3G: Late, Pricey, and Almost Here

And so the India market for mobile devices and apps will change by 2011.

We'll also finally have a reason to buy iPhones and iPads and their competitors

and clones.

Here's to the teamwork between the ICT, Finance and Defence ministries, for

holding back Indian telecom by a halfdecade.

I remember talking to an impressed Western audience seven years ago about our

mobile usage. We already had SMS services, including m-banking, ahead of the

global curve. US users were not into mobile messaging; the BlackBerry had just

begun to take off in its present form. But then came 3G and the iPhone, and that

market changed forever. In a more recent talk to a US B-school group, the

questions I faced were mostly about why India did not have 3G yet.

It will be end-2010 before 3G services roll out in India. Oh yes, 3G has been

around. BSNL and MTNL got a special deal and started offering 3G over a year

ago, a last-ditch effort at monopoly protectionism in a competitive market- but

got few users. And CDMA operators have been selling 3G data cards since

end-2009.

After over 30 days and 180 rounds of bidding, the government closed the

auction with nearly Rs 70,000 crore in license fees. No one took up a pan-India

license, with the base price for that license being nearly matched by the final

bid price for Delhi alone. The big three, Airtel, Vodafone and Reliance picked

up many of the slots, but Aircel and Idea picked up more circles than Airtel

(though the latter took the top five circles).

Prasanto K Roy (pkr@cybermedia.co.in) isChief Editor of CyberMedia'sICT Publications

The revenue is staggering. A stroke of government genius, poised to wipe out

a tenth of our fiscal deficit? Well. That's a short-sighted view. Operators are

going to be hard pressed to recover the money, while keeping services

affordable.

Affordable mobile data services and high quality mobile voice would have

given a big boost to industry and economy, employment, tax collections. The

finance ministry has taken the easy way out-take the money upfront. This is not

unlike what hotels in India did by overpricing phone calls (and then wi-fi),

forcing customers to use alternatives. Remember the goose that laid the golden

eggs?

India's telcos are innovative: they show profits in the world's lowest

revenue regime while facing cost pressures like diesel genset backup for

thousands of towers. But this is no cakewalk. Apart from the 3G fees, they have

to worry about the premium to pay for the 2G spectrum they own in excess of 6.25

MHz. The pressure to recover will be very high, though they have some years to

do so (this will be booked as capex). Nine-tenths of India's600 million mobile

users are low-revenue and prepaid. From the rest, operators have to somehow

recover over Rs 10,000 per customer for just the license fees.

So do expect some initial overpricing of 3G data services. That could be

India's second 3G market fiasco, the first being the BSNL-MTNL 3G offering since

2009. I hope this does not happen. I hope our operators come up with innovative

ways to launch affordable data services--and raise the quality of voice service,

while keeping it affordable.