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Laggard looks for second wind in mobile tech race

Some experts bet CDMA may even thrive because of rising demand for high-speed wireless data services
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First Published: Mon, Jan 07 2013. 05 39 PM IST
At the end of the June quarter, India had 102.24 million CDMA subscribers in India, down from 105.11 million in the preceding quarter. Photo: Hemant Mishra/Mint
At the end of the June quarter, India had 102.24 million CDMA subscribers in India, down from 105.11 million in the preceding quarter. Photo: Hemant Mishra/Mint
Updated: Tue, Jan 08 2013. 01 04 AM IST
New Delhi: When Tata Teleservices Ltd and Videocon Industries Ltd pulled out of the auction of CDMA spectrum in November, leaving no takers for the radiowaves, it seemed like curtains for the mobile phone technology platform 10 years after its advent in what has today become the world’s second largest wireless market.
Yet, some technology experts are betting CDMA, an acronym for code division multiple access, will find a second wind and may even thrive because of an expected explosion in demand for high-speed wireless data services in a country where the rival GSM, or global system for mobile communications, standard is now favoured by nine out of 10 users.
Tata Teleservices and Videocon were the only two operators in the race for CDMA spectrum in last month’s auction. After putting in their applications, both withdrew from the sale citing a lack of business case for bidding, forcing the government to abort the auction it had expected to generate Rs.10,000 crore of revenue.
“The facts speak for themselves. The fact is that there were no bidders for spectrum in the 800 megahertz (MHz) band that was kept for the CDMA operators,” said Rajan Mathews, director general of Cellular Operators Association of India (COAI), the main lobby group for GSM operators in the country. “That’s why we have made a presentation to the government to harmonize this spectrum and allow the GSM operators to bid for it and offer extended GSM or e-GSM.”
It has been a no contest so far.
At the end of the June quarter, India had 102.24 million CDMA subscribers, down from 105.11 million in the preceding quarter, according to the Telecom Regulatory Authority of India’s (Trai’s) latest quarterly report. This number is likely to drop below 100 million at the end of the December quarter, say telecom analysts.
GSM-based users, at 831.86 million in June, account for almost 90% of the total 934.1 million mobile subscribers in India.
CDMA services pale even in terms of revenue from subscribers. Monthly average revenue per user, a key metric of profitability, for CDMA subscribers was Rs.74.90 in the June quarter, against Rs.95 for GSM users, Trai’s report shows. Another metric, minutes of usage, was at 228.6 a month for the average CDMA subscriber in the June quarter, against 346 minutes per GSM user.
Anil Ambani’s Reliance Communications Ltd (R-Com) is the largest CDMA mobile operator in the country, with 56.73 million subscribers for the technology at end-June, according to Trai. Including GSM users, the telco had 154.6 million subscribers.
The other key CDMA operators in the country are Tata Teleservices, Sistema Shyam TeleServices Ltd that operates under the MTS brand, and state-run Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd.

Blunted tech edge

R-Com made CMDA popular and affordable in India when it launched its service in December 2002, touting the technology to be superior to the GSM standard used by Bharti Airtel Ltd, Vodafone India Ltd and Idea Cellular Ltd.
Even Matthews of COAI concedes that CDMA is superior.
“CDMA, in terms of efficiency, is no doubt the better technology, which is why it commands a premium,” he said. “But for a technology to succeed, there have to be the economies of scale and development of an ecosystem for it. There was a lack of CDMA handsets and even the equipment needed to operate the technology was more expensive due to the lack of economies of scale.”
This superiority was based on the fact that CDMA was developed to enable more efficient packing of information in a specified amount of spectrum. As a side-effect, CDMA allowed for more efficient wireless data transfers than GSM. The technology enabled packing of more users in the same amount of spectrum.
“It was this reason (spectrum efficiency) why the telecom policy gave 2.5MHz of CDMA as start-up spectrum, as compared to 5MHz start-up for the GSM operators,” an executive heading the regulatory division at one of the CDMA operators said.
But data usage wasn’t as prominent in India a decade ago as today. So though CDMA had an additional unique selling point in data technology, in India, only voice subscriber addition was incentivized, thereby not allowing the platform to prove its superiority.
“An operator would get additional spectrum based on the number of voice customers, so the telecom operators went after voice subscribers. The CDMA operators were not able to leverage the data capabilities of the technology against the older established GSM players,” the executive said.
According to the prevailing policy at the time—called subscriber linked criteria—a telco became eligible for additional spectrum based on it adding a certain number of customers. “There was no incentive to sell data at the time,” an executive with a telecom technology vendor said, requesting anonymity.
This policy has been scrapped since, with the government opting to auction spectrum instead to discover a market price.
Another problem with CDMA was a lack of handsets, especially after leading phone makers Nokia and Sony Ericsson stopped making CDMA phones a few years ago.
Besides, the technology did not allow users to easily change their handsets the way a GSM subscriber could. CDMA handsets came with the SIM cards locked in, making it difficult for users to upgrade to newer, feature-rich devices. CDMA operators began offering open market handsets, but that didn’t help reverse the trend of dwindling CDMA users.

Staying relevant

So R-Com and Tata Teleservices secured dual spectrum licences that allowed them to sell GSM-based mobile connections as well. The industry’s diminished interest in CDMA for basic services was evident even before last month’s auction.
When then communications minister A. Raja was to allocate telecom spectrum in January 2008, there were hundreds of applications for GSM spectrum and only one, from Sistema Shyam, for the CDMA band. The allocations were cancelled by the Supreme Court in February on grounds that the process was flawed.
But while CDMA as a technology for basic voice telephony may be on its last legs in India, its evolution along with the huge pent-up demand for wireless data is ensuring the platform remains relevant, with the advent of third-generation (3G) mobile phone spectrum that makes for faster data downloads.
Mobile data traffic in India rose 54% between December 2011 and June 2012, according to a report in August by telecom equipment vendor Nokia Siemens Networks. The report also said while Indian 2G users were consuming three-quarters of the total mobile data traffic, the average 3G user was consuming four times more data than 2G users. At this pace, Nokia Siemens Networks expects India’s mobile data consumption to double by June 2013.
The numbers of 3G subscriber connections in India are forecast to reach 400 million within four years, representing almost 30% of the country’s total, according to a study by Wireless Intelligence, a data analytics company.
The increase in data use plays out in the latest earnings results of telcos. Bharti Airtel, India’s largest telco by subscribers and revenue, saw a 26% increase in data traffic on its networks in the first six months of this fiscal year (April-September). Idea Cellular reported a 20% sequential increase in data traffic in the June quarter. Both operators reported a significant increase in 3G subscribers.
Several telcos offer high-speed wireless data services that are powered by an enhanced CDMA technology.
R-Com, Tata Teleservices and MTS sell dongles or data cards that enable high-speed data usage through a laptop or computer terminal. These data cards use a technology called EVDO (evolution-data optimized), which is essentially an enhanced version of CDMA.
R-Com and Tata Teleservices did not respond to email questionnaires for the story.
Interestingly, all the operators that won 3G spectrum in the 2010 auction are rolling out 3G services using a technology called HSPA+, or evolved high-speed packet access technology, which has its origins in CDMA via WCDMA (wideband code division multiple access).
“GSM hit an inflection point and could not evolve further while CDMA was able to become much bigger,” the executive from the technology vendor cited above said, adding that due to India’s delayed adoption of 3G technology, operators were able to jump straight to HSPA+.

Premature death knell

The study by Wireless Intelligence says that more than 80% of 3G connections will be based on WCDMA in five years, and the remaining 20% on CDMA-based 3G networks.
“It is fair to say that CDMA as a technology continues to hold a lot of promise. However, there is also no denying the fact that the technology also does need regulatory support,” said a spokesperson for Systema Shyam. “In the end, it is also in the interests of the consumers that they have access to both the competing telecom technologies, i.e. CDMA and GSM.”
Sensing an opportunity after the auction for 800MHz band was scrapped, Bharti, Vodafone and Idea last week wrote to communications minister Kapil Sibal suggesting that GSM operators be allowed to bid for the unsold 800MHz spectrum to be able to offer what’s known as extended GSM. This would allow operators to use spectrum in the 800MHz or 3G band after it is harmonized to the 900MHz band that is currently used for GSM operations. The 800MHz spectrum, once harmonized, can be used to offer 3G and 4G LTE services.
“CDMA is going through a difficult time right now. There are challenges in terms of a poorer global ecosystem, and limited spectrum availability in the Indian context (20 MHz, compared with 100 MHz in 900 and 1800 bands for GSM),” said Ashok Sud, secretary general of the Association of Unified Telecom Service Providers of India, the primary lobby group for CDMA operators.
But “CDMA operators may yet have an opportunity if they can leverage the data capabilities of the technology while continuing to provide high quality voice to their prime customers,” he added. “Hence, it may be a little premature to ring the death knell for CDMA.”
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First Published: Mon, Jan 07 2013. 05 39 PM IST
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