225-270 Mbps.

Even the current version of Wimax supports theoretical maximum downlink speeds of up to 50 Mbps, it pointed out. Of course, the real world rates are usually around one-fifth to one-tenth of the theoretical maximum speeds, for all the technologies.

RIL is also learnt to have set to rest speculation that it will wait for
LTE technology to mature, before launching its services.

Instead, the company is reported to have shown a preference for starting off as soon as possible by deploying services on the current generation Wimax technolgy, on the lines of the US operator Sprint. “We are likely to migrate towards LTE once that platform becomes ready,” said an official close to the company.