With a wireless subscriber base of over 230 million and an exponentially growing market, the Indian telecom sector is gearing up for the rollout of 3G. 3G services are expected to be launched in 2008, and would mark yet another milestone in the growth path of the Indian telecom sector.
3G is an International Telecommunication Union (ITU) specification for the third generation of mobile communications technology. 3G provides larger bandwidth, higher voice capacity and faster download speeds, and supports a greater variety of products and services. The technology allows for high speed data transfers of up to 2 Mbps, 0compared to 10 kbps for 2G and 144 kbps for 2.5G.
The introduction of 3G technology in India will benefit consumers, operators and vendors. Consumers can avail themselves of voice, data and video facilities simultaneously, as 3G provides far higher speeds (up to 200 times more than the current speeds) and data throughputs. 3G networks will also play a key role in enabling high speed mobile broadband access at speeds ranging from 386 kbps to 2 Mbps.
Operators will benefit from the new revenue streams and the substantially higher average revenue per user (ARPU) that is likely to be generated with the introduction of 3G networks. For instance, in South Korea, the ARPU for 3G is more than twice that for 2G. Moreover, since a 3G network has the capacity to service a far higher number of users than comparable 2G networks, the 3G launch could resolve the problems of network congestion in saturated urban markets such as Delhi and Mumbai.
According to T.V. Ramachandran, director-general, Cellular Operators Association of India, “The higher voice capacity of 3G will help alleviate the spectrum crunch in urban areas and deliver satisfactory quality of service to Indian consumers. The higher data speeds of 3G will allow it to become the predominant platform for achieving the government’s broadband objectives and for facilitating key social initiatives such as e-education and telemedicine.”
Mobile operators in India are expected to invest approximately $6 billion to set up 3G networks. As a result, equipment vendors are already preparing for the expected boost in business. However, as interoperability is a key issue, vendors that offer a full suite of products are in a better position to capture these customers.
Leading mobile operators such as Bharat Sanchar Nigam Limited, Mahanagar Telephone Nigam Limited, Bharti and Vodafone Essar carried out 3G trials in October 2006, after the government provided low power spectrum in the 2.1 GHz band for carrying out trials. The spectrum, which was given for a period of one month to those who had applied for it under the National Frequency Allocation Plan, 2002, was used for interface checks on a non-commercial basis. The trial spectrum was 1/1000th of the actual 3G spectrum capability.
3G spectrum in India
According to the National Frequency Allocation Plan, 2002, the ITU-identified, globally harmonised 2.1 GHz band of 1920-1980 MHz paired with 2110-2170 MHz has been reserved for 3G services in India. A key advantage of this band is that it is technology neutral and will ensure a smooth evolution of both CDMA and GSM operators to 3G. The Telecom Regulatory Authority of India (TRAI) has also identified the 450 MHz and 800 MHz bands for 3G. However, the actual availability of these bands depends on them being vacated by the incumbent users, especially the defence ministry.
Meanwhile, the government has recently decided to release 3G spectrum in the 2.1 GHz band. 3G licences will be granted through an auction process in which telecom companies ?? existing operators, licence holders and new international players ?? can bid. Also, contrary to TRAI recommendations, foreign firms without a telecom licence have been allowed to bid for 3G spectrum subject to security clearance by the home ministry. This gives players like Verizon and AT&T an opportunity to enter the Indian market.
CDMA spectrum in the 800 MHz band for EV-DO applications would be treated separately from 2.1 GHz spectrum. If CDMA operators opt for the EV-DO carrier of 2×1.25 MHz, they would have to pay an amount proportionate to the highest bid for spectrum in the 2.1 GHz band.
According to Department of Telecommunications (DoT) estimates, 0-30 MHz of radio frequency will be available for 3G across different circles by April 2008, with Delhi being the only circle where 30 MHz of spectrum is expected to be vacated by the defence forces by April 2008.
Service providers would be required to pay 0.5 per cent of their aggregate gross revenue as a recurring annual spectrum charge, which is likely to be raised to 1 per cent after three years.
According to industry experts, CDMA operators will have an eightto nine-month headstart over GSM players in rolling out 3G services, as well as a significant price and technology advantage from the day of acquiring frequency. This is largely because CDMA players have been given the option to bid for 3G services on the 800 MHz spectrum that they already use. Moreover, fewer towers will be required for operations in the 800 MHz band vis-? -vis the 2100 MHz band, as the former has enhanced propagation characteristics. GSM players, on the other hand, have been allocated only 2.1 GHz spectrum for 3G, which requires installation of new equipment and software. This discrepancy has once again stoked the discord between GSM and CDMA operators. “The 800 MHz spectrum is far more valuable than 2.1 GHz because of its far higher propagation characteristics,” says Ramachandran.
VAS with 3G
With the introduction of 3G services in the country, additional value-added services (VAS) will be available to the public. Content will be the key to 3G adoption. Therefore, with the availability of better bandwidth and reliable high speed data transfer, quality transmission of TV channels, music download and video streaming are likely to be the killer applications.
With 3G networks, over 200 million mobile subscribers will access the internet for the first time. E-mail via mobile is expected to become an essential service. Gaming is another VAS that will witness a meteoric rise as feature-rich mobiles offer console-like gaming experience. The 3G networks will support greater interaction among different user groups. Multiple-user gaming, which has not gained momentum yet due to poor GPRS connectivity, is also expected to witness growth.
The demand for value-added services is currently greater in the urban markets, but with time, the rural and semi-urban markets will also offer tremendous growth for the VAS industry. Localised content such as video clips, mobile comics and mobile magazines in regional languages would provide entertainment services in various rural pockets.
E-learning and e-governance initiatives would meet a major need of the rural users, and would have a great appeal to the rural masses. Rural India can be served well with applications that provide access to knowledge centres, medical facilities, etc. For a rural user, these could translate into access to local weather reports, farming updates or medical and educational aids. Such content would help mobile operators open up the mostly untapped rural markets.
Qualcomm hopes that rural connectivity will come of age with 3G. According to Qualcomm officials, interactive learning that can be facilitated by video conferencing is likely to gain momentum.
Challenges
The road to 3G is new and there are many issues that need to be resolved. “A sudden, massive overnight migration to 3G may be unrealistic to expect,” says Sridhar Pai, chief executive officer, Tonse Telecom.
Globally, while Japan and South Korea have been the poster boys of 3G with over 50 per cent penetration, Europe and the US are still to witness extensive uptake of 3G. In the UK, 3G services were slow to take off and operators were saddled with debilitating debts having spent over ??22 billion for 3G spectrum.
Given the price-sensitive nature of the Indian market, pricing will play a key role in the uptake of 3G services. For instance, while 2G services were launched in the country in 1996, the market witnessed sizeable growth only after 2003 when call tariffs and the price of entry-level handsets were reduced drastically. Prior to that, the wireless subscriber base stood at just 13.86 million (as in March 2003).
For 3G to succeed in India, it will be crucial for the operators to price their services correctly and have a wide basket of services. In a market dominated overwhelmingly by voice-based revenue, wrong pricing for 3G services could lead to a lacklustre demand, resulting in the service failing to take off.
Moreover, according to research firm Ovum, migrating customers from an old technology to a new one is one of the biggest challenges for an operator. Customers’ interests and technology timetables are diverse, and people are not always keen to abandon their old networks. It is clear that issues related to pricing and the technical aspects of introducing 3G need to be ironed out to tap the full potential of the technology.
