* BSNL will spend about Rs 3,000 crore on a nationwide WiMax network that is expected to cover close to a sixth of India?s population in three years.

* Tata Communications is investing Rs 2,000 crore to launch its WiMax network. Mega plans include a new brand name and a rollout in 115 cities by the year-end.

* Leading research firm, Gartner finds Indian market less attractive for carriers and warns of thin demand for WiMax connections here.

The disconnect is hard to miss. Why are telecom bigwigs willing to sink in mega-bucks in an untested technology in a less attractive market?

Hot action in the WiMax market seems to have completely missed the scepticism or even the hurdles like uncertainty over spectrum and high cost of equipment. India seems to be emerging the latest hotbed of technology that has ignited several debates globally, with Intel, Samsung and Sprint betting heavily on its success and Ericsson, Verizon and Qualcomm pitted against it.

Interestingly, original WiMax proponents including Sprint and Clearwire are busy sorting out their financial woes. And industry is already wondering if the real WiMax champions will come from Asia.

Indian telcos are wiring up to take broadband wireless. While BSNL and Tata?s plans are hitting global headlines and are being counted among the world?s largest WiMax rollouts, Reliance is also reported to be betting heavily on the technology. Bharti, which has already deployed WiMax for companies like Hero Honda, ITC, DLF and Cadila, is learnt to be evaluating the business case of rolling out WiMax on a big scale.

?India has an immense need for connectivity across a varied and wide-ranging demographic population,? BSNL chairman and managing director Kuldeep Goyal explains. ?Deficient broadband infrastructure, along with the growing demand and increasing ability to purchase internet services, is making India and other emerging countries as the best market for

WiMax,? agrees Shankar Prasad, president?retail broadband business unit, Tata Communications.

India is one of the most appropriate places to take wireless for broadband and the government seems to appreciate that. Government is pushing it too and has chosen the technology to bridge the connectivity divide with rural areas, where physical local network access is lacking. In phase one, the government will make investments to set up WiMax base stations in 1,000 blocks. After that, the Universal Service Obligatory fund will contribute to connect another 5,000 blocks. ?Mega bucks will flow in the next six months. The question is not if broadband will take off but whether we can afford any further delay in allotting WiMax spectrum and miss the broadband bus,? says Soma Networks India managing director, Jatinder Ahuja.

What makes analysts like Gartner so pessimistic then? Clearly, there are hurdles like low computer penetration, high equipment costs and uncertainty over spectrum, but it does not seem to dampen the enthusiasm in any way. Even Gartner seems to agree that WiMax is around the corner but it differs on how sharp that corner is. ?Near term, WiMax is still a niche technology and limited to enterprise and high-end residential users in urban India,? feels Gartner principal research analyst, Naresh Singh. Gartner forecasts that by the end of 2011, 6.9 million mobile and fixed WiMax connections will be in use. It goes to the extent of cautioning vendors that it is a gamble to participate in risk-sharing models with Indian operators.

Spectrum seems to be the biggest hurdle. Seven companies have been licensed to offer WiMax services in India, but in the 3.5 GHz band with a very narrow slot of 5 MHz each. ?We would require 15 to 20 MHz to rollout the network on a decent scale,? says Bharti vice-president (technology), TV Sriram. The government also plans to open up the more widely used 2.5 GHz band and give each service provider more frequency, but it would be at least a few months away.

WiMax or worldwide interoperability for microwave access, for starters, is a telecom technology that provides wireless data over long distances in a variety of ways. It exists in two flavours. Fixed WiMax, or the d version, is essentially the same as DSL or cable broadband internet.

It is simpler, quicker and more cost-effective to erect WiMax towers and antenna than to lay wire and is generally seen as the viable option to reach new places that don?t have good broadband connections. Mobile WiMax or e version allows for roaming between WiMax base stations and offer users a true mobile internet experience.

As the mobile frequencies will not be available in the short term, WiMax rollouts in India are not likely to be available in large scale before 2009. While fixed would be the starter, industry expects to realise the full potential with the mobile version.

India is not alone. World Economic Forum?s Global IT report says that developing countries are benefiting considerably from IT by ?leapfrogging? heritage technologies like copper wires in favour of technologies like WiMax. Ovum estimates 46% of WiMax users in 2011 will be located in Asia Pacific region, where wired infrastructure is poor or even non-existent. In Pakistan, for one, Wateen Telecom is rolling out the mobile WiMax network in 22 cities including Karachi, Lahore and Peshawar.

At its launch last year, it also staked claim on being the world?s largest with its CEO Tariq Malik saying, ?We are proud to be the largest and the first in the world to rollout a WiMax 802.16 e network in 22 cities.? Excitement seems to be spreading to Africa and Latin America too. Korea and Japan have been leading the WiMax deployments till now. KDDI, the Japanese operator, is yet to roll it out nationwide and Korea has its own version, called WiBRO. India has allotted 3.3 GHz frequency while the worldwide standard is 2.5 GHz, which means vendors will have to build special equipment for India. However, allotment in 3.3 GHz band is also on anvil.

This means that we might be among the first few to test WiMax on such a large scale. Cost and return equations are being hotly debated. ?Users don?t care whether you put up a WiMax or ADSL. If we are able to deliver a 256 kbps connection at Rs 500 per month, it should be good. Cost of equipment still hovers around $70 on a volume deal, compared to a $40 for ADSL,? opines Bharti?s Sriram.

Fierce competition is expected to bring the prices down. India?s service tariffs are among the lowest in the world. Indian users currently pay between $15 and $23 per month for unlimited usage of broadband services. However, the DoT is considering free broadband services. Gartner expects price for a WiMax 802.16-2004d solution at $30 per line in the near future.

The good news is that products for the mobile version are now making an appearance. After several postponements, WiMax Forum labs has started the certification tests from the end of 2007. From then to February 2008, 28 Wave 2 WiMax products in the 2.3 GHz and 2.5 GHz band have been sent to WiMax Forum labs for certification.

BSNL estimates an ARPU of $20 and expects 1,50,000 broadband subscribers to be added by the end of the year and three million during the next five year. Vendor financing business model used between BSNL and Soma may be reused in future deals, according to Gartner. It, however, warns of three types of financial risks in this model. First, an overoptimistic expectation of ARPU and market size may lead to low margin, and in extreme cases, to a vague ROI. Also, responsibility for holding inventory to roll out the service, and employment of a system installation and technical support team on an extended scale, may cause serious cash flow problems for vendors.

Thirdly, vendors, who do not have the financial capability to invest in resources, will have to get investment from the capital market. These activities will either dilute vendors? share, or increase its debt ratio and disturb the balance sheet (loaners usually charge a high return rate for risky projects. This will also eat into a vendor?s margin). Both may hurt the healthy growth of a company.

The solution sounds simple. Service providers need to establish a long-term vision with a competitive road map and end-user targets to be able to frame a ROI framework around content, quality of experience and quality of service convergence and security for 802.16 e-2005, 802.16-2004 and mobile broadband.

At the same time, competition with 3G would play a big role in deciding its fortune. Analysts believe that the timeline and bandwidth of 3G and WiMax licenses will heavily impact the future mobile broadband access market share between 3G and WiMax. The permission for mobility in the WiMax license will also influence the future of WiMax growth. Also, 3G seems to have, in comparison to WiMax, a better ecosystem in place.

Though the industry continues to debate its short-term market potential, it could turn out to a game changer in the long run. To being with, it is likely to be restricted to enterprise market and high-end residential users. As Gartner analysts point out, long term potential of the Indian WiMax market heavily relies on spectrum allocation, WiMax ecosystem maturity level and the timelines of WiMax and 3G licenses.