3G hype doesn`t meet ground reality

Updated: Jun 27, 2011, 14:26 PM IST

Siddharth Tak/Zee Research Group

Seven months into its much publicized launch in India, the 3G service in the country is yet to create any waves. Analysts say inadequate infrastructure, linear tariff models, and less than enthusiastic consumer experience threaten to derail the gen-next breakthrough in the Indian telecom story.

An independent 3G survey by Bangalore-based IT and Telecom consulting firm, Knowledgefaber suggested a modest uptake so far for the service.

Said Jayant Kholla, telecom practice leader at Knowldgefaber, “As per our estimates, as of mid-April there were three million to 3.5 million subscribers (voluntary 3G upgrades by users) as compared to 5 million to 6 million claimed by operators.”

This rather lowly figure assumes importance in the context of the estimated total number of 3G handsets in circulation in the country. “There are about 80mn to 100mn 3G enabled mobile handsets installed base in India.” 3G handsets have been available as early as 2005-06 in India.

Although there hasn`t been much change in the average selling price of 3G handsets post the launch of 3G services, about 65 3G enabled handset models have been launched in two quarters starting October 2010, as compared to about 50 in the two quarters leading up to October 2010, said Kholla at Knowledgefaber.

The ground situation on infrastructure hosting 3G is also said to be sparse. As per Knowledgefaber estimates, there were just over 40,000 3G base transceiver station (BTS) installed by end of March 2011 as compared to 3,50,000 2G BTSs pan India (all operators combined).There are close to 300,000 mobile towers (passive infrastructure) for supporting the existing 2G active infrastructure. The operators can potentially use the available tenancy on these towers to deploy their 3G antennas.

Indian carriers (especially incumbent carriers) currently face multiple structural challenges such as inadequate infrastructure and limited available spectrum (5MHz) to offer 3G enabled data optimized services at launch.

Also, carriers’ “walled garden” approach to value added services and prevalent piracy and Indian consumers’ lack of willingness to pay for such services pose a huge challenge for immediate uptake of 3G services, the study argued. However, once the 3G device prices decrease and the tariffs stabilize in the first two years, Knowledgefaber believes that the 3G uptake will rise in 2013 and reach over 90 million by March 2014.

Shobhit Agarwal, managing director, Protiviti Consulting said, “Key would to be keeping pricing low and have good customer experience – as there is no single killer application. Operators will continue to bundle and have aggressive pricing to induce people to try more and more of data services.”

Top operators like Bharti Airtel, Vodafone, Reliance and Tata Communications are offering various services including video based services, high definition gaming, high speed mobile internet browsing and app stores on their 3G networks.

Knowledgefaber cited poor end-user experience as the other reason for poor uptake. “Many consumers (early adopters) who have opted for 3G services offered by some of the leading carriers are facing issues with services and network coverage. A single block of 5MHz spectrum is insufficient to offer dedicated data & video services on 3G,”its study said.

“Video becoming more popular and as the base of customer using 3G expands, operators will have to keep innovating/optimizing as they have limited 3G spectrum – this would be an important factor to ensure good customer experience; if initial experience continues to be good, adoption will be accelerated which will help 3G realize its potential in India – a country with a significant unmet data demand,” Protiviti’s Agarwal added.

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