4G is likely to be disruptive but still few years away
The impact of 4G is likely to be significant on the Indian telecom market when most of the Broadband Wireless Access (BWA) license holders will roll out LTE services across the nation in 2013.30 There will be substantial impact of 4G launch on the enterprise segment .31
LTE was first launched in Sweden in 2009.32 Growth has since been steady but slow, with exception of the United States, Canada, Japan and South Korea, which have seen faster take up.33 By end 2013, more than 200 operators in 75 countries will have launched a LTE network.34 About 300 LTE devices (smartphones, tablets and dongles) are expected to be available by year-end, including a growing range of sub-$100 smartphones.
India was a late entrant in the 3G arena, but as the auction of BWA and 3G spectrum was done simultaneously, India stood almost in-line with other countries to grant spectrum and to launch LTE networks. There might be several reasons for the delay in 4G services. LTE ecosystem is still developing. The number of towers required to launch 4G services (due to frequency band of 2300 MHz) will be more than that required for 2G services, thereby, increasing cost to the operator. The new electromagnetic frequency radiation (EMF) radiation norms set by Indian Government needs to be met. Widespread availability of 4G-enabled devices working on 2300 MHz band will be a challenge and depends on the price point at which they will be launched. Considering the vast geography of India and the lack of competition with pan-India presence, it would take some years for LTE operators to provide seamless coverage, which may impact adoption of 4G.
Bharti Airtel took the lead in rolling out LTE services on dongles and wireless router in Bangalore, Kolkata and Pune in 2012.35 As per the tariff plans launched by Airtel, the 4G services in these cities cost between INR 100 to 150 per gigabyte (GB) (3G service is cost between INR 150 and INR 250 per GB). It is likely to expand its services to other areas in 2013, where it has BWA spectrum. Users in these cities are grappling with limited coverage, limited availability of devices, non-availability of compatible LTE handsets or tablets, steep downgrades in speed after the utilisation of plan data and high tariffs.36
New pan-India players are likely to enter the market with 4G services in 2013. Lack of 4G-enabled devices working on 2300 MHz band are expected to be fulfilled by Mi-Fi,37 which will convert 4G signals into Wi-Fi signal, hence, extending its reach to all current smartphones, tablets, laptops and other devices in the market.
This could impact the other players, both in 4G, as well as, 3G. LTE is more efficient in carrying data than 3G networks over a given amount of radio spectrum, meaning that the cost to the operator of carrying a gigabyte of data on an LTE network should be several factors lower than for 3G. Customers using 3G may move their relatively high data usage to LTE networks triggered by the availability of higher speeds. This is likely to be a disruptive trend for the 3G service providers who have paid large amounts towards license fees and infrastructure. Also the other 4G players (having 4G license in fewer circles) could be impacted with these low tariffs and bundled device offers.
The launch of 4G will also be disruptive for fixed line broadband (although the penetration levels are not high). Due to the lack of optic fibre infrastructure, the bandwidth offered on fixed line in India is far from being competitive with 4G.
The New Telecom Policy 2012 has opened doors for ISPs to provide VoIP services in India. This is another angle where 4G could prove disruptive in the primarily voice-driven (voice revenues amount to 80% of total mobile revenues) Indian telecom market. ISP players with 4G spectrum will have a competitive advantage by routing voice calls on data networks of LTE and bundling these voice calls free with data plans. Such bundling offers could be a boon for enterprise segment and all the international long distance (ILD) users. This could adversely impact the ILD service providers as most of the customers would move to LTE networks for making high quality international voice and video calls. Nevertheless, given the robust network of inexpensive 2G voice services in India on affordable handsets, there is unlikely to be significant impact of Voice over LTE (VoLTE) on 2G service providers.
Overall, Deloitte expects the majority of voice calls made over LTE handsets to continue to be carried over 2G or 3G networks. While LTE networks will be fast enough to support video downloads, Deloitte expects that LTE will be used only occasionally for video download, due principally to the cost of serving that capacity and /or the data costs to the end-user.
There may be no new killer app for 4G that 3G could not deliver. Deloitte expects that usage of 4G handsets, tablets and dongles will be largely similar to that of 3G. Voice calls and simple text-based messages are likely to remain a key usage of LTE phones. What will differ markedly, however, is the user experience. Browsing a website could be faster and more pleasurable. Photos captured on a device may be shared at a higher resolution than with 3G, simply because the upload for a larger file takes less time. For business users, e-mail is still likely to remain a key application, but sending and receiving e-mails with bulky attachments should be an easier experience, and as such is likely to be attempted (and accomplished) more often.
Initially, LTE network coverage is likely to focus on urban areas, as this is where the majority of traffic is generated and revenues are earned. However, mass market adoption is unlikely in 2013. Deloitte believes it will still take few years for the ecosystem to develop for adoption of 4G services by the masses.
31 Enterprise segment will also include employees
NTT Docomo’s LTE subscriber base has doubled in the last six months: http://www.nttdocomo.com/about/operating/index.html; http://www.pcworld.com/article/261111/japans_ntt_docomo_signs_up_1_million_lte_users_in_a_month_hits_5_million_total.html
34 GSA forecasts that 209 LTE commercial networks will be available by the end of 2013 http://www.gsacom.com/downloads/pdf/GSA_Evolution_to_LTE_report_011112.php4