For India’s telecom sector, which has delivered tremendous growth in the last few years, the next quantum jump is expected to come from wireless broadband, conventionally known as 3G. In this context, the telecom committee of the Confederation of Indian Industry (CII) worked with the Yankee Group for a comprehensive discussion on how to enable wireless broadband and unleash a multitude of possible new services. We bring you the highlights of the Yankee Group presentation…
When it comes to enabling broadband in India, there’s good news and there’s bad news. The good news is that India’s mobile market is growing at an impressive rate with 5 million users being added every month and going by this growth rate, the country will overtake Japan to become the third largest mobile market in the world after China and the US in terms of size within two years.
At least 200,000 people will be 3G subscribers by the end of 2006 and 21.3 million will use 3G by 2010, making up 11 per cent of the total subscriber base.
Operators will also make a killing from 3G revenues. These revenues are expected to skyrocket from negligible until early 2007 to 23 per cent of overall revenues by 2010. Moreover, by that time, the average cost of 3G infrastructure will be comparable with the cost of installing base stations for today’s 2.5G and 2G technologies. This, too, will be welcome by operators, whose average per user revenues are skidding from $9.5 per month in 2004 to below $5 by 2008, since in low ARPU markets operators must deploy technology solutions that reduce capex and opex.
The bad news is that for 3G to be successfully deployed in India there are several issues to contend with, key among these being the unresolved spectrum problem. According to Farid Yunus, Yankee Group senior analyst for wireless/mobile, AsiaPacific, “The stumbling block for 3G in India is the regulatory ambiguity on spectrum.”
Recently, the future spectrum policy suggested allocations of additional blocks of 2.5 MHz and 1.25 MHz for GSM and CDMA operators respectively, based on raised subscriber criteria on a per circle basis.
According to Yunus, this is not an improvement on the existing policy as technology distinctions run contrary to international best practice and are against the principle of neutrality and universal service licensing.
Citing China’s example, he pointed out that 3G has not taken off in China because its spectrum allocation did not match the globally adopted 3G frequency.
Thus, for 3G to succeed in India, spectrum allocation should be according to need and not subscribers as this ignores congestion in certain towns where the total number of subscribers in the circle might not satisfy the criteria for additional spectrum. This problem should be resolved at the earliest as a capacity crunch will occur for both CDMA and GSM operators within a year.
A critical aspect that requires immediate attention is the facilitation of mobile network coverage in rural areas, as this is the main market now with urban areas having become saturated. About 35 per cent of the new cellular users in 2010 will be from the rural segment. Impressive plans have been announced and the government is planning to give several incentives to operators.
In addition to this, carrier costs need to be reduced. Government tariffs, for instance, are amongst the highest in the world. TRAI has given some recommendations which include subsidising rural mobile infrastructure rollout using USO funds, offering discounts on regulatory costs such as annual licence fees and spectrum charges, and encouraging network infrastructure sharing.
One more bottleneck in the transition to 3G is handset prices. Handsets are currently priced at over $50. They need to be in the range of $30-$50 for mass adoption. This would require a domestic manufacturing base, reduced taxation, improved distribution methods and harmonised frequency bands. There is also a need to educate consumers on how to get the most out of 3G applications.
3G services are likely to be adopted in India at a faster rate due to technological maturity (25 3G networks have been launched in the Asia-Pacific region alone), greater economies of scale and availability of low-cost devices. Voice will continue to be the main revenue driver in the Indian mobile market. Once 3G is allowed, data, both video and multimedia, is expected to account for 13 per cent of total service revenues in 2010.
Keeping in view that the country has managed only 1 million broadband users against the 3 million targeted to have been achieved by December 2005, there is a need to exploit 3G technologies to enhance the penetration of broadband access, particularly in the congested urban areas, as well as to make available the benefits of e-governance to the rural population. Thus, migration to 3G will augur well for both the industry as well as the consumers at large, thereby enabling the economy to achieve double-digit growth.
