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| Wanted: Killer applications for 3G service operators |
| Surajeet Das Gupta & Mansi Taneja / New Delhi Sep 09, 2010, 00:21 IST |
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Don’t hold your breath for tariff wars; the entertainment, business & commerce functions will blow you away.
Come December and the long-awaited 3G mobile revolution promising high-speed internet — nearly five times faster then what we are used to — will be right in your hands through mobile devices. And, the seven private telecom giants that were handed spectrum on September 1 are already on overdrive to kick off 3G operations, for which they have waited for over two years.
Together the telcos have forked out a staggering Rs 50,000 crore for 3G spectrum for three licences through a long drawn-out auction process. And they are topping it off by finalising equipment orders of over $6 billion to ready their networks. Remember, despite all this money being spent, none of the operators can boast a pan-India 3G operation, with Bharti getting 13 circles (out of 22) at the top of the pecking order.
| HOT SERVICES |
- Video telephony for those with 3G mobile phones that have a front camera
- Cash withdrawal from ATMs and shopping at stores that have digital readers
- Utility payments and banking services, especially in unbanked communities
- Three-dimensional displays, without the need for special viewing glasses
- Bar codes containing personal data that can be shared with others
- Automatically updated national and international news and weather forecasts
- Downloadable movies, music videos, games and sporting events
- Location-based services using GPS for navigation or to locate stores, among others
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But, how revolutionary will the tryst with 3G be for consumers, and how significant will it be for the future viability of telcos? While no one is prepared to officially give away their 3G strategy before launch, Business Standard pieced together the blueprint of the emerging 3G world.
The consensus among operators is that it will take four to five years before anyone sees at least one-fifth of the subscribers shifting to 3G. Vodafone-Essar, for instance, estimates that industry revenues from data — the key USP of 3G services is only 3 per cent (which does not include SMSes or caller tunes, which if added hauls the number up to 10-11 per cent ). The company estimates this share will go up to 20 per cent in five years.
Executives at Tata Telesevices (TTSL) believe the reason for the slow change is simple: only 3 per cent of current mobile consumers have a 3G-enabled phone, so the shift will not take place at one go. Their expectation is that about 20 per cent of the subscriber base (currently 650 million) will shift to 3G, but only in four to five years. That is also probably also when operators will break even, or recover their total investment.
US telecom giant Qualcomm, however, says the move towards 3G could be faster and that it all depends on how quickly device prices fall. 3G phones based on Qualcomm chipsets is already available at below Rs 5,000 (these phones offer speeds of 3.1 mbps) from companies like Micromax or MTNL. Says Qualcomm India CEO Kanwalinder Singh: “We expect prices to fall by another 25 per cent in the next two to three years as we bring down our costs. And, our expectation is that in many cities, 3G will face congestion within two to three years, as there is a large latent demand for data.”
Industry experts expect that with lower prices, at least 40 per cent of the incremental new subscribers (about 100-120 million annually), will for 3G-enabled phones rather than 2G by paying only a small premium. But the big mobile phone makers caution consumers. “3G is globally available for over nine years. So, you have phones based on old technology whose hardware cannot sustain more than 384 kbps of data speeds even though your operators offer speeds many times higher,” explains Pankaj Mohindroo, president of the Indian Cellular Association.
Also, many operators believe the bulk of 3G consumers might not come from mobile phones users at all, but from those who use data cards (or dongles) on their laptops — a market which they think will expand exponentially as more customers buy cheaper laptops or tablet PCs. GSM operators have been unable to offer dongles on EDGE or GPRS because they do not offer high speeds. As a result, most consumers use data cards that are on CDMA networks like a Tata Photon, which promises 3.1 mbps data speed.
“I think 60-70 per cent of 3G revenues will initially come from users of data cards, who will get speeds of 7.1 mbps, which is good for 99 per cent of applications on a laptop,” says a senior executive with a company that offers data cards and is in both GSM as well as CDMA. Qualcomm’s Singh says that even here, the price of dongles is falling and is already below Rs 2,500 — bringing more consumers into the fold.
Operators are clear on one thing: no one is in the mood for cut-throat tariff wars in the pricing of 3G services. After all, state-owned telcos BSNL and MTNL, which kick-started their services months ago, offer 3G services at rates that are cheaper than 2G, but have not picked up too many customers.
There is a rationale, of course, to why there won’t be tariff wars. Says a top executive of Reliance Communications, one of the leading telcos with both GSM as well as CDMA operations: “With operators paying huge amounts for 3G spectrum, compared with only Rs 1,450 crore for 2G, everyone has to look at viability and cannot afford such wars. Also remember, there are only four private players in each circle in 3G compared to 12-14 in 2G. So don’t expect a price war.”
To grow the market, consumers will be offered tariffs in which they pay per use and even according to the services they use most. Says Mahesh Uppal, telecom analyst: “3G services cannot be priced vastly different from 2G services, unless operators offer dramatically different applications from those available on the 2G platform. The high market entry cost cannot be passed on to customers of 3G. Any operator attempting to do so risks losing customers for the new service.”
Surely, the real challenge will be to increase data use, and that will need killer applications. The bottomline: how quickly operators can make the mobile phone a tool — not for voice calls —but straddling entertainment to business and commerce. That will also determine how much money they make.
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