Wireless Wireless Local Loop in Emerging Markets
Total Page:16
File Type:pdf, Size:1020Kb
Section VI: Wireless Wireless Local Loop in Emerging Markets Nicole Baker Research Associate, Wireless Advisory Service Pyramid Research/The Economist Intelligence Unit This essay discusses the marketplace for wireless local loop Wireless Local Loop Market Overview (WLL) in broad terms. It begins with an overview of wireless local loop in emerging regions and then explains some of the Pyramid Research defines WLL as a system that connects sub- obstacles to wireless local loop uptake that have become ap- scribers to the public switched telephone network (PSTN) parent over the last year or so. Next, it provides case studies, using radio signals as a substitute for copper wire for all or one from Hungary and one from Argentina, and concludes part of the connection between the subscriber and the switch with an outlook for wireless local loop. (see Figure 1). This definition includes cordless access systems, proprietary fixed radio access, and fixed cellular systems. FIGURE 1 Wireless Local Loop Architecture As Figure 2 shows, wireless local loop is being deployed in every major emerging market region around the world. Several typical deployment patterns for wireless local loop have developed. In the first, competing operators use WLL to provide services quickly in order to compete with entrenched players. This is the case for Atlantic Telecommunications, Ltd. in the United Kingdom, which is using wireless local loop to establish subscribers quickly to compete with British Telecom, Cabletel, United Artists, and Mercury. Elsewhere, emerging firms are using wireless local loop as a tool to meet license requirements and service targets established by regu- latory authorities. This is the case, for example, for PT Asia West in Indonesia, which the government has required to in- stall 500,000 new main lines over three years. The company is FIGURE 2 WLL Deployment Plans 1998 ANNUAL R EVIEW OF C OMMUNICATIONS ■ 817 W IRELESS FIGURE 3 TABLE 1 WLL Subscribers, Contracted vs. Installed WLL Uptake Hamstrung by Regulators using wireless local loop for 97,000 of these lines. Wireless local loop is also being used in some cases to provide afford- able rural service. In Hungary, Matav uses wireless local loop Despite wireless local loop’s potential to provide a low-cost for this purpose, and in Russia, Tatincom uses wireless local alternative to copper, deployment has been slow. As Figure 3 loop as a hybrid fixed mobile service for its subscribers. indicates, a wide disparity exists between the number of sub- Finally, wireless local loop can be used to provide service for scribers contracted and the number of subscribers actually in- small business applications. stalled in the top nine emerging wireless local loop markets as of year-end 1996. In total, emerging markets by the end of Wireless local loop has been a buzzword in the industry for 1996 had less than 1 million installed subscribers. the last couple of years. Regulatory authorities, operators, and vendors are all interested in wireless local loop because it has Obstacles to WLL Uptake the potential to provide faster network build-out than is cur- rently possible with copper solutions, and at a lower cost. There are several reasons for wireless local loop’s slow up- WLL has the potential to fulfill rural needs where copper take. Delayed licensing, spectrum allocation, and pricing lines would be too difficult or costly to install. Also, WLL en- have dampened wireless local loop rollout in virtually every ables competition. With WLL, new operators can build net- major emerging market. Of these reasons, spectrum allocation works quickly in competition with entrenched providers. is the single most important. Wireless local loop’s success de- Finally, wireless local loop offers flexibility: The system can pends on efficient use of scarce frequencies, adequate alloca- be expanded as demand grows, and wireless local loop sys- tion of frequencies by regulatory authorities, and tems can be moved from one area to another as copper-wire compatibility with a wide range of standards. Wireless ser- solutions become available. vices are gobbling spectrum, and how regulatory authorities choose to allocate this resource will have a significant impact FIGURE 4 WLL Pricing Based on Selected Contracts 818 ■ 1998 ANNUAL R EVIEW OF C OMMUNICATIONS N ICOLE BAKER on start-up cost, network expansion, and the level of competi- FIGURE 5 tion. Spectrum allocation is likely to differ significantly from Wll Subscribers by Standard country to country depending on objectives. Regulatory issues have held up wireless local loop uptake in some of the biggest potential markets, as regulatory authori- ties continue to struggle over how to define wireless local loop services, license operators, and allocate frequencies. In Mexico, for example, the regulatory authority has dragged its feet on frequency allocation for wireless local loop, delaying network rollout indefinitely (see Table 1). Mexico opened local services to competition during 1997, and operators such as Telinor are planning extensive wireless local loop rollout to compete with the former entrenched monopoly, TELMEX. In India, repeated delays have stalled plans to license operators by the Department of Telecommunications in twenty-one re- gional circles, pushing network build-out plans well into 1997 and possibly beyond. Although China’s MPT has yet to adopt a national standard, local and provincial authorities have de- ployed the first pilot wireless local loop systems. However, widespread acceptance still hinges on the MPT’s decision. Figure 4 helps explain the pricing obstacles to WLL uptake. It markets. Analog cellular wireless local loop systems are shows wireless local loop pricing based on contracts awarded probably the least expensive. However, voice quality suf- between 1990 and 1997. Although a growing number of wire- fers, and less capacity is available on these systems. Their less local loop contracts are coming in below $600 per line, the best use is for hybrid fixed/mobile applications. Proprietary average still ranges between $800 and $1,200 per line, which systems are more flexible in terms of the spectrum they can is a competitive—although not a compelling—alternative to use, and they promise faster data rates. However, these sys- copper. Many of the most aggressive plans for wireless local tems are unproven and cannot offer mobility. Their best use loop hinge on attaining price points of around $500 per line. is for newly licensed operators in competition with incum- Such prices have made wireless local loop attractive to opera- bent carriers. Finally, cordless access systems provide a low- tors such as Matav in Hungary and Entel in Uruguay, which cost, low-power solution, and they promise faster data rates. have made significant wireless local loop procurement deci- However, cordless access systems cover smaller cell radii sions in recent years. However, pricing at that level has re- and are, therefore, best used in dense urban settings and for mained elusive for most other carriers. hybrid fixed/mobile applications. Wireless local loop uses a wide array of standards (see Wireless local loop also has been held up because it does not Figure 5). No single wireless local loop product adequately typically offer quality of service equivalent to copper-line. addresses the broad range of applications, performance Voice quality continues to be an issue, particularly for analog specifications, and population densities typical of emerging cellular-based systems. Also, most commercial implementa- TABLE 2 MATAV (Hungary) 1998 ANNUAL R EVIEW OF C OMMUNICATIONS ■ 819 W IRELESS TABLE 3 TASA (Argentina) tions provide data speeds of only 9.6 kbps. However, expensive than a copper solution. The need for rapid deploy- some of the digital and proprietary systems are address- ment was another key factor in Matav’s selection of wireless ing these issues and making improvements to voice quality local loop. Matav is required to provide a certain number of and data rates. lines, and the company uses wireless local loop for 40 percent of them. Case Studies Standards. The standard Matav chose was an analog wireless Pyramid Research interviewed several wireless local loop local loop system, which was the best standard available in operators to determine the reasons they selected WLL, the the 890B897.5 MHz and 935B942.5 MHz bands that it was as- standards they chose, how they chose a vendor, how well signed for wireless local loop. the system has performed since installation, and, finally, fu- ture deployment plans. This section will look at the re- Vendor Selection. Matav held a competitive tender in 1995 sponses from Matav in Hungary and TASA in Argentina as and tested systems from Ericsson, Nokia, and Motorola. case examples. Nokia was eliminated from contention due to the high price of its wireless local loop system in comparison with Ericsson Hungary and Motorola. Motorola subsequently won the contract for Matav, the former state-run monopoly provider in Hungary, offering a better price and a faster deployment schedule was privatized in December 1993 and Magyarcom, a consor- than Ericsson. tium of Deutsche Telecom and Ameritech, now owns 67 per- cent. In 1995, Matav transferred 18 of its 54 primary districts Performance. According to Matav, the Motorola system pro- to private companies that will provide local telephony in their vides acceptable voice quality, although it is not equivalent to respective concession areas. Matav, Deltav, Hungartel, and copper. Matav’s wireless local loop network provides fax PapaTel all currently provide wireless local loop systems, and transmission at 9.6 kbps and data transmission at 7.2 kbps. the country’s cellular operators are not permitted to provide these services (see Table 2). Future Deployment. Looking to the future, Matav has begun evaluating code division multiple access (CDMA) wireless Deployment Status. In June 1995, Matav awarded a $100 local loop. The company wants a system that will be able to million contract to Motorola for the installation of 200,000 provide integrated services digital network (ISDN) and high lines of analog WLL.