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Will 3G and wireless broadband services change India like mobile phones did over the past decade? The answer, the telecom ecosystem tells us, is yes.

Kushan Mitra, Manu Kaushikand twitter-logoRahul Sachitanand | Print Edition: September 5, 2010

Meerut is not a city used to attention from large businesses. Sure, it is home to a little over a million people and has grown by being host to one of the largest Army cantonments in India. But the Uttar Pradesh conurbation has never had any of the gold-dust that glosses Noida or even Ghaziabad - both neighbouring rich New Delhi.

Until yesterday, that is. Today, for India's barrelling telecom companies, the intersect of 29░ 01' north of the equator and 77░ 45' east of Greenwich is ground zero. If Meerut represents the big cusp of change ahead for them, city resident Himanshu Puri is the face of that coming revolution. A senior manager at a local construction firm, Puri, 24, is on the road six or seven days a month and stays in touch with his friends through Facebook updating his status once an hour, or more often, and posting pictures taken on his Nokia N97 phone.

"I have over 100 friends on Facebook and almost 60 of those friends interact only through their mobile phones," says the MBA from Meerut's Choudhury Charan Singh University. Puri often runs through the popular Rs 98 monthly Internet surfing recharge with a 2 gigabytes (GB, a measure of data used) cap from Bharti Airtel, India's biggest mobile services firm, and has to top up twice. At Rs 300 a month, his spending on data is 30 per cent - or more than three times the national average - of his monthly Rs 1,000 mobile phone bill.

Customers like Puri and places like Meerut - the city is among the top five consuming locations in India of services like text or SMS messages, caller tunes and ring back tones and mobile Internet - present hope to companies such as Bharti Airtel, Vodafone Essar and Idea Cellular. They are among eleven firms that have spent an unprecedented Rs 1 trillion, about two times the national income of a country like Afghanistan, in buying spectrum and licences for data-heavy third generation mobile phone services, better known as 3G, and broadband wireless access (BWA) offerings.

On the face of it, that amount makes for a poor investment. To recover that money and another Rs 2.5 trillion needed to set up 3G and BWA networks - assuming Indian phone firms quickly get 200 million customers signing up and have them spend an average of Rs 100 a month on data alone (both very ambitious targets) - the industry will have to wait for 14 years and six months, backof-the-napkin calculations show. Profits come later, if any. To put that in perspective, the average monthly mobile phone bill of an Indian today is Rs 120.

A Billion Datum Needs
Still, hey, this is India. A market that nobody a decade ago would have predicted to be home to more than 600 million mobile phone connections, second only to China. Just like cellphones were not about mobility in India but access to a phone service, 3G and BWA services promise millions and millions of Indians their first high-speed Internet and data experience. And, just as mobile phones fed into the huge latent demand for the metaphorical dial tone, high-speed data capability on the move could feed into a big unmet need for entertainment and information - all customised and personalised on handhelds and other devices.

India today has fewer than nine million wireline broadband connections measured by the government's definition of 'anything above 256 kbps speed is broadband'. In the developed world, it is a 2 mbps throughput that is set as a threshold for such connections - by which yardstick India counts under 200,000 truly broadband connections. That low number spells a big opportunity for 3G networks, which promise speeds of up to 14 mbps. "The weakness of wireline broadband will be the single biggest factor to the success of 3G and BWA," says Samaresh Parida, Head of Strategy at Vodafone Essar. BWA networks could deliver 100 mbps speeds - allowing downloads of a DVD quality movie in under a minute.

A large swathe of Indians is already familiar with the ease of wireless access of data. The country's telecom regulator estimates some 177 million people access the Internet through mobile devices, of which some 30 million do so as often as at least a week. A small and fast-growing segment of more than 10 million subscribers use high-speed wireless connections through USB dongles and mobile phones on networks of Reliance Communications, Tata Teleservices and MTS. Most of this demand, say company executives, is new and has come about in the last year, overtaking the seven million dial-up fixed-line Internet connections.

Such access to the Internet is routine in the work lives of doctors in Kerala's Malabar region. Online medical reference material is often quickly accessed on mobiles and PDAs, says R. Satheesh, Chief Medical Officer at Al Shifa Hospital, Perinthalmanna. When treating newborns, he says, as an example, "we check drug dosage schedules, indications for the drug and the contra-indications".

A data scheme by phone operator Aircel in April 2009 had a huge impact on an unexpected quarter. Launched with an ad campaign with Indian cricket captain Mahendra Singh Dhoni showing how he used Facebook on the move, the scheme had local handset marketer Micromax quickly unveiling a handset with a 'single click' button to launch Facebook. The result was electric: Facebook's user base in India doubled from under five million users to close to ten million and it became India's top online social network ahead of Google's Orkut. Today, over half of Facebook users from India access the site on mobile phones.

In Chinnankudi village near Nagapattinam, one of the worst-hit areas in the December 2004 tsunami, fishermen have a new tool: an application on their mobile phones that tells them wind speed, wave height, wind direction, temperature and the weather forecast. Also available are the co-ordinates of fishing zones that hold a potential good catch. The village's 500-odd households are beneficiaries of Fisher Friend Mobile Application, a pilot project the M.S. Swaminathan Research Foundation is implementing in partnership with Tata Teleservices and chipmaker Qualcomm.

Fish catches are now 30 per cent higher and fishermen "save significantly on diesel costs (up to Rs 3,000 a trip)," says K. Balachandran, an owner of two boats. Some three million people, mostly in rural India, have signed on to Nokia's Life Tools text-messaging information service that delivers commodity prices, weather data and even English education one word a time charging Rs 30 to Rs 60 a month.

So, how will Indian consumers and companies harness the big wave of mobile data building up? That will depend on how many 3G phones India ends up having in the coming years. There is a range of projections - our columnist Pradip Baijal believes India will have 300 million phones in a year of nationwide launch. But a study commissioned by international industry group GSM Association and conducted by consultancy PricewaterhouseCoopers (PwC) is instructive. The study projects the number of 3G customers in India at 107 million by 2015.

"Initially, the rollout is expected to be more focused in urban areas. Therefore, the uptake of 3G services will be concentrated among urban subscribers," PwC predicts. "By 2015, rural subscribers are likely to comprise up to 24 per cent of the overall 3G subscriber base." And, just like average revenue per user (ARPU, or customer billing a month) rose in countries that introduced 3G services - Telstra's 3G ARPU is 2.5 times second generation network billings; in Japan, it is 58 per cent higher - Indian phone firms are also expected to benefit. ARPU for 3G users is expected to be Rs 712 in 2011 and end at Rs 265 in 2015, notes the PwC report, still much higher than 2G ARPUs of Rs 120.

Even so, it is not clear that mobile data services will find custom in India. But, two or three trends can be extrapolated from the way cellphone users consume data today. Almost everyone interviewed for this story agrees that the biggest use of data will be plain old Internet access through what venture capital manager Mohit Bhatnagar calls a "better, faster and bigger pipe through which more of audio, video, pictures, full songs... will be downloaded".

Think of Puri, the Facebook addict from Meerut, and what he could do with a high-speed wireless data connection. PwC predicts Internet access will make for 35 per cent of mobile broadband services by 2015 and start-ups like Gurgaonbased Y2CF Digital Media are coming out of the woodwork in dozens to capture latent demand. It is developing a social networking platform with an important ingredient that mobile devices provide: location-based information. "With where-you-are information, people can have networks around restaurants, discover places, tell friends where they are, etc. (Commercial) possibilities with that are interesting," says Mohammad Imthiaz, CEO.

In Pune, start-up Xtremum Solutions is ready with a proof of concept solution for doctors to navigate patient information on tablet PCs. Music, applications, gaming , government services, telemedicine, Internet telephony and education could make for other important slices of the mobile data pie and examples of application and content developers around these abound. (See Game For Growth)

Video, The Killer App?
Services pandering to uniquely Indian appetites could be on the horizon too. Video calling may not have taken off in the other 3G markets but D. Shivakumar, Managing Director India for Nokia, the No. 1 phone brand, insists it will be a big hit in India. "The concept of privacy and openness is very different in India. In small towns, 80 per cent of boys and girls don't mingle. For them, SMS is a big way of communicating today. Tomorrow, it will be video calling," he says.

A Nokia survey shows video calling will be the No. 1 service that Indians customers - nearly half of 7,500 respondents said they would definitely avail themselves of it - want when 3G becomes reality. Indeed, there are hints of video being a big hit if the experience of government-owned Bharat Sanchar Nigam Ltd is a gauge: About 70 per cent of broadband content consumed by its 1.3 million 3G customers is video including movies and, more interestingly, interactive video content. Already, Bollywood stars such as John Abraham have started video blogs.

Shivakumar believes 3G/BWA will change every - yes, every - business in India "especially those whose goods and services have strong sensory and visual aspects to it," he says. As an example, he sees shoppers making "how does this look" calls to friends and relatives. Phones priced at less than Rs 4,000 are already on the horizon. Many consider Mahanagar Telephone Nigam Ltd's 3G pricing of 1 paise for 10 KB, or Rs 100 for a GB of data, as an early benchmark.

International experiences augur Indian phone firms and the eco-system around 3G/BWA heading to a sweet spot. While Europe took two-and-ahalf years to reach a seven per cent 3G penetration, newcomers have got results quicker. Turkey reported that level of customer conversion into 3G in just nine months, points out St├ęphanie Baghdassarian, Research Director at Gartner in the UK. A similar pattern could hold out for India especially with applications around mobile banking, she predicts.

To be sure, there are several hurdles that could trip India's waltz into the world of opportunities that 3G offers (see The Big Leap...) and the ability to make payments on mobiles - India has under 20 million credit cards - to conclude a transaction is one of them. Hyderabad tech firm IMI Mobile may have the fix for that.

It is readying a pan-operator platform that content and application developers can plug into without the hassle of signing commercial terms with multiple phone firms or making sure software code works on different operating systems. Embedded in the plan is a micro-payments gateway that will allow users to bill as little as one paisa for a purchase. That could really make the Indian mobile network sing.

- Additional reporting by N. Madhavan and K.R. Balasubramanyam

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