2009

Future of 3G in Indian Telecom sector

GROUP - 7 IBS PUNE 7/8/2009

Contents
Telecom Industry "#$or Pl#yers &'#t (s !G) E*olut(on +rom 2G to !G GS" e*olut(on to !G &'#t ,(ll !G me#n to users) -e#tures o+ *#r(ous ser*(ces /o, (s !G d(++erent +rom 2G #nd 0G) 1(m(t#t(ons o+ 2G /o, !G ,or2s) T'e 3d*#nt#4es o+ !G Tec'nolo4y USER BENE-ITS OPER3TOR BENE-ITS 3N5 Gu(del(nes +or !G Ser*(ces6 Issues o+ !G 7urrent st#tus #nd Im8#ct o+ !G (n Ind(# Roll-out str#te4(es "#r2et o88ortun(ty Gett(n4 su:scr(:ers on t'e !G :#nd,#4on !G 388l(c#t(ons (n your l(+e; -uture o+ !G &'(c' com8#n(es '#*e #88l(ed +or !G l(cense) &'#t (s t'e 8r(c(n4 (ssue (n Ind(#) &'#t #:out t'e secur(ty (n # !G net,or2) &'ere ,#s !G s8ectrum +(rst (ntroduced) "E5I3 /OUSE BENE-ITS ! % % 7 8 9 .0 .0 .. .. .2 .! .! .0 .0 .9 .% .7 .7 .8 20 20 2. 2. 2.

1oo2(n4 3'e#d;

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BSN1 #nd "TN1 #re *ery d(++erently 8l#ced (n com8#r(son to ot'er 8r(*#te 8l#yers It (s not yet 2no,n ,'en !G #uct(ons ,(ll '#88en #nd ,'(c' com8#n(es ,(ll :e (n t'e s8ectrum run &(t' # 'u4e #mount o+ (n*estment only to #c<u(re l(cense= # lot o+ ot'er costs ,ould :e (n*ol*ed ,'en (t comes to net,or2 :u(ld(n4 #nd (m8lement#t(on 22 5(s8ute o*er +ore(4n Telecom com8#n(es /o, ,(ll !G 8ol(cy un+old) 20 29

Telecom Industry
Objective: Future of 3G Technology in Indian Telecom Sector. The Indian telecommunications industry is one of the fastest growing in the world and India is rojected to become the second largest telecom mar!et globally by "#$#.India added $$3."%
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million new customers in "##&' the largest globally. In fact' in ( ril "##&' India had already overta!en the )S as the second largest wireless mar!et. To ut this growth into ers ective' the country*s cellular base witnessed close to +# er cent growth in "##&' with an average ,.+ million customers added every month. (ccording to the Telecom -egulatory (uthority of India .T-(I/' the total number of tele hone connections .mobile as well as fi0ed/ had touched 3&+ million as of 1ecember "##&' ta!ing the telecom enetration to over 33 er cent. This means that one out of every three Indians has a tele hone connection' and telecom com anies e0 ect this ace of growth to continue in "##, as well. The overall cellular services revenue in India is rojected to grow at a 2(G- of $& er cent from "##&3"#$" to e0ceed )S4 35 billion. 2ellular mar!et enetration will rise to %#.5 er cent from $,.& er cent in "##5. The Indian telecommunications industry is on a growth trajectory with the GS6 o erators adding a record ,.3 million new subscribers in 7anuary "##,' ta!ing the total user base to "%5.+ million' according to the data released by 2O(I. India is the fourth largest telecom mar!et in (sia after 2hina' 7a an and South 8orea. The Indian telecom networ! is the eighth largest in the world and the second largest among emerging economies. (t current levels' telecom intensiveness of Indian economy measured as the ratio of telecom revenues to G19 is ".$ ercent as com ared with over ".& ercent in develo ed economies. Indian telecom sector has undergone a major rocess of transformation through significant olicy reforms. The reforms began in $,&#s with telecom e:ui ment manufacturing being o ened for rivate sector and were later followed by ;ational Telecom 9olicy .;T9/ in $,,< and ;T9=$,,,.

9olicy reforms can be broadly classified in three distinct hases3

>The 1ecade of $,&#=s saw rivate sector being allowed in telecommunications e:ui ment manufacturing. 6ahanagar Tele hone ;igam ?imited .6T;?/ and @idesh Sanchar ;igam ?imited .@S;?/ were formed and a Telecom 2ommission was set u to give focus to telecommunications olicy formation.

>In $,,#s' telecommunications sector also benefited from the general o ening u of the economy. ;T9 $,,< was the first attem t to give a com rehensive roadma for the Indian telecommunications sector. (vailability of tele hones on demand .targeted by $,,5/ )niversal service covering all villages and one 92O er +## ersons in urban areas at the earliest .targeted to be achieved by $,,5/ Telecom services at affordable and reasonable rices Aorld standard :uality of services

>;T9 $,,, brought in the third generations of reforms in the Indian telecommunications sector. India is one of the fastest growing telecom mar!ets in the world with an addition of more than % million connections er month. F1I inflow in Indian Telecom sector is the highest among all sectors. It is emerging as telecom manufacturing hub. Bear "##5 was declared as >Bear of Croadband> in India.

It is rojected that the industry will generate revenues worth )S4 <3 billion in "##,3$#. -ural India had 5%.%+ million fi0ed and Aireless in ?ocal ?oo .A??/ connections and ++$'#%< @illage 9ublic Tele hones .@9T/ as on Se tember "##&. Therefore' ," er cent of the villages in India have been covered by the @9Ts. The target of &# million rural connections by "#$# is li!ely to be met during "##& itself. )niversal Service Obligation .)SO/ subsidy su ort scheme is also being used for sharing wireless infrastructure in rural areas with around $&'### towers by "#$#. The Indian rural mar!et is going to be the ne0t big thing for wireless telecom roviders. Aith the tele3density in rural areas being still about $# er cent against the national average of about "$ er cent' there seems to be huge unta ed otential for mobile hone enetration in rural India. The government also lans an investment of )S4 " billion' during "##& to "##,' for the develo ment of around $##'### community service centers in rural India to rovide broadband connectivity. (dditionally' by "#$#' the government targets:

&# million rural connections 6obile coverage of ,# er cent geogra hical area Internet 9rotocol Television .I9T@/ in %## towns Duadru ling manufacture Two3fold increase in telecom e:ui ment -E1 from the current level of $+ er cent.

Major Players
There are three ty es of layers in telecom services: F 3State owned com anies .CS;? and 6T;?/ F 39rivate Indian owned com anies .-eliance Infocomm' Tata Teleservices'/ F 3Foreign invested com anies .Gutchison3Hssar' Charti Tele3@entures' Hscotel' Idea 2ellular' C9? 6obile' S ice 2ommunications/ 6ar!et Shares of 8ey India 6obile O erators' "##&

What is 3G?
3G .Third Generation/ is the latest wireless technology. It is also !nown as )6TS .)niversal 6obile Telecommunications System/' an im rovement over "G .Second Generation/ roviding wireless access to the data and information to the users from anywhere and anytime. It is the latest mobile technology and in fact it is described by 2ellular ."##</ as being a generic name for the most of mobile technologies. 3G cellular hones were first launched in 7a an in October "##$. This 3G hone was designed so users would be able to surf the Internet' view ictures of the eo le they are tal!ing to' watch movies and listen to music on their handsets .

International 6obile Telecommunications3"### .I6T3"###/' better !nown as 3G or 3rd Generation' is a family of standards for wireless communications defined by the International Telecommunication )nion' which includes GS6 H1GH' )6TS' and 216("### as well as 1H2T and Ai6(I. Services include wide3area wireless voice tele hone' video calls' and wireless data' all in a mobile environment. 2om ared to "G and ".+G services' 3G allows simultaneous use of s eech and data services and higher data rates .u to $<.< 6bitJs on the downlin! and +.& 6bitJs on the u lin! with GS9(K/. Thus' 3G networ!s enable networ! o erators to offer users a wider range of more advanced services while achieving greater networ! ca acity through im roved s ectral efficiency. 6obile tele hony allowed us to tal! on the move. The internet turned raw data into hel ful services that eo le found easy to use. ;ow' these two technologies are converging to create third generation mobile services. In sim le terms' third generation .3G/ services combine high s eed mobile access with Internet 9rotocol .I9/3based services. Cut this doesn*t just mean fast mobile connection to the world wide web. -ather' whole new ways to communicate' access information' conduct business' learn and be entertained 3 liberated from slow' cumbersome e:ui ment and immovable oints of access. It will enhance and e0tend mobility in many areas of our lives.

Evolution from 2G to 3G

GSM evolution to 3G

What will 3G mean to users?

>6obility> will be offered with many services that we currently regard as >fi0ed> L indeed' 6obile o erators believes that mobility will become the norm for many communication services. Ae*ll be able to ma!e video calls to the office and surf the internet' or lay interactive games with friends at home 3 wherever we may be. Cut 3G is not just about a lications that re:uire high s eed data rates. It*s about convenience and s eed of access. There are various technology comes under various forms of services li!e under $G its (69S' "G its 216(' T16(' GS6' 912 E 3G its A3216(' 216(3"###'T13S216( TH2G;O?OGB $G (69S "G 216( T16( GS6 912 3G A3216( 216(3 "### T13 S216( (dvanced 6obile 9hone Service 2ode 1ivision 6ulti le (ccess Time 1ivision 6ulti le (ccess Global System for 6obile 2ommunications 9ersonal digital cellular Aide3band 2ode 1ivision 6ulti le (ccess Cased on the Interim Standard3,+ 216( standard Time3division synchronous code3 division multi le3access FH(T)-HS 3(nalog voice service 3 ;o data service 3 1igital voice service 3 ,.%8 to $<.<8 bitJsec. 3 216(' T16( and 912 offer one3 way data transmissions only 3 Hnhanced calling features li!e caller I1 3 ;o always3on data connection 3 Su erior voice :uality 3 ) to "6 bitJsec. always3on data 3 Croadband data services li!e video and multimedia 3 Hnhanced roaming

Features of various services

Services "G Features S eed Time to 1ownload 36in 6 3 song 9hone 2alls' @oice 6ail' -eceive Sim le Hmail 6essages $#!bJsec 9hone callsJfa0 3 @oice mail 3SendJreceive large email messages 3 Aeb browsings %<3$<<!bJsec ;avigationJma s 3 ;ew u dates

3$3 <$ 6in

".+G

%3,min

3G

9hone callsJfa0 3 Global roaming 3 SendJreceive large email messages 3 Gigh3s eed Aeb ;avigationJma s @ideoconferencing $<<!bJsec3"mbJsec $$sec3$.+min 3 T@ streaming 3 Hlectronic agenda meeting reminder.

How is 3G different from 2G and G?

Ahile "G stands for second3generation wireless tele hone technology' $G networ!s used are analog' "G networ!s are digital and 3G .third3generation/ technology is used to enhance mobile hone standards. 3G hel s to simultaneously transfer both voice data .a tele hone call/ and non3voice data .such as downloading information' e0changing e3mail' and instant messaging. The highlight of 3G is video tele hony. <G technology stands to be the future standard of wireless devices.

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!imitations of 2G
1esigned mainly for tele hony a 2ircuit3switched Gigh CH- .Cit Hrror -ate/ ?ow data bit rate .M $<.<!b s/ Too many standards globally GS6' 216(' 912' 9GS etc. lication

How 3G wor"s?

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The #dvanta$es of 3G Technolo$y

9erform all those functions that they erform at resent with their mobile devices but at much higher s eed than before. 9rovides them with faster connectivity' faster internet access' and music entertainment with im roved :uality. 2an avail the benefits of video calling. 2larity is better and the facility can be enjoyed as long as both of are using the 3G technology. (ccess any site on the Internet by using your hone as a modem for com uter or la to and mail the im ortant documents. 1ownloading games and songs is much faster with this technology 2an be also used for favorite search engines to find information on news headlines' get information about the evening weather. 9rovide with the data transmission s eed of u to "6b s when the users are using the hone on stationary mode. 9rovides significantly faster data transfer rates of connectivity and increased networ!ing and most im ortantly the resistance to noise. Increased the bit rate thus enabling the service roviders to rovide high s eed internet facilities' increased call volumes and host of the multimedia a lications to their customers. (ll these services can be rovided to the customers on the basis of the amount of data they transmit and not on the time for which they use the service thus ma!ing the services chea er. Ceneficiary to the service roviders as well as the intermediaries li!e the content roviders and the media houses who are loo!ing for an additional latform mar!et their roducts. Casically it holds three way benefits to all the arties involved. Im roved erformance over "G' including:
Aill ease s ectrum constraints on the "G networ!s and accommodate

subscriber growth
Aill im rove data o

ortunities as s ectrum constraints are a major barrier to ado tion and usageN Indian consumers already own c"m 3G devices 3G s ectrum will allow incumbents to differentiate services from new entrants and regional layers Im roved ca acity Im roved coverage' enabling migration from a "G de loyment. ( high degree of service fle0ibility' including:

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 Su ort of a wide range of services with ma0imum bit rates above " 6b s and the ossibility for multi le arallel services on one connectionN ( fast and efficient ac!et3access scheme.

( high degree of o erator fle0ibility' including: Su ort of asynchronous inter3base3station o erationN

Hfficient su ort of different de loyment scenarios' including hierarchical cell structure and hot3s ot scenariosN Su ort of evolutionary technologies such as ada tive antenna arrays and multi3user detection.

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Guidelines for 3G &ervices

The 3G .3rd generation/ mobile telecommunications is the generic name for the ne0t generation of mobile networ!s that will combine wireless mobile technology with high data rate transmission ca abilities. The 3G networ!s will be ca able of roviding higher data rates and will also be ca able of su orting a variety of services such as high3 resolution video and multimedia services in addition to voice' fa0 and conventional data services. 3G s ectrum will be ermitted in the ".$ GGO band. The 3G licenses would be granted through a controlled' simultaneous ascending e3 auction' by a s ecialiOed agency to ensure trans arency in the selection rocess. Cesides the initial' one time s ectrum charge' it has been decided that the successful service rovider would ay additional s ectrum charge of #.+ P of their total (djusted Gross -evenue .(G-/' as the recurring annual s ectrum charge. This additional revenue share is ro osed to be $P of (G- after 3 years from the date of s ectrum assignment. The roll out re:uirements' including rural roll3out' as well as stiff enalties for non com liance of the same has been sti ulated. 6ergers will not be allowed during the initial five years. ;o tradingJ reselling of s ectrum is allowed. The 216( s ectrum in &## 6GO band for H@31O a lications would be treated se arately from ".$ GGO s ectrum. If the 216( based service rovider.s/ as! for the H@31O carrier of " 0 $."+ 6GO' they would have to ay an amount ro ortionate to the highest bid for s ectrum in ".$ GGO band.

Issues of 3G
(lthough 3G was successfully introduced to users across the world' some issues are debated by 3G roviders and users:
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H0 ensive in ut fees for the 3G service licenses in some jurisdictions 1ifferences in licensing terms between states ?evel of debt incurred by some telecommunication com anies' which ma!es investment in 3G difficult ?ac! of state su ort for financially troubled o erators

2ost of 3G hones ?ac! of coverage in some areas Gigh rices for 3G in some countries 1emand for high s eed services in a hand3held device Cattery life of 3G hones

.urrent status and Im/act of 3G in India

The success of 3G is going to de end on demand for su erior :uality voice services and data heavy' media rich content. The initial ricing has been on the higher side and it will have to dro if mass ado tion is to ensue. S ectrum olicy in India has been the victim of slow decision3ma!ing' which has left the country lagging behind many others. The delay in auction over three years has de rived Indian subscribers of the benefits of high3 s eed mobile data services available to over 3## million subscribers residing in over $"+ countries with significant concentration around the (mericas' Huro e' and South Hast (sian countries. This is also an o ortunity for Indian software com anies to join hands with service roviders to develo a lications that will meet the needs of the Indian mobile user. (t a later stage' these could be rolled out into other emerging mar!ets.. 3G in India is initially e0 ected to rovide additional s ectrum for voice services. This would ave the way for data usage on mobile hones. This is vital as o erators are focusing on customer ac:uisition as well as Qstic!y offerings* to revent churn. 3G enables better @(S services due to the higher levels of bandwidth that it can accommodate. The technology is e0 ected to drive data card ado tion. 2urrently' Tata Indicom and -eliance are the only layers in the data card segment. Aith more layers coming into the mar!et' sales are e0 ected to boom with com etitive rices and attractive schemes.

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9oor broadband enetration' a large unta ed rural mar!et' and the challenge of roviding high bandwidth in rural areas using landlines are all factors favoring a 3G rollout. Aith 3G' networ! o erators can offer wireless broadband services. 6oreover' many o erators are starved of s ectrum and as 3G offers four to five times the voice ca acity of "G s ectrum' it is a cost3 effective tool to deliver voice. Services beyond voice and te0t can be offeredN 3G offers a latform which can offer true multimedia services. The technology will be critical for o erators in enabling the differentiation of their service ortfolio' by roviding a far richer service e0 erience than is currently availableR articularly in the de loyment of audio3visual services. The fundamental driver for 3G in India is to serve the country*s demand for broadband services. From a technological oint of view' in areas where no fi0ed3line infrastructure e0ists' de loying a mobile networ! is much chea er and it can be rolled out a lot faster than wired infrastructure. (evenue from 0alue added &ervices

.2000 .0000 8000 %000 0000 2000 0

..09% 7292 9000 27.2 .792 2009 200% 2007 2008 2009 20.0 !708

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(oll1out strate$ies
Starting in February "##,' CS;? and 6T;?Rthe state3run o erators who were re3awarded 3G licensesRhave rolled out 3G services in 5# .CS;?/ and two .6T;?/ cities nationwide res ectively. The rivate telecom o erators are in the rocess of lanning their 3G networ! infrastructure and awaiting final a roval from the 1OT auction to start rolling out their networ!sN they are ready to go fully o erational within si0 months of s ectrum allocation. 1es ite the hy e around 3G' 6T;? and CS;? have attracted a few thousand subscribers for these services. ?ac! of attractive a lications and content' the high monthly charges and the antici ation of rivate layers entering the 3G arena soon are the li!ely reasons for the low u ta!e of 3G services. 6eanwhile' Frost E Sullivan estimates that the number of 3G subscribers will be around 53& million by the end of FB "##,3$#. In the first year of 3G o erations' the o erators are e0 ecting 3G subscribers to ay about five times the current "J".+G tariffs. 3G3enabled handsets and data modems for la to s are also li!ely
.%

to be e0 ensive. This is a stee increase and will target only niche demogra hics' but in the coming three3four years the o erators will see higher subscriber volumes and better o erational efficiencies and conse:uently the rices will dro to attract a wider audience. The challenge for o erators will be to offer wide coverage .including roaming/' high :uality service and attractive content in the initial years to sustain high3 aying subscribers long enough to reach the ti ing oint of growth.

Mar"et o//ortunity
(ccording to the Federation of Indian 2hambers of 2ommerce and Industry .FI22I/' in India' the 3G subscriber base is e0 ected to hit ,# million by "#$3' accounting for $"P of the overall wireless user base. Cy "#$3' 3G service revenues are e0 ected to generate 4$+.& billion' accounting for a share of <%P in overall wireless service revenue. 1ue to the +"P contribution made by the re lacement mar!et' annual sales of 3G devices are rojected to reach &$.3 million by "#$3. There will also be an increase in the share of non3voice services' including data card access' and short messaging service. The (verage -evenue 9er )ser .(-9)/ from these services will rise from the resent ,P to nearly "3P. 3G would be initially de loyed as a voice technology. The (-9) is not e0 ected to rise significantly in the initial years. The overall im act on (-9) will be determined by ricingJbundling strategies that o erators ado t. In some mar!ets' where 3G services have already been rovided' o erators have ado ted a enetration ricing strategy' aimed at building a strong base of 3G users by ricing 3G services attractively. Indian mobile o erators already generate significant revenues from non3S6S data services and 3G will see new' e0citing data services available to the Indian ublic. It*s worth noting that India already has a dynamic mobile content industry. Gowever' some e0 erts thin! that a art from data cards' there are no other !iller a lications in mobile data services. In the enter rise' e3mail may be a major driver for this mar!et. (s far as retail is concerned' video streaming could be a driver. This de ends u on the ricing of video cli s and the download s eeds that 3G can guarantee. 3G services are at a nascent hase with only state owned com anies offering 3G services in limited oc!etsRso real rice cuts cannot be seen

Gettin$ su2scri2ers on the 3G 2andwa$on

In urban regions' telecom carriers are facing declining service :uality and decreasing margins er minute. Aith ,P of the subscribers contributing <+P of carriers* margins and ",P of
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revenues' 3G will certainly enable the carriers to transfer high (-9) customers to the congestion3free 3G networ!. ( combination of better services' innovative a lications' and smart handset bundling cou led with right ricing can attract a large base of users to 3G. Cesides' many Indian customers already have 3G3enabled devices. These eo le will be the first movers. In order for the customers to !now and get the feel of 3G' 6T;? is initially offering a trial ac! for $+ days. The customer can get a first hand feel of e0actly what 3G is all about. They can e0 erience the service' and 6T;? is sure that after getting the feel of the same the customers would not li!e to go bac! to "J".+G data services. To im rove overall service e0 erience' o erators will need to allocate s ectrum for 3G to rovide im roved voice services. Gowever' this is unli!ely to im act the ability to rovide richer @(S services. The eventual cost of de loying 3G networ!s may deter o erators from rolling out 3G networ!s to the entire e0isting customer base' meaning that some segments will not have immediate access to 3G. The cost of de loying the networ!s may im act the ricing strategies for service ac!ages offered to the mar!et' with o erators ado ting different strategies to attract new subscribers and cover their investment costs.

3G #//lications in your life34

Casically' 3G o ens the door to anything you can imagine. Bou will be able to do a multitude of things while going through your daily schedule' whether at wor! or at leisure. The scenarios below demonstrate just a few a lications for 3G and only hint at what will be on offer in the future.

Scenario1:
(n e0ecutive at a client meeting realiOes that he has brought an outdated version of his resentation. It*s no roblem though because one of his colleagues bac! at the office emails the u dated 9ower9oint file directly to his 3G terminal. Ge transfers it to the la to .wirelessly of course/ and is in no time ready to start the resentation.

Scenario2:
This scenario is about three women who are trying to find a gift for their friend. Two of them are out sho ing' but they are out of ideas and use a web site that generates gift suggestions based on ersonality rofiles. They decide to buy a handbag at a sho situated somewhere near the city centre .but at an un!nown address to the women/. ;ot !nowing e0actly where the sho is' they use a ma and ositioning service to find it. The ma is dis layed on their 3G terminal and shows them the sho location and their current osition. (t the sho ' they want to ma!e sure that the third woman .who was unable to ma!e it/ li!es the gift. They ta!e a digital icture of the bag and send it to her with a hand written note see!ing her
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roval.

Scenario3:
The grand arents are out travelling in Huro e. Gere you see them in front of the Hiffel tower. .The tour guide too! the icture of them admiring the magnificent building/.In order to share their e0 eriences with their friends and family' they have created a virtual hoto album on their ersonal web site. This way' anyone with access to the Internet can follow them on their tri .

Cut what about those without Internet accessS Aell' that=s been ta!en care of by the Aal!6ail networ!. The ictures are rinted' together with the te0t' on high :uality a er and delivered as regular ostcards within "< hours.

Scenario4:
( busy e0ecutive doing her grocery sho ing hasn*t had time to :ueue at a teller machine' but cash is not needed. (t the chec!3out' she uses her 3G terminal to ay for the groceries. It automatically debits her ban! account' and gives her an u dated balance on re:uest.

Scenario5:
In this scenario' we see two men tal!ing on their way from a meeting. They decide to go out to dinner' but one of the men would li!e to invite his wife along so he chec!s her calendar on his 3G terminal .their calendars are constantly in synch/.

Scenario6:
So far' there has not been an easy way to electronically communicate with character based languages. Cut this drawbac! is over come with the white board a lication. The erson in this scenario is actually handwriting a message when a friend of his initiates a video call with him. This way of creating a message ma!es the communication more ersonal than a regular e3mail whether in 2hinese' 7a anese' Hnglish' French or any language.

Scenario7:
This guy would li!e to catch u with his friends for a coffee. Ge uses the See!BourFriends service to find out who=s on3line' and then sends a message telling his friends to meet him in a groovy new cafT that he*s just discovered.

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Future of 3G
The good news for mobile users is that now 3G has been u loaded in all the latest handsets from the leading manufacturers including Sony Hricsson' Samsung' ?G' ;o!ia and 6otorola. In addition' a new technology called GS19( has been u graded with the 3G system which wor!s faster than 3G. The latest gadgets are well3e:ui ed with ower3 ac!ed features' enabling you to communicate and enjoy loads of fun. Today "G is booming' one of the big reasons is the low3 riced handsets. This' however' is not the case with 3G. O ortunities are big' but we will have to ma!e it ha en. The success of 3G will de end on innovative business models. The most certainly needed thing is favorable regulations in terms of s ectrum fees. It is creation and com etition that are the two mantras for the success of 3G in India. There is a need for creating an enthusiasm of technology among the consumers' and 3G ortals need not be the only goal of the o erators.U The big challenge set before us is the affordability of the 3G devices. Hducating the customer on 3G is another challenge. 3G is most certainly going to be e0citing' but also challenging. Ae need the infrastructural su ort and the handset' too' would be at an affordable rice. The sta!eholders should come together in order to see some good develo ment. There is an o ortunity to transform the society' which is ossible as long as all of us can wor! together.U One of the advantages of 3G networ! is that it would give better voice clarity. It will shift the Internet largely to the mobile s ace and we can ensure a 3G success ( matter of concern before us is the !ind of bidding that would ta!e lace. It is e:ually challenging to attract consumers to 3G. The reason why (-9)s are on the decline is because the consumers are not able to see value for money. Ae need to concentrate more on customers. ( ro er wor!ing strategy will lead to the success of 3G services.U

Which companies have applied for 3G license

3G s ectrums has been rovided to GS6 layers li!e CS;?' 6T;?' Charti' and @odafone and some international com anies have also shown interest to carry out an interface chec! on a non3 commercial basis ahead of the start of 3G mobile services.

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( art from 9S) majors' s ectrum for carrying out 3G trials has been given to all those who have a lied under the ;ational Fre:uency (llocation 9lan on the ".$ GGO band. GS6 layers o erate on ,## 6GO and $'&## 6GO' while 216( layers o erate on &## 6GO.

What is the pricin! issue in "ndia

Ahile Tatas have welcomed Trai*s -s $'<##3crore .-s $< billion/ base rice for a nationwide rollout of 3G services' the rest of the layers find the rice too e0orbitant. Charti3(irtel is disa ointed with the ricing as they were e0 ecting it to be -s 3##3<## crore .-s 33< billion/. The reserve rice is a disincentive for telecom com anies in India. Charti has a ealed to lower the rices es ecially for rural enetration.

What a#out the securit$ in a 3G net%or&

3G networ!s offer a greater degree of security than "G redecessors. Cy allowing the )H to authenticate the networ! it is attaching to' the user can be sure the networ! is the intended one and not an im ersonator. 3G networ!s use the 8(S)6I bloc! cry to instead of the older (+J$ stream ci her. Gowever' a number of serious wea!nesses in the 8(S)6I ci her have been identified. In addition to the 3G networ! infrastructure security' end to end security is offered when a lication framewor!s such as I6S are accessed' although this is not strictly a 3G ro erty.

Where %as 3G spectrum first introduced

7a an was the first country to introduce 3G on a large commercial scale. In "##+' about <# er cent of subscribers used only 3G networ!s. It is e0 ected that during "##% the subscribers would move from "G to 3G and u grade to the ne0t 3.+ G level. The success of 3G in 7a an also shows that video tele hony was the !iller a networ!s. 1ownloading music was the biggest draw in 3G services. There are about %# 3G networ!s across "+ countries. For infrastructure roviders 3G will be a value3add during slowdown' as they would get to ut in a lot of new develo ments. ?ayout of ne0t generation networ!s that are 3G com atible will hel in better manageability of services over the networ!s. Hven service roviders believe that 3G would ma!e the entire mobility s ace much more accessible. The broadband connection' as they have not reached the set target' will also benefit with 3G coming to India. 3G will hel service roviders manage their e0isting infrastructure better and remain com etitive in a mobile number ortability .6;9/ regime. It will also generate a more addressable mar!et to the GS6 service roviders. They can go bac! to their e0isting customer base and rovide them with enhanced data services
2.

lication for 3G

3G will not only ma!e its resence felt in cities and towns but also bring in better and faster networ!s to rural India. In the years to come 3G would ma!e a lot of difference in ma!ing business models more innovative. 3G and Ai6a0 will hel solve the roblem of low broadband enetration in India to a great e0tent. It is high time the government realiOes the need and use of 3G. In a fast growing economy these technologies have the ower to change the develo ment roadma of the country.

!oo"in$ #head344
CS;? and 6T;? are very differently laced in com arison to other rivate layers. It is not yet !nown when 3G auctions will ha en and which com anies will be in the s ectrum run. Aith a huge amount of investment only to ac:uire license' a lot of other costs would be involved when it comes to networ! building and im lementation. Cut the high costs will lead to new services ma!ing its way into the mar!et' es ecially the urban areas. V)nli!e "G' in 3G one has to come u with very innovative a lications and tariff lans. The enetration level of 3G' however' is still uncertain. The new technology comes with costs attached' and while the u er3middle class business rofessionals might be able to utiliOe these services' a major art of our o ulation is still far from the levels of affordability that these services as! for. Aith a er ca ita income .national average/ of as low as 4,+# er annum .-s 3&'### a ro0imately/' access to these technologies shall remain for the select few. -s &'###' the minimum amount re:uired for urchasing a 3G handset' is a lu0ury that most can=t afford. (lso' other gadgets such as la to s' which can use 3G3run broadband access' are yet to ma!e inroads among the large o ulation. Hven as most handset manufacturers see a tremendous growth o ortunity in the realm of 3G3 enabled mobiles' it is certain that rice will lay a !ey role in deciding the fate of the new technology. To tac!le this concern' mobile hone manufacturers are ma!ing efforts to come u with hones as chea as -s 3'+##' against the currently available minimum rice of over -s &'###. 6obile ma!ers in India are also e0 ecting rices to di ' and thus are contem lating aggressive lans to come u with affordable handsets in this category. (nalysts say that 3G first needs to be o ular with the middle class segment if it is to bring the much tal!ed about Vbroadband revolutionU. For such !ind of change to ta!e lace' the rice of the handset and the services will lay a crucial role. (bout $+3"#P mobile hones in India are already 3G3enabled' but they have to be made affordable. The availability of reasonably riced hones has already made many e0 erts rewor!

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their estimates of the siOe of the 3G mar!et to grow from the resent <#35# mn to $##3$+# mn by "#$". 3G is one of the most cost effective ways to deliver mobile broadband to the masses. H0 ectedly 3G can single3handedly achieve far more in terms of bridging the digital divide than any other way of mobile internet connection introduced by the government. Cecause of its higher voice ca acity' 3G could also facilitate the delivery of far more cost3 effective voice services. Gowever' this will ha en only if o erators do not have to ay e0orbitant rices for 3G s ectrum. (n auction of 3G s ectrum could lead to irres onsible bidding resulting in high costs and tariffs' which would com letely negate the tremendous ca acity advantage that 3G has to offer. (uctions also have another downside 3 by their very nature' they entail a selection amongst bidders' which would result in discrimination between e0isting cellular o erators as it would deny some o erators their legitimate e0 ectation of evolving to 3G. (lso' it would not be in the national interest if the 3G olicy ended u being disru tive' creating uncertainties' leaving the survivors with the winners= curse and others with the ros ect of gradual colla se of businesses. Therefore' the answer to the :uestion raised is that' yes' 3G has a future in India and that it is relevant and im ortant' but the !ey to the success of 3G will lie in its rice' that is' if it has to become a mass service. 3G did not ta!e off in the west because of the e0orbitant rices attached to its s ectrum' which made the service unaffordable and restricted to a niche mar!et. The 3G service can also hel to alleviate the severe s ectrum crunch that is currently being e0 erienced by various o erators' es ecially those in the big cities and metros. There sim ly is not enough "G s ectrum that can fuel the aggressive growth in services. (lso the 3G s ectrum has a voice ca acity that is four3five times higher than the "G s ectrum. This could actually lay a crucial role in hel ing to overcome the limited availability of the "G s ectrum. It may be hel ful in achieving a national telecom target of "+# million by "##, and +## million by "#$#. 3G networ!s enable networ! o erators to offer users a wider range of more advanced services while achieving greater networ! ca acity through im roved s ectral efficiency.

2!

,is/ute over forei$n Telecom com/anies

Overseas' 3G has failed to deliver on the hy e that often led to frenOied license auctions. In South 8orea' S8 Telecom 2o and 8TF 2o have been offering 3G services for more than a year' but high costs associated with subsidies for new hones and mar!eting has been a worry for "G mar!et leader S8. Singa ore' Indonesia and 6alaysia are few e0am les where 3G mobile broadband has given a boost to its revenue growth. Investment and the ca acity of the investment ossess a tough challenge before India.U Foreign telecom firms could gain access to India=s booming mobile mar!et through a global auction of 3G licenses this year' but low call rates and established layers mean it could ta!e years to turn a rofit. Foreign telecoms with 3G e0 eriences are allowed to bid at the auctions' o ening the way for firms such as (TET' Htisalat' ;TT 1ocomo to gain a foothold in the world=s fastest3growing mobile mar!et. Cut India=s "G o erators' including Charti' (irtel' -eliance 2ommunications' @odafone Hssar and T6 International 3bac!ed Idea 2ellular' are not going to cede their territory easily. Five 3G licenses will be available for most of India=s "" service Oones' although limited s ectrum means there will be a ma0imum of three in large cities such as ;ew 1elhi and 6umbai.
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;e0t3generation high3end 3G services give users a chance to enjoy fast Internet access' games and a host of multimedia content from ma s to music on their cell hones' areas where "G has been handica ed by a slower data transfer ca ability. India has set a base rice of "#."# billion ru ees .4<3+ million/ for a national license. (ctual bids are e0 ected to be higher' es ecially in lucrative centers such as 6umbai and ;ew 1elhi' as the government is loo!ing to raise u to 4, billion. Im ortantly for new entrants' a winning 3G bid does not automatically get a bread3and3butter "G license. Foreign o erators will have to loo! for an Indian artner that owns a "G networ!. ;ew "G licenses such as )nitech' 1atacom and ?oo Telecom could be targets for foreigners' although Indian olicy at resent does not allow two "G license holders to merge their licenses for three years from issue. ( huge unta ed mar!et bec!ons in the rural areas' which currently accounts for only a third of total mobile users in India. If the government=s lans to connect every village to a broadband networ! are fully im lemented' this mar!et could see an e0 losive growth. T-(I and 1oT disagree on the issue of ermitting foreign telcos to bid for 3G s ectrum. 1oT thin!s the resent com etitive intensity .$< e0isting telcos/ is not enough for com etitive bidding in the 3G s ace and as such has been e0 loring the idea of allowing foreign telcos to bid. 6eanwhile' T-(I thin!s e0isting o erators are in a better osition to deliver 3G services efficiently and :uic!ly. (ccording to T-(I' any foreign telecom layer who emerges as a successful 3G bidder via international auctions will have to ac:uire a )nified (ccess Service ?icense .)(S?/ before they can begin o erations. The issue of a )(S license will entitle them to <.<6GO to start "G o erations. This will mean more layers in the crowded "G s ace which already has $< layers. (nother o tion is to allow overseas bids for 3G s ectrum but not allow foreign layers any rights to "G s ectrum. This will involve creating a new license category' which may delay the 3G auctions. (s we stated earlier' while bidding for 3G ma!es no sense from the business ers ective' it does re resent an indirect way to obtain "G s ectrum. It is this that is creating a lot of interest. Ae believe the :ueue for "G s ectrum will discourage the Indian regulator from holding international 3G auctions. Cut the regulator is un redictable and we cannot rule out further sur rises.

'o% %ill 3G polic$ unfold

Our analysis suggests that international layers will not be allowed to bid for 3G s ectrum. The !ey constraint for the regulator is the limited availability of "G s ectrum' which is available on a seniority basis. (ny foreign layer becoming eligible for "G s ectrums via international 3G auctions will have to wait until the new entrants and e0isting layers receive their share of "G s ectrum. (ny attem t to modify the seniority based rule would lead to litigation and delay the 3G s ectrum auctions .which the Indian government wants to avoid/. This oor visibility is a major deterrent for any foreign layer wanting to bid aggressively for 3G s ectrum

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