Several research firms and industry analysts had estimated the 3G subscriber base to reach 200 million-300 million by 2016. However, as of March 2012, the 3G user base was reported to have crossed only about 15-20 million. As has been observed in several other telecom markets worldwide, it takes two to three years for 3G technology to achieve mass adoption. This requires a comprehensive 3G ecosystem, which includes higher smartphone penetration, availability of content and applications, and improved network coverage by operators.

Moreover, the right mix of service quality, pricing and relevant content is crucial for higher uptake of these services. For instance, Japan witnessed the launch of 3G services about a decade ago, but it was only recently that these services achieved widespread adoption. This near-complete 3G penetration was made pos-sible through innovative data plans and relevant service offers by operators. In contrast, 3G penetration in China has been slow primarily on account of low consumer awareness about 3G applications. In Korea, though 3G penetration has reached nearly 90 per cent with government help, the country has not yet registered high data usage, mainly due to the lack of innovative applications. Korean operators have now started creating consumer-oriented services to increase data usage and revenues.

The Indian telecom market is still awaiting the technology leap which was promised when 3G services were launched in late 2010. This will only come about if Indian telecom companies work towards putting a comprehensive 3G ecosystem in place. So far, inadequate network coverage, lack of sufficient spectrum and the absence of a mass market and affordable 3G handsets have prevented these services from becoming a success in the country. Operators have not been able to demonstrate the relevance of this platform to customers. There are several issues and challenges that demand immediate attention to ensure smooth and speedy adoption of 3G services.

A look at the challenges that need to be addressed in order to drive 3G growth in the country...

Most of the 3G operators have patchy network coverage that forces consumers to switch between 2G and 3G networks continuously. This results in an inconsistent 3G experience while on the move. At present, service providers are busy expanding their 3G coverage across their licensed circles. The issue of patchy coverage can be resolved only when operators start providing denser coverage. Some of the challenges that operators face while scaling up their infrastructure for these services are high opex and providing last mile connectivity. For improving coverage, operators need to deploy more base stations, which translates into higher opex and capex. Laying cables across cities and villages to provide broadband is also an expensive and time-consuming process.

Since none of the players acquired a pan-Indian 3G licence during the spectrum auctions in 2010, operators initially launched services in only their respective licensed circles. While the operators had signed several roaming deals with one another to make their services available in all telecom circles, the Department of Telecommunications declared these agreements invalid. At present, the case is pending with the Telecom Disputes Settlement and Appellate Tribunal. Incumbent operators such as Bharti Airtel, Idea Cellular and Vodafone India may have to terminate these agreements, besides paying heavy penalties. Further, there is no possibility of another 3G auction in the near future, thus posing a challenge for operators looking to expand their 3G network.

Interestingly, most of the 3G spectrum allocated was initially used by operators to reduce their existing network congestion and accommodate voice calls. Faced with a severe spectrum crunch over the years, they saw 3G spectrum as a means to address this challenge.

Limited 3G device penetration in India has also restrained large sections of the target audience from experimenting with high-end data offerings. The affordability of 3G handsets is another issue. The devices need to be available at prices that encourage mass adoption of this technology. Currently, for a good 3G experience, customers have to depend on expensive high-end smartphones with multiple applications support. Though there are a few low-end smartphones with 3G support available in the market, these devices do not offer an optimal 3G experience. Industry analysts believe that 3G demand would spike once devices providing a satisfactory user experience are available at below Rs 5,000 price points. The battery life of 3G handsets is another area of concern. 3G applications use more battery life than voice calls and text messages. Thus, handset manufacturers need to ensure that their devices are equipped with longer battery life so that users can access high speed internet services at a stretch.

That said, it has been observed that consumers who invest in 3G handsets are not very keen on using these services. Besides patchy coverage, lack of a “killer” 3G application and dismal speed of services have disappointed users. There are very few applications that demand exclusive 3G bandwidth at present. Other than live cricket and a couple of games, there are no applications that would compel an average user to shift to 3G services.

Thus, innovation in the value-added service segment is a critical factor for higher 3G uptake. Users today need applications that would make them adopt 3G services even at higher prices. The lack of adequate content, especially in vernacular languages, has posed a major challenge.

Besides ecosystem development, the pricing of services is also crucial to the widespread adoption of the technology. Moreover, Indian operators have failed to generate significant revenues from 3G services as they have not been very aggressive in pricing these. Current 3G tariffs are very high as compared to GPRS/EDGE and hinder 3G uptake. Indian consumers are highly price sensitive and do not accept a new service unless it fits their budget.

Bundling handsets with data allowances and other free services is a new concept that has found its way into the Indian telecom scenario. This primarily offsets the high selling price of the device. Operators such as Bharti Airtel, Aircel and Reliance Communications have joined hands with device manufacturers to offer voice, SMS, and data bundle plans at tiered monthly rates.

A significant number of customer complaints relate to the 3G service experience being similar to EDGE and GPRS on 2G networks. This compelled users who initially activated the 3G facility to exit from it as there was little or no value addition for them. Further, operators have been emphasising the superior data download speeds that 3G offers, but have failed to provide ubiquitous access, which is far more important for a good user experience than network speed. There are several popular applications in the market that may not demand high speeds but require undisrupted connectivity.

Going forward

While there are several roadblocks that have prevented 3G services from reaching their expected uptake in India, most of them are short-term hiccups rather than long-term challenges. 3G roll-out case studies from across the world have shown that other countries too experienced a two to four-year time lag, before 3G service uptake reached satisfactory levels. According to industry analysts, India is currently in its gestation period with respect to 3G and will mature by 2014.

As mentioned earlier, service providers would need to improve their networks and devise new tariff schemes to attract consumers. Further, to provide undisrupted coverage, operators would need to invest in small cell deployments such as femtocells and picocells. Some operators like Tikona Digital Networks have already started providing WiMesh services that are complementary to 3G networks in sharing the data load.

Besides, operators would need to continuously innovate and look for new user-friendly applications to address subscriber needs. They must also give due consideration to the growing demands of the rural population, as this section will go a long way in boosting 3G numbers. Besides providing connectivity, it is essential to develop applications that will meet the needs of the rural populace.