Constant innovation in technology and the increasing need to stay connected have created a world that is communicating at an extraordinarily high speed. The growing need for communication services in India can be gauged from the fact that mobile phones have penetrated even the remotest of villages where there is no road connectivity and electricity.

Given this pace of growth and demand for mobile services, the launch of 3G services was long awaited in the country. The technology was commercially launched in Japan as early as 2001. Currently, 3G is being used in 132 countries in the world and 32 countries in Asia. According to the available data, 650 million people use 3G across the globe.

Though this late launch has deprived India of the 3G experience so far, it has, nevertheless, given operators an opportunity to capitalise on the global experience. Indian operators were able to use the technical expertise of vendors like Huawei, Nokia Siemens Networks and ZTE to roll out services in record time.

As India takes a leap with 3G technology, a plethora of opportunities are opening up for operators as well as consumers who can now explore endless applications of wireless internet through 3G. According to industry experts, by 2013, 6 per cent of the total 3G users worldwide will be from India. With the ARPUs of operators under pressure due to eroding voice tariffs, data services can provide the much-needed push to their revenues.

From a connectivity standpoint, 3G comes at an appropriate time, as both the government and industry are looking to boost internet usage in India, where broadband teledensity is still less than 1 per cent.

Though there are many positives attached with 3G, there are also some issues and challenges that need to be addressed to facilitate the smooth and speedy adoption of these services. Affordable availability of services, low-cost handsets and good quality of services are some of the key areas that need to be looked at for 3G services to be a success in India.

tele.net takes a look at some of the issues and opportunities related to 3G in India…

Opportunities 

With the current mobile subscriber base at over 800 million, second only to China, the time is ripe for 3G service uptakes in India. Going by the high adoption of 3G services in China and other Asian countries, the demand for 3G services in India is also expected to increase non-voice usage significantly. For operators who have been cash-strapped on account of falling ARPUs, 3G is expected to increase revenues.

Currently, the most important step for operators is to get users initiated into experiencing 3G. Once this is achieved, ARPUs will start increasing. Hence, greater collaboration is likely to take place amongst operators, handset and content developers, chipset manufacturers and players in other fields such as broadcast. This will give users compelling, differentiated, cost-effective applications and devices.

Initially, 3G is likely to take off in urban India. According to Frost & Sullivan, at least 20 per cent of metro subscribers are expected to shift to 3G in the first year of its launch. This will amount to 18 million subscribers, which forms 3 per cent of the current total mobile subscriber base. The fact that a significant proportion of the operators’ user base in metros and Category A circles has 3G-enabled devices will also lead to a quicker adoption of data usage.

The need to stay connected 24x7 has especially increased in the urban youth segment. This segment’s internet usage pattern has gone up significantly with the growing popularity of blogging and social networking sites like Twitter and Facebook. Moreover, with growing interest in amateur photography and videos, mobisodes is another concept that is likely to increase the uptake of 3G services.

Another segment that is expected to push up the demand for 3G services is corporate users, who already have BlackBerrys, i-phones and similar smartphones, and regularly access mail on their handsets. Moreover, a 3G-enabled handset can act as a server for accessing internet on PCs, laptops and tablets. Going by this trend, the enterprise data market is expected to grow at 30-35 per cent.

Currently, internet browsing and VAS account for 10 per cent of the monthly expenditure of elite subscribers. Frost & Sullivan projects that an increase in data usage on account of 3G service uptake could translate into an increase of around 5 per cent in data ARPU. This usage may further increase if popular internet applications such as mobile gaming, mobile TV and videoconferencing pick up significantly.

3G can also open up new avenues in the mobile banking, e-commerce and e-transactions segments. The larger screen sizes of 3G handsets enhance and simplify the customer interface for such services. Further monetisation of the mobile industry can take place through mobile advertising. Mobile operators can benefit from this model by deciding what part to play in the advertisement value chain. Given the reach of mobile phones, the advertisement industry can be a significant revenue generator going forward.

3G can also provide a major boost to location-based services in the country. Globally, users are constantly using location-based services to identify the nearest restaurant or store offering the best deals. In India too, malls and shopping centres are already offering day-to-day deals through SMSs. With 3G, this can be taken to the next level with mobile applications offering suggestions on what to do in a certain neighbourhood or city. Operators can capitalise on such services by charging a percentage of the transaction carried out by a customer who was routed to the store through such services.

As mobile phones penetrate Category C circles and remote areas, 3G services will have the potential to enhance the welfare and well-being of the rural populace. Distance education and medical diagnoses through videoconferencing is one such example that could go a long way in improving the rural sector.

If marketed right, 3G has the potential to cater to several rural interests. It can help provide information and technological know-how to farmers, give them meteorological updates and list prevalent grain prices. It can also help to empower rural women by educating them about their social rights, and providing health-related advice and first-aid information.

Challenges 

Though the prospects of 3G are immense, a lot of effort is required to be put in by the operators to speed up adoption and keep the early customers’ interest in the services alive.

A recent Nielson survey on 3G says that only one in five urban mobile subscribers in India will adopt 3G services in the short term, and it may take up to 10 years before the majority of mobile users are on the 3G platform. The study also reveals that reducing prices to drive 3G adoption may not necessarily be the best decision to grow the 3G business. Both the relevance of the content and quality of service will play a major role in how 3G pans out for the Indian telecom industry. With a multilingual and multicultural audience, providing the relevant content will be extremely difficult. Also, educating users about the technology as well as providing a good initial consumer experience are important.

The global launch of 3G services also shows that having the relevant content and right marketing strategies in place are vital for the uptake of these services. In Japan, for instance, 3G services were made available about a decade ago, in 2001. However, it wasn’t until recently that operators could get consumers to adopt 3G fully. Japan achieved near-complete 3G penetration through innovative data plans and relevant services. In contrast, 3G penetration in China has been sluggish due to low consumer education on what 3G can do. The Korean market too, despite achieving nearly 90 per cent 3G penetration with government help, has still not managed to register high data usage. Korean operators have now begun to create services more relevant to consumers for increasing revenues from data usage.

There are some key issues at the operators’ end as well. 3G is deployed further down in the frequency band as compared to 2G, and hence, the wavelength of the signal transmitted through this technology is reduced. This limits 3G’s area of coverage. Poor coverage and “3G holes” (zero coverage in certain pockets) are prompting customers to switch from 3G to 2G, which causes dissatisfaction. Also, 3G applications need to take care of 2G and 3G switchovers, so that the customer experience is not marred.

Therefore, operators need to deploy more base stations to meet coverage and capacity requirements. This would also imply an increase in their capex and opex. Laying cables across cities and villages to provide broadband for all is a time-consuming and expensive process. All this will add to the costs already incurred on procuring 3G spectrum.

Operators are also looking at 3G as a potential revenue source. However, consumers are price conscious and will, therefore, not accept a new service that does not fit their budget.

The affordability of 3G handsets is another issue. For a good experience, customers need to use high-end smartphones with larger screens and multiple application support that come at high prices. Low-end smartphones that support 3G are not able to provide the desired experience. Even though smartphone prices are expected to come down, this will take some time.

The battery life of 3G handsets is another area of concern. 3G applications use  much more battery life than voice calls and text messages. Handset manufacturers need to ensure a long battery life for users to spend hours at a stretch accessing internet services without running out of battery. 

Finally, when the operators who won BWA licences roll out services, 3G will have to compete with technologies like Wi-Max and LTE. Although the internet speed with 3G will be higher than 2G, one cannot discount the fact that the technology will be competing with much faster broadband services. Globally, 3G was introduced much before wireless broadband. But in India, 3G and BWA may emerge as rival services.