Why 3G did not pick up and what needs to be done

Ashim Roy, country manager, Stoke Networks

BANGALORE, INDIA: My experience with India has been that the country works on some norms followed by various groups:

1. Government: When it comes to terrorist activity, corruption at the highest levels or safety and security of ordinary citizen, Government's approach is Inaction. However, when it comes to business regulation, Government goes into overdrive has multiple agencies dealing with each industry. End result is often contradictory, confusing and irrational regulation that stymies business opportunities and growth.

2. Private Industry: Private industry, in general, works on the principle of taking a course of action to get business started. As and when it becomes necessary due to regulatory challenges, consumer action or business needs, it makes course correction.

3. Citizen: Helped by social media and other forms of communications, citizen gets into frenzy over some issue and within week or two the frenzy subsides and life is back to normal. Citizen frenzy related to any business activity is often a result of agenda driven by some political party. Citizen often gets the short end of the stick in such issues or disputes as the political master derives most of the benefit.

Deployment of 3G services in India has not followed the norms outlined above. Key Problems facing 3G Services in India are to due to regulatory confusion that has led to inaction on the part of the operators to improve the services. Without investment the services cannot improve and without improvement in services 3G uptake will continue to be lackluster.

Problems:

1. 2G Vs 3G Services: While the 2G-service uptake in India has been phenomenal, the same did not happen for 3G-service. It should be noted that in India, the voice and SMS are biggest part of the end user need today. There is no change in voice and SMS service, if one migrates from 2G to 3G. In fact, the quality of service degrades because of lack of radio infrastructure for 3G as compared to 2G.

2. Data Service: Primary advantage of 3G over 2G is the enhanced data services. The data services are more popular among the younger generation living in urban centers. For 3G to succeed in India, the data service must be more reliable. Unfortunately, even within the urban centers, there are many locations where the data service cannot be accessed.

3. Roaming: Because of Government's diktat on roaming, it is not possible to get 3G services from the same service provider throughout the nation (No nationwide roaming). For frequent travellers across Telecom circle boundaries, 3G is useless because of lack of data services while roaming. If the regulation related to roaming was clarified by the DoT and TRAI before the spectrum auction took place, it is quite likely that many of the operators would have been very cautious when they were bidding for the spectrum. Roaming regulation is by far the biggest challenge facing deployment today.

4. ARPU: In a low ARPU country like India, it is an uphill battle to sell data services. Operators need to create attractive packages for consumers in tier-2/3 markets such that subscribers are exposed to the benefits of the data services. Once consumers get to see what else is possible, 3G uptake would increase.

5. Handsets: High priced smart phones have deterred most 2G subscribers to switch over to 3G. In many other countries, handsets are made available at lower price in exchange of service contracts. These and other approaches to bring down initial investment by the subscriber are needed to ensure increased demand.

6. Infrastructure: Even in the major urban centers, access to 3G network can be difficult at times because of the number of towers deployed by the operators. Unless service is reliably available, many subscribers will sit on the fence and not switch over from 2G to 3G.

7. Managed Services: Managed services model helped many of the operators to keep initial cost of deployment to a minimum. Equipment vendors traded CAPEX with OPEX to win the business. Equipment vendors had expected that 3G services would be as successful as 2G services and signed up for revenue sharing arrangement with the operators. However, with low subscriber uptake, equipment vendors are still waiting to see the payday. It is unlikely that new deployments would be based on the older managed services agreements. It is fair to say that the cost of new deployment would be very high and bulk of this cost would have to be borne by the operators.

Potential Solutions:

1. Roaming Regulation: Government needs to address the roaming issue immediately. There is precedence for changes in regulatory position the Government takes. For instance, recently the implementation of GAAR provision has been delayed by 3 years. For GAAR, there was significant pressure from businesses inside and outside the country to make the changes and Government realized that all FDI discussions would come to a standstill, it they did not make the course correction.

However, in case of 3G, it is only the operators inside of the country who are pushing for a change. Government has already collected the spectrum licensing fee and is not dependent upon success or failure of 3G services. Without changes in roaming policy, operators are not going to make further investment in 3G infrastructure and uptake would remain slow.

2. Supreme Court: A more drastic measure would be for the Supreme Court (the only functioning part of the Government in India) to recall the spectrum license and hold new auction to give nationwide license to the operators.