White Paper: Broadband in India – realizing the vision

The Government of India has set out its vision of how telecoms can help drive the

Indian economy and bridge the digital divide. But for India’s mobile broadband

vision to become reality, operators will need access to more spectrum, new network

capabilities and new revenue models.

ericsson White paperUen 284 23-3247 | October 2014

Broadband in India: realizing the vision

BROADBAND IN INDIA: REALIZING THE VISION • INDIA’S BROADBAND VISION 2

India’s broadband visionIn its National Telecom Policy 2012 (NTP-2012), the Government of India set out its vision,

objectives and targets to extend the reach of broadband in the country over the coming years.

The main aims are to:

> boost broadband subscriber numbers to 175 million by 2017 and to 600 million by 2020

> deliver a minimum download speed of 2Mbps, with speeds of 100Mbps or more available on

demand

> increase rural telecom penetration to 70 percent by 2017 and to 100 percent by 2020

> make available an additional 300MHz of spectrum for International Mobile Telecommunication

services by 2017 and another 200MHz by 2020 [1].

The NTP-2012 also outlines several important initiatives for broadband development, including

licensing, spectrum management, equipment manufacture, telecom infrastructure, QoS, security,

public sector needs, cloud services, and future technology development.

Broadband has the potential to help bring about inclusive growth in India by extending

education, health care and financial inclusion to rural areas and lower-income groups.

Delivering this vision, and meeting the ambitious targets for coverage and data speeds, will

require significant attention to factors on both the supply side and the demand side.

On the supply side, regulators and operators need to tackle the constraints of limited spectrum

availability, device affordability and network performance gaps.

On the demand side, the industry needs to ensure it can meet the pent-up demand for mobile

broadband, while stimulating interest in and uptake of services in new markets with new revenue

models.

Operators will need to pay close attention to network quality and pricing, and facilitate innovation

in local apps and content. They will need to evaluate incremental revenue opportunities by

addressing vertical markets, such as entertainment, education, banking, utilities, health care,

and travel and transport, and expand beyond traditional services into machine-to-machine

services.

In short, the NTP-2012 targets are achievable, but only if market needs are met. These include

the availability of low-cost (sub-USD 50) and capable smartphones, the resolution of spectrum

issues (greater availability, appropriate pricing, harmonized bands and contiguity), and investment

in infrastructure.

BROADBAND IN INDIA: REALIZING THE VISION • HUGE POTENTIAL 3

Huge potentialIndia is a market with huge pent-up demand for broadband services. To date, the penetration of

broadband in the country has been held back by the limited reach of fixed networks and limited

availability of broadband technologies other than digital subscriber line copper. However, there

has been exponential growth in wireless subscribers in India in recent years, and there is an

opportunity to build on this growth with mobile broadband.

While fiber deployment is expected to be limited to the top 25 cities in India – mainly to serve

offices and Multiple Dwelling Units – the rollout of 3G networks has already kick-started growth

in mobile broadband on a much larger scale. This growth is expected to pick up pace as device

prices continue to fall, and services become more widely available and affordable.

Growth in high speed broadband connectivity to rural areas is expected to be stimulated by

government initiatives, such as the National Optical Fiber Network, which will see optical fiber

rolled out in 250,000 panchayats (local communities) by early 2016 [2]. The Universal Service

Obligation Fund subsidy for rural broadband is also expected to drive fiber connectivity in rural

areas.

CHANGING DEMOGRAPHICS

Mobile data user demographics are evolving fast in India, with

mobile broadband starting to bridge the digital divide between

rural and urban populations. As Figure 1 shows, mobile data

usage and services are going mainstream with a growing

proportion of people from less educated, lower-income groups

now downloading apps and streaming video content from the

internet using mobile devices [3].

GSM/EDGE technology has the widest reach and covers more

than 90 percent of India’s population. By the end of 2013, more

than 20 percent of the Indian population was covered by WCDMA/

HSPA. Further expansion of WCDMA/HSPA will be driven by

increased demand for internet access, affordability of

smartphones, and regulatory requirements to connect the

unconnected.

By the end of 2020, more than 95 percent of the Indian

population will be covered through GSM/EDGE technology,

while more than 90 percent will be covered through WCDMA/

HSPA networks. Additionally, about 45 percent will be covered

through LTE networks, as shown in Figure 2. This is an increase of around 70 percent on WCDMA/

HSPA population coverage and 45 percent on LTE population coverage compared with the end

of 2013 [4].

CHANGING USER HABITS

Consumers’ mobile habits are also changing quickly in India; people are increasingly downloading

and using apps, using over-the-top social media and messaging services, and browsing for

information on their mobile devices.

According to the Ericsson ConsumerLab Analytical Platform, India Country Study 2012-2014,

mobile broadband users now send 40 out of every 100 messages through instant messaging

apps, rather than SMS, thanks to lower cost, ease of use, ease of content sharing, and a better

overall user experience. On average, 3G smartphone users download 10 new apps per month,

of which chat and gaming apps account for more than 35 percent.

The average blended monthly data usage of 3G subscribers (including 3G dongles) in India

has reached approximately 600MB [5] and this is likely to increase further with the availability of

more affordable devices. More spectrum availability will lead to higher download speeds and

higher data usage (especially for video).

Mobile web bridgingthe digital divide

16-19%

20-24 25-39 40+

Educated, urban, affluent

Less educated, low income2012 2013

2012

2013

6139 4555

3033

37

27 29 27

4

13

Older generation goes digital...3 x increase in user share

Figure 1: The changing demography of Indian mobile telecoms (percentages)

BROADBAND IN INDIA: REALIZING THE VISION • HUGE POTENTIAL 4

Devices, applications and networks all have to work well together to create

a good user experience. As customers start to use better and more

capable devices, their need for better network and application coverage,

faster speeds and data services will only increase.

As Ericsson ConsumerLab’s research in India has discovered, network

performance is a key issue in the minds of consumers. Network reliability,

coverage, call quality and data speed are key drivers of customer

satisfaction.

EXPANDING, EVOLVING SUBSCRIBER BASE

Across all technologies, total active mobile connections (measured by

active SIMs) in India are expected to increase from around 800 million

(63 percent penetration) in 2013 to around 1.2 billion (about 85 percent

penetration) in 2020, driven primarily by rural penetration. Among these,

the number of mobile broadband subscribers will increase from 70 million

in 2013 to 600 million in 2020. Around 20 percent of mobile broadband

subscriptions will be 4G by 2020 [6].

2013 2020 2013

>20%

>95%

>90%

2020 2013 2020

~45%

198

>90%

0%GSM/EDGE

WCDMA/HSPA

LTE

Figure 2: Total population coverage for GSM/EDGE, WCDMA/HSPA and LTE technologies. The ability to utilize the technology is subject to additional factors, such as access to devices and subscriptions

BROADBAND IN INDIA: REALIZING THE VISION • THE POTENTIAL BUSINESS IMPACT 5

In order to examine the potential revenue impact of mobile broadband rollout in India, let us

consider two alternative evolution scenarios: ‘conservative’ and ‘aggressive.’

In the conservative scenario, monthly data consumption per subscriber increases from around

150MB in 2013 to around 600MB in 2020 (with 50 percent video usage for high-end smartphones1

and 30 percent video usage for low-end smartphones). Operators choose to deploy their 900MHz

spectrum for 3G in circles with higher data uptake, introduce 1800MHz LTE in selected cities,

and deploy 700MHz LTE in selected cities based on high revenue share and high data growth.

Additional 2100MHz carriers are available as an option to evaluate for potential 3G deployments

in select circles.

In the aggressive scenario, there is higher video consumption resulting from better availability

and lower pricing of services and smartphones (including better quality smartphones). Average

monthly data usage per subscriber increases from around 150MB in 2013 to around 850MB in

2020 (with 70 percent video usage for both high-end and low-end smartphones). Operators

choose to deploy their 900MHz spectrum for 3G in circles with higher data uptake. They also

deploy 1800MHz and 700MHz LTE in selected cities and have additional 2100MHz carriers

available as an option to evaluate for potential 3G deployments in select circles.

Across all mobile technologies in India, monthly data usage per subscriber is still relatively

low, primarily because of suboptimal user experience on both 2G and 3G. This is down to the

inability of 2G networks to support high-bandwidth services, insufficient 3G network coverage,

and a lack of relevant content.

In future, as operators improve their 3G network coverage and launch 4G services, subscribers’

usage patterns are likely to evolve toward consumption of high-bandwidth content and video.

Average data usage of a 3G subscriber is expected to increase from around 600MB (including

3G dongles) in 2013 to around 1GB (conservative scenario) and around 1.6GB (aggressive

scenario) in 2020. This effect will primarily be seen on high-end smartphones and large-screen

devices (laptops and tablets).

CHANGING REVENUE MIX

The revenue mix of Indian operators is expected to evolve to include a higher contribution from

data-driven 3G and 4G service revenues in future. The industry’s overall gross revenues are

expected to increase from USD 28 billion in 2013 to USD 46-49 billion in 2020. This will translate

into a higher earnings before interest, taxation, depreciation and amortization (EBITDA) margin,

which is expected to increase from current levels of 25-30 percent to 30-35 percent by 2020.

Data will represent an increasing proportion of the total revenues, and these are expected to

rise from 10-12 percent in 2013 to 35-40 percent by 2020, driven by growth in data subscribers

as well as usage per subscriber. Other revenue from SMS, traditional value-added services and

new services is expected to remain stable at USD 2 billion over 2013-2020 [7].

Opportunities in emerging services such as m-health, m-education, m-commerce and

m-banking are expected to remain limited in the short term, due to monetization and regulatory

challenges. However, these services are expected to have long-term potential as operators,

regulators and other value chain players (such as device vendors, content providers and app

developers) increase their focus and take initiatives to promote health, education and financial

inclusion among the population.

To encourage the rollout of such services, policy measures will be needed to cover areas such

as setting up guidelines for value chain players, fund allocation and fostering innovation.

Growing revenues are expected to translate into higher profitability for operators. Experience around

The potential business impact

1 In this study, high-end smartphones have been defined as those with a minimum processor speed of 800MHz, screen size of 3.5 inches and an internal memory of 512MB, with reasonable 3G internet experience.


the world shows that EBITDA tends to decline one to two years after launching 3G, as revenues do

not grow in line with the increased operating costs associated with a higher number of sites. Thereafter,

margins start to increase with 3G uptake as data provides incremental revenue per user.

Since their 3G launches in 2010, Indian operators have been following this trajectory and are

starting to show improvements in mobile EBITDA. This is primarily fueled by the growth in the

share of mobile data revenues, which is expected to grow from 25-30 percent in 2013 to 30-35

percent by 2020 [8].

HOW CAN OPERATORS DELIVER?

The ambition to deliver 2Mbps download speeds to users on mobile broadband, with speeds

of 100Mbps or more available on demand, has an impact on both network and spectrum

requirements. Across all currently available mobile networks in India, the typical average data

speed is around 250kbps. On 3G networks, the average data speed is less than 1Mbps [9]. There

is clearly still a large gap to be filled.

Fueling and sustaining mobile broadband growth in India will require access to additional radio

spectrum; it is the basic resource required for building efficient networks able to serve large

numbers of subscribers generating large amounts of traffic.

Improving and maintaining the quality of user experience will likely be top of Indian operators’

agendas over the coming years, and Indian operators will also need to invest in their networks

to support the expected exponential growth in data traffic. They will need to adapt continually

as mobile devices, apps and network capabilities all develop in parallel. Heterogeneous networks

will need to be established with a mix of macro sites, micro sites, small cells and Wi-Fi hotspots

to manage coverage, capacity and network performance for maximum user experience [10].

Network investments including mobile infrastructure, fixed access, service provider routers

and switches and optical transport and other network elements for communications service

providers in India between 2014 and 2018 are expected to be in the range of USD 40-45 billion

[11].

NEW SPECTRUM: A BASIC NEED

Currently, India has much less mobile broadband spectrum than markets with high mobile

broadband penetration. The release of additional spectrum in the relevant bands will contribute

to affordability of services, and harmonization of spectrum will allow a lower-cost device

ecosystem to evolve. This will play a key role in driving mobile broadband growth in India in the

long run, and will be an increasingly important driver of capacity, user experience and quality.

It is likely that the single 5MHz 3G carrier currently available to operators in the 2100MHz band

in India will only be sufficient to meet data growth for the next year or two in metropolitan areas.

By 2016, Indian operators will need additional spectrum to serve fast-growing data needs in

these areas. Spectrum strategy will therefore start to define mobile operators’ businesses from

2015, but decisions on this need to be made today.

The country’s February 2014 spectrum auctions saw Indian operators spending close to USD

10 billion to open up various new options for delivering mobile broadband services [12]. Both

the 900MHz and 1800MHz bands can be used for offering mobile broadband services.

To deploy 3G in 900MHz or LTE in 1800MHz, Indian operators will need to refarm the existing

2G services in these frequencies to different frequency spots within 900/1800 MHz depending

on the decision they take. This implies the introduction of new network infrastructure to support

the new technology, as well as the replication of the existing service at different frequency spots

to provide full coverage.

The 800MHz band is currently being used by India’s CDMA operators, who face a similar and

potentially more urgent challenge to upgrade their networks to wider bandwidths and, in the

longer term, to newer technologies in the 800MHz band as CDMA reaches its end of life. While

some of this spectrum is being used for 3G data connectivity using Evolution Data Optimized

technology, the bulk is still dedicated to 2G services. Contiguity is a challenge in this band

because of the fragmented allocations and small channel size (1.25MHz).

Twenty-seven countries in Asia and Latin America have so far adopted the Asia-Pacific

Telecommunity (APT) 700MHz band plan (known as APT700). Australia, Chile, Ecuador, Japan,

Mexico and Taiwan have licensed APT700, and in Taiwan operators have started commercial

service.

In order to compete effectively, it is important that operators have adequate spectrum operating


with the same or better technology. An operator with less spectrum will have to build more cell

sites to be able to deliver the same QoS to the same number of users as an operator with more

spectrum.

This makes the auction of additional spectrum for 3G vital in serving the Indian mass-market for

mobile broadband. At least 10MHz of 3G spectrum in the 2100MHz spectrum band is required

to deliver credible 3G services [13]. Moreover, if operators need to deliver 2Mbps speeds to their

subscribers, spectrum will need to be auctioned at affordable prices to enable affordable services.

It is likely that 4G LTE will only become important for specific segments that consume large

volumes of data.

AFFORDABILITY

Affordability is critical to mobile broadband

growth in India. Nowhere is this more apparent

than in smartphone pricing. Falling prices have

seen low-end smartphone manufacturers

gaining significant market share in recent years.

The current minimum price of high-end

smartphones is the equivalent of about USD

165, and that of low-end smartphones the

equivalent of about USD 652. These prices are

expected to continue to fall by 40-50 percent

over the next three years, driving the affordability

of such devices even further, which in turn

drives the overall affordability of 3G and its

uptake [14].

Figure 3 shows how smartphone affordability

and installed base are likely to evolve in India

over the coming decade or so.

APPLICATION COVERAGE

Network performance is critical both to user experience and to cost-efficient operation. Network

performance is enabled by low-frequency, large coverage area macro cells combined with high-

frequency small cells providing capacity in high-traffic areas. One key way of assessing the level

of user experience is the concept of application coverage.

The coverage area for any given app is relative to the level of network performance needed

for that app. App coverage describes an area with a high probability of experiencing sufficient

network performance to run a given app, such as video streaming or web browsing. Its usefulness

comes from the fact that smart devices and apps continually evolve and encompass newer

capabilities, and therefore require more network resources to provide a good user experience.

App coverage is an integrated view of mobile broadband network coverage, capacity and quality.

A successful approach involves understanding the requirements of the most popular apps,

and setting targets to deliver sufficient performance with a high probability that the most widely

used applications will perform well throughout the network coverage area. The targets should

then be regularly assessed and modified to accommodate new devices and apps.

Application coverage, and therefore user experience, is directly affected by the dimensioning

of the RAN. Important factors that determine dimensioning include radio technology, functionality,

device and application mix and, above all, the amount of spectrum available to the operator.

2013 2020 2013 2020

>650>700

11085 High-end smartphone

Low-end smartphone

Population able to afford asmartphone and a service (millions)

Installed base –smartphones (millions)

470

240

4565

3550

270

410

Figure 3: Affordability of smartphones

2 In this study, high-end smartphones have been defined as those with a minimum processor speed of 800MHz, screen size of 3.5 inches and an internal memory of 512MB, with

reasonable 3G internet experience.

BROADBAND IN INDIA: REALIZING THE VISION • CONCLUSION 8

ConclusionThere is huge pent-up demand for mobile broadband services in India. The Government of India’s

broadband penetration target of 600 million connections by 2020 can be achieved if sufficient

spectrum is made available in a timely way in globally harmonized bands.

Differentiation based on network performance can be directly linked to the expansion of

spectrum assets. Spectrum ownership becomes the key capacity determinant rather than

advances in spectral efficiency or growth in the number of base stations. This means Indian

operators will need to find new spectrum resources to meet demand after 2015. Regulators need

to ensure timely and transparent auctions, allocate larger spectrum blocks, promote spectrum

sharing, and focus on globally harmonized bands.

In addition to getting access to additional spectrum, operators will also need to address issues

around affordability of devices and services, and the provision of relevant local content. The

availability of sub-USD 50 handsets, an accelerated and streamlined spectrum allocation process,

differentiated 3G and 4G networks based on high speeds, attractive data packages, and good

user experience will be critical in driving demand in India.

Operators will need to make investments in their networks to service their growing subscriber

base by providing a superior data experience.

With all this in place, India’s mobile broadband industry can expect to see significant growth

both in terms of active SIMs and revenue between now and 2020, driven by growing 3G uptake

and 4G rollout on 700MHz and 1800MHz.

This is how the vision of connecting people, business and society, and of enabling a digital

India, can be realized.

References1. Government of India, National Telecom Policy 2012, accessed September 2014, available at:

http://www.dot.gov.in/sites/default/files/NTP-06.06.2012-final.pdf

2. Bharat Broadband Network Limited, accessed September 2014, available at: http://www.bbnl.nic.in/content/

3. Ericsson ConsumerLab Analytical Platform, India Country Study 2012-2014

4. Ericsson analysis

5. Ericsson ConsumerLab Analytical Platform, op. cit.





10. Ericsson, September 2014, White Paper, Heterogeneous networks – securing excellent mobile broadband user experience,

everywhere, available at: http://www.ericsson.com/news/140911-heterogeneous-networks-securing-excellent-mobile-broadband-

user-experience-everywhere_244099436_c?categoryFilter=white_papers_1270673222_c

11. Gartner, July 2014, Forecast: Communications Service Provider Operational Technology, Worldwide, 2Q14 Update, available at:

https://www.gartner.com/doc/2799018/forecast-analysis-communications-service-provider

12. Government of India, February 2014, Subject: Auction of 1800MHz and 900 MHz Spectrum: Update on Payment Methodology,

available at: http://www.dot.gov.in/sites/default/files/Final_results_and_Payment_Methodology_0.pdf



BROADBAND IN INDIA: REALIZING THE VISION • REFERENCES 9

BROADBAND IN INDIA: REALIZING THE VISION • GLOSSARY 10

GLOSSARYAPT Asia-Pacific Telecommunity

EBITDA earnings before interest, taxation, depreciation and amortization

NTP-2012 National Telecom Policy-2012

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