3G Technology Adoption in India

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Neil Taskar| 61110056 | Indian School of Business | Class of 2011

Synopsis

With the 3G auction completed, the wait for the Indian consumer for 3G services is finally over. In
spite of all the hype surrounding 3G, it is not expected to have the same impact as voice services. In
the short term, 3G is expected to enhance the mobile-based internet usage experience and provide a
slew of infotainment based services targeted at the urban junta. Adoption of 3G as a pure “mobile
service” by the larger populace remains doubtful, though it may be the harbinger of increased
broadband penetration, something which has been on top of the government agenda.

Introduction

“What the car is to the American, the mobile phone is to the Indian” (anonymous). For the American
society, car ownership came to be associated with independence, freedom, and increased status
(Wikipedia). Similarly, the advent of mobile telephony in India in the mid-90s liberated the Indian
soul. The first phase of the mobile revolution in India, i.e. the 2G / 2.5G mobile services (essentially
voice) allowed Indians to do what they love doing most – talk. Several initiatives by the government
(CPP – Calling Party Pays) and the private sector (Reliance Infocomm’s Monsoon Hungama)
improved the affordability of mobile services for a large section of the population. At the crossroads
of its evolution, the Indian telecom sector is now poised to leap into its next phase of growth. If the
phase-1 was voice, then phase-2 is undoubtedly belongs to data.

Impact of 3G Mobile Services

The immediate impact of 3G is expected to be significant, though not of the same magnitude as that of
voice services. Incumbent technologies like GPRS and EDGE have whetted the appetite of the Indian
consumers for data based services. Till yesterday the consumer was happy just making voice calls;
today the consumer wants to do a lot more. The consumer now wants to be able to surf the internet at
high speeds, quickly pay utility bills, watch high quality streaming video of the latest cricket match
live, switch on the geyser from office etc. Due to its high cost, the increased consumption of data
services is expected to be initially limited to urban areas.

The real impact of 3G shall be felt in the long run. Increased adoption and hence economies of scale
will eventually lead to more affordable devices and services. Consequently, 3G will be able to usher
in an increased adoption of broadband and hence internet based services by the larger Indian
populace. It is well known that one of the biggest challenges that India faces today is the inequitable
distribution of wealth, a key reason for which is the inequitable distribution of knowledge. 3G and
hence broadband access can help eliminate this huge knowledge barrier, allowing Indians to improve
skills and education levels and hence improve their productivity and overall quality of life.

For a country with 1200 million people, India has a mobile penetration of nearly 50% and an
extremely poor broadband penetration of nearly 0.65% (recent TRAI reports). What these figures
actually reveal is that if affordable broadband services were made available on the mobile phone, it
could give a huge fillip to the overall broadband adoption by the Aam Aadmi (majority of the Indian
populace) and this is where 3G will make its biggest impact albeit in the long run.

Blockbuster Services a.k.a. The Killer Application

The one question that has been on the mind of anyone and everyone associated with the telecom space
– regulators, operators, equipment manufacturers, value added service providers etc has been “What
is that Blockbuster Service or Killer App that’s going to define the 3G landscape?” The answer,
surprisingly, is counter intuitive – broadly speaking, there is no single or defining Killer App.

To figure out this conundrum, think back to when broadband was first launched in India. We were
moving from a Neanderthal-esque age of inefficient and slow dial-up connections to an age of faster
and reliable broadband connections, essentially opening up a thicker pipe between the end-user and
the service provider. Did this advent of broadband really throw up any radically new services? No.
However, what did happen was that we started using mail more often, did more of song / video
downloads, were able to update our social networking statuses much faster, uploaded and shared our
pics almost instantly etc etc etc. So what broadband really did was improve the overall user
experience and hence drove increased usage of a lot of existing internet based services. Analogously,
3G will do to the mobile phones what broadband did to PCs, i.e. dramatically improve the end-user
experience of a lot of the existing services.

Having said so, there will be a few services that will be new to the Indian consumer; the adoption of
these services, however, depends on several factors which we shall examine later.

A. Existing Services that will see Increased Usage

a) Wireless Data Cards - One of the main reasons for poor consumer broadband penetration in
the country has been management of the “last mile”, which has predominantly been wired. With 3G
bringing a wireless “last mile” option, more and more consumers in urban and semi-urban India are
expected to avail the wireless broadband services.

b) Mobile Broadband - Probably the most telling impact of the adoption of 3G mobile services
in India is going to be on the increased use of internet based services via mobiles. The following three
areas will probably see the greatest surge in mobile-based internet traffic:
i. Social Networking Services – 3G is expected to give a boost to creation and sharing of User
Generated Content (UGC) via social networking sites. 3G devices and services shall together enable
the Point-Shoot-Upload (PSU) generation. A breathtaking Tendulkar “On-Drive” could make its way
to YouTube even before the Little Master readies himself to face the next delivery.
ii. Multimedia Services – Increase speed and convenience will increase usage of service such as
Video on Demand, Music Track Downloads and Mobile TV.
iii. Location-based Services – LBS applications such as traffic alerts, navigation tools, location
based advertising etc are expected to find more takers.

c) Machine-2-Machine Applications - Machine-to-Machine (M2M) refers to technologies that

allow wireless systems to communicate with other devices of the same ability (Wikipedia). This opens
up the field for a large number of telemetry-based applications such as Tele-Medicine, Intelligent
Transportation Systems, Remote Video Surveillance, Emergency Services etc. Till date, the weak link
in the telematics ecosystem has been the absence of a fast, efficient and reliable carrier of information.
With 3G, this ecosystem will now be strengthened and we could see an explosion of services in this
space. For e.g. an alarm of a breach of security at your house could be relayed to you / nearest police
station almost instantly and you could immediately switch to watching live video of the incident.

B. New Services

In earlier generation systems voice was transmitted over circuit switched connections (dedicated
connections) whereas data (and video) was transmitted over packet switched connections (shared
connections). 3G systems allow for transmission of video over dedicated circuit-switched connections
and this technological difference allows for radically new services, such as:

a) Video Telephony - The most basic service that 3G will provide is video telephony i.e. the
ability to see the person being spoken to. Mass adoption of this service depends on factors such as
price of service, availability of 3G-enabled ultra low cost handsets (ULCHs) and cultural issues.
While it may be a while before handset manufacturers are able to provide ULCHs in the price range
of 2G handsets, the bigger issue for the adoption of this service is whether Indians are culturally ready
to view the person being spoken to. Also, the pre-requisite for this service is that the called party must
also have a 3G-enabled handset and be on a 3G network. These factors will possibly lower the
adoption of this service. Though a novelty, this service is expected to find few takers.

b) Video Portals - Video Portal services are similar to Voice Portal services currently offered by
most telecom operators. This dial-in service allows users to access several infotainment services such
as local news, live astrology alerts, trailers of latest movies, music videos, educational videos etc.
Given the low literacy level in semi-urban and rural India, video portal based services are expected to
be more popular in such areas, subject to availability of vernacular content.