The increasing demand for voice, video and data services in India has given rise to the need for 3G networks that are equipped to deliver these services at the requisite speed and desired quality. Industry associations, experts and service providers share their views on 3G market opportunities, the demand and the challenges…
What are the market opportunities for 3G technology?
Kunal Bajaj: There is immense potential for 3G in India. But operators need more spectrum before 3G can be launched. What that essentially boils down to is that whenever 3G is launched, it will give more capacity to the operator and better quality of service to the consumer. We also see 3G revenues growing rapidly in the first twothree years since it is targeted primarily at high-end users.
T.V. Ramachandran: The biggest market opportunity for 3G technology in India is low broadband penetration. Mobile phones are becoming the most effective medium for the delivery of broadband and differentiated services. 3G in India will provide the via media for meeting the broadband objectives of the government. 3G in India will not only fulfil the content-rich mobility experience increasingly demanded in the urban and metropolitan markets but will also prove extremely beneficial for the rural areas where the market is driven by affordability.
Another big opportunity for 3G in India would be content development. In the present scenario, a major part of the content used worldwide is being developed in India. We need to escalate these efforts for India. The introduction of 3G services in the country will also bring in much-needed foreign investment, cater to the demand for high speed data services in the urban markets and enhance India’s competitiveness in the BPO segment.
Ashok Sud: Worldwide, for most leading CDMA2000 operators (offering 3G services), mobile data (including SMS) accounts for 15 per cent or more of their total average monthly revenue, according to the CDMA Development Group. 3G will transform the mobile market in India. 3G ARPUs are likely to be much higher than the present revenues. An entire new economy will blossom once this comes into effect. It is estimated that globally, 3G mobile users will account for onethird of a 3 billion user wireless market by 2010.
Anil Tandon: 3G will come in first for voice. While data requirements will be there, it will clearly not be the driving force. 3G will most likely come in with HSPA. But given the current spectrum paucity, I do not think there will be separate spectrum allocated for HSPA. The carrier for WCDMA is 5 MHz and operators are likely to get only one carrier to run HSPA and 3G. However, there is still greater opportunity for voice.
Given the price-sensitive nature of the Indian market, would 3G technology be financially viable vis-a-vis 2G networks?
Kunal Bajaj: Price sensitivity in voice is definitely there but primarily at the bottom of the pyramid and not throughout the customer base. There is a substantial customer base of high-ARPU and high-end users, both corporate and personal users. Given that 3G will essentially be targeting these users, operators will be able to build financial viability as the ARPUs of these users would be high enough to justify the high price of 3G networks.
On the 3G side, while there is going to be substantial investment upfront, most features of 2G networks can be reused, requiring only a minor upgrade. This will reduce the operators’ rollout costs. Then, once the networks are in place the operator will have a ready base of users who are keen to transition to 3G and because they have higher willingness to pay, that network will become economically viable.
T.V. Ramachandran: In the case of GSM, the 3G network could be overlaid on the 2G network. Today, GSM constitutes 75 per cent of the total mobile market in the country and the operators have invested over Rs 750 billion in building this infrastructure. To provide GSM-based 3G services, the operators would need to upgrade their existing infrastructure. This would greatly help in offering reasonable prices to customers. Mobile operators are entitled to provide all types of access services, including 3G. Under the UASL, no separate licence would be required by operators to provide 3G services, which would mean no additional cost. These benefits would certainly be passed on to the customers.
It is seen worldwide that the uptake of 3G services has been many times more than the uptake of 2G services. Hence, faster growth of 3G services will also bring the benefits of economies of scale and help in the provisioning of affordable services. We have to learn from the experiences of the West. In Europe, it was the high price for 3G auctions that was responsible for the high cost/slow take-off of the service. While determining the principles for spectrum pricing, it is important to keep in mind the mobile objectives that are before the government and the industry.
Ashok Sud: I don’t agree with the statement that 3G is not financially viable vis-? -vis 2G. It is noteworthy that in Japan, voice and data services on 3G networks cost less than those on 2G networks. The promise of 3G goes beyond high data transfer speeds to significantly improved spectrum efficiency. A 3G network has the capacity to service a far higher number of users than comparable 2G networks. In saturated urban markets like Delhi and Mumbai, 3G could resolve the problems of network congestion to a significant extent for a service provider. Today, 3G has become a necessity.
Anil Tandon: Even if there is a higher price for these services, most operators will still roll out 3G networks. For instance, an operator will be able to save on 3G infrastructure costs by using the existing infrastructure as much as possible. Keeping that in mind, the overall rollout cost will not be as high as compared to 2G networks because while the telecom equipment cost will be higher, the infrastructure cost, by virtue of using the existing infrastructure, will be reduced. If the handset prices are high that may have an impact on the subscriber. But if we provide better speeds to them, the cost of the speed will be higher and people will have to pay for that.
How extensive is the anticipated demand for 3G services?
Kunal Bajaj: According to our research in June 2007, we were predicting a large demand in the beginning of 2008. We further predicted that there will be 34-35 million 3G subscribers by the end of 2010. There may be a little bit of a change in this figure, given that 3G spectrum has still not been released and 3G services are yet to be launched. At the same time, if these get delayed, a larger number of customers will be ready for 3G. So, the ramp-up will be pretty quick. A figure of 34-35 million three years later is still very reasonable.
T.V. Ramachandran: There is an important indirect indicator for anticipating huge demand for 3G in India. The number of Indians accessing the internet through the mobile is now over three times that of people using the PC to connect to the web. According to TRAI, India has 9.27 million internet subscribers as against 31.3 million users accessing the internet through mobiles. This means that one out of every five mobile users in the country connects to the internet through the mobile handset. With the introduction of 3G technology there would be an exponential growth in these numbers, helping the penetration of mobile broadband in the country.
Ashok Sud: The number of 3G subscribers in Asia is estimated to grow at more than 50 per cent annually to reach 178 million by the end of 2011, according to Frost & Sullivan Research. If 3G is introduced in China and India, given the huge populations and the advantages of economies of scale, it will account for much of this growth.
Anil Tandon: The choice of technology is generally irrelevant to the normal consumer. Internationally, some of the rollouts do not even mention that the service is 3G. The users have certain requirements for some services, be it voice or data applicAtions, and they want these services at adequate speeds. So they are mainly interested in the services part of it.
Typically, there are very few services today that 2G cannot provide. In fact, video conferencing is the only service that cannot be provided in 2G networks. In all other cases, whether it is streaming, downloading MMS, etc., it is only a matter of better user experience in 3G networks.
What services can the consumer expect with the launch of this technology?
Kunal Bajaj: Looking at the international experience, there is a tight integration of handsets, networks and applications ?? that integration is not available in 2G networks today. That could be one big difference between 2G and 3G. But the actual applications that will be available include track or movie downloads, which are not viable on a 2G network because of reduced speeds. Location-based services that include mapping and location identification would also be made possible. This does not mean that these services are possible only on 3G networks. However, when offered on 2G networks, the clips are either of low quality or, if the quality is good, the download takes very long. Therefore, the user has to spend more in order to download these clips.
T.V. Ramachandran: There will be a whole gamut of services available for consumers with the launch of 3G technology. These include e-education ?? live interactive educational classes; telemedicine ?? live interactive checkups and reporting; e-governance ?? online government applications; online local information about local rates for agri-products and weather conditions; entertainment services, live television, video conferencing, surveillance, etc. These services will enhance employment opportunities and improve the quality of life.
Various applications useful to the local population will also be developed to revitalise the rural economy by creating rural micro-enterprises. These enterprises could be in the areas of agriculture, food processing, animal husbandry, fisheries, sericulture, handicrafts, etc.
Ashok Sud: World over, 3G telecom services are redefining the telecom experience for millions of subscribers. The 3G subscriber base is expected to grow from 29.1 million in 2004 to 540 million in 2010, according to the Financial Times. By the end of this year, users may just be able to download their favourite video clip in a few seconds and a whole movie in a couple of minutes on their mobile phones with the power of 3G. The entertainment business is just a small fraction of the opportunities that 3G will open up. As a service provider what is exciting is that once 3G comes into effect it will lead to higher ARPUs, which will in turn empower us to increase investments in our businesses. 3G brings in a broadband pipe to the wireless device, thereby enabling launch of bandwidth-intensive services such as video streaming and mobile TV. Value-added services such as video-on-demand and video streaming would be on customers’ most favoured list when India embraces 3G.
The key application in 3G networks, especially in rural and semi-urban areas, will be basic broadband access. Next-generation technology can enable rollout of the following applications that are particularly relevant to the rural markets in India:
Anil Tandon: Primarily, 3G will give the user faster speeds. Although, theoretically, the speed may go up to 384 kbps, in commercial deployment the speed ranges from 120 kbps to 144 kbps. With HSPA, the user may get even higher speeds. But HSPA is usually meant for computer connectivity or the data card which is put in laptops. Other services include games, wallpapers, music, video streaming, etc. One service that is possible only with 3G networks is video conferencing, which is quite expensive.
What are the key issues and challenges in implementing 3G networks?
Kunal Bajaj: Besides spectrum and licencing issues I do not see any other challenge in the way of implementing or introducing 3G. The operators’ infrastructure is ready. The consumers are also getting ready for 3G as they are fed up with the existing quality of service and bad user experience which can be taken care of better through 3G networks.
T.V. Ramachandran: The two major challenges in the implementation of 3G would be:
Spectrum: As per the National Frequency Allocation Plan 2002 (NFAP2002), the ITU-identified globally harmonised 2.1 GHz band of 1920-1980 MHz paired with 2110-2170 MHz has been reserved for 3G services/applications. The most important advantage of this band is that it is technology neutral and will ensure harmonious evolution. The complete 60 MHz in the 2.1 GHz band would be required for the provisioning of 3G services. In this regard, the defence services need to cooperate and expeditiously vacate this spectrum for 3G services.
Handset availability: In a price-sensitive market like India, to make 3G technologies more affordable, low-cost handsets would be a prerequisite. Low-cost 3G handsets would also serve as an affordable mobile broadband device that would help in providing mobile broadband to the masses, especially in the rural areas.
Ashok Sud: By delaying the imminent rollout of 3G services, policy-makers are denying Indian businesses a crucial technological enabler to compete globally. It is ironical that a progressive and global economy like India is lagging behind its far more conservative neighbours in offering 3G services. A 3G network serves a far higher number of subscribers than a 2G network. It is ironical, therefore, that spectrum itself has emerged as the biggest roadblock to the introduction of 3G services in India. The operators are ready and waiting with their investments, but what is missing is spectrum allocation. Spectrum allocation is delayed because the government is waiting for the defence services to release a vital chunk of spectrum, which could then be allocated to telecom service providers for offering 3G services.
Anil Tandon: Technically, managing a 3G network is difficult because both high and low speed users coexist on the same network. This makes overall radio frequency planning a little complicated. The technical team would need more realistic estimates of the type of users on the network. For example, if the number of broadband users in a cellsite increases, it will take away the capacity from voice or from somewhere else. Otherwise it is like any other network that has to be planned.
On the core side in 3G, Release 4 architecture is used and this has already been introduced by us in 2G networks. But in the Release 4 architecture for a 3G network, instead of a standard mobile switching centre (MSC), an MSC server and a media gateway are used. This 3G architecture has already been incorporated into our 2G networks. So today, even in the 2G networks, all the operators are in the process of introducing this architecture. This means that, in a way, our MSCs today are capable of taking on 3G. Thus, from a core network point of view, we have already started moving towards the architecture that is required for 3G. In fact, if these are in place, what we need is only a little bit of hardware and software upgrade.
