The 3G Haze

It is almost 2 years since BSNL and MTNL launched 3G services in the country in early 2009. The momentum picked up in 2010-11 when majority of private operators launched their 3G services in respective circles to cash in on the World Cup Cricket and IPL fever. It seems operators have not been able to encash on this, mostly because of their premature launch of 3G services.

Operators need to rework on their strategy and tie all loose ends by offering full-fledged services to subscribers. This is not a difficult exercise as they need to work in tandem with operators, handset vendors, and VAS players for providing better quality of experience to 3G customers. Not only this, they also need to focus on 4 key areas: Make 3G infrastructure IP ready; reduce cost of 3G handsets for increasing handset penetration in the country; provide exciting and innovative content; and offer interoperability services at the earliest.

Operators Launch 3G

All operators except Stel have launched 3G services in different circles. MTNL was the first to start 3G services on 6th February, 2009 whereas BSNL started its services on 22nd February, 2009 followed by Tata Teleservices on November 4, 2010. Reliance went for a big-bang 3G launch on 13th December, 2010 followed by Bharti, Aircel, Vodafone, and Idea.

In case of 3G, incumbent operators have taken a lead vis-a-vis private operators. MTNL started with a pilot in December 2008 and has launched 3G services in Delhi and Mumbai and has a subscriber base of 250,000. BSNL launched their services in February, 2009 and is operational in 700 cities pan-India. The company claims to have 3 mn subscribers on 31st March, 2011.

Tata Teleservices was the first private operator to launch 3G services in 110 cities and presently has around 1.5 mn subscribers.

Reliance Communications has launched 3G services in 150 cities of its 13 circles and was the second private operator to launch services in December, 2010.

“We are having a very decent uptake of 3G services from the customers but perhaps it's too early to give any figures on the subscriber side,” says Prashant Gokarn, head of 3G, Reliance Communications.

Bharti Airtel has got license for 13 circles and the company has launched services in 8 circles and 40 towns by March-end. They claim to have around 2 mn subscribers. Plans are to launch 3G services in 400 towns by September-end.

Vodafone has launched 3G services in all its 9 circles and is exploring opportunities to tie up with other operators to provide high quality 3G services in other circles. The company has huge 3G investment plans for 2011 in the range of `3,625-7,250 crore.

Aircel has launched 3G services in all the 13 circles but refuses to divulge the number of cities where 3G services are operational. The company plans to launch 3G services in other circles through strategic alliances.

“We expect 30% of our subscribers to shift to 3G platform in the next 3 to 4 years,” says Gurdeep Singh, COO, Aircel.

In terms of investment, Sandip Das, Group CEO, Maxis says, “Our commitment to the market is underlined by the investment of over $8 bn that we have made already and we plan to spend further $3 bn in the next 3 years.”

Idea Cellular has launched 3G services in 200 towns whereas STel which has bagged the license for 3 circles is yet to start 3G services. It is expected that STel will launch 3G services by end of this year according to company insiders.

Presently, 3G services are in the inaugural phase so service providers have gone for lot of freebies. Even services are very flexible to suit everybody's pocket. It needs to be seen how 3G services are priced when 3G services move from pilot phase to full-fledged commercial operations.

Some operators feel that 3G pricing won't go the 2G way since they have paid a huge license fee of around `67,719 crore of which government operators have paid `16,751 crore whereas private operators have paid `50,968 crore.

Shireesh Joshi, CMO, mobile services, Bharti Airtel explained, “Given the spectrum constraint and hefty prices that all operators have paid for offering 3G services in this country, we do not see any player offering discounted prices at a sustainable level.”

Infrastructure: Making it
IP-ready

Presently, operators are busy setting up new towers, co-locating their node B sites and tying up with other operators or IP-1 players for co-locating their node B sites. All this is taking time, so operators are going slow on their 3G launches and presently the focus is on top 50 cities for providing in-depth coverage. Middle of this year, the focus would be on top 100 and top 150 cities by end of the fiscal for in-depth coverage. The numbers will be on the higher side for blanket coverage.

With India opting for 2,100 MHz frequency band for 3G, the service providers need to set up more than 2 or 3 times towers vis-a-vis 2G if they plan to provide good quality of experience to users and since there is also demand of high-speed data. This will take time but this will definitely help in enriching 3G experience to users and providing seamless 3G service in large cities.

“Currently 3G rollouts are limited to top 40 cities in India and the primary focus has been on upgrading and utilizing the existing infrastructure,” says Prakash Ranjalkar, wholetime director & CEO, GTL Infrastructure.

As explained by Amit Sharma, executive vice president and president, American Towers, “The advent of 3G/BWA services is likely to lead to a quantum increase in the usage of data services among consumers. The rollout of 3G and BWA services across India cannot happen without significant addition of towers-in urban areas to provide capacity and in rural areas to provide coverage.”

For infrastructure, the 3G operators need to also focus on back haul as this can act as a choking point for data services. Presently, majority of backhaul is on microwave and this needs to be upgraded to high-end microwave or optical fiber cable for which operators need to invest heavily. With the coming of 3G, the operator need to make even backhaul IP ready.

In the Indian market, the focus has been more on tower sharing but new hi-tech companies like Radio Design Technologies are taking site sharing to the next level. In this case, savings are not limited to towers but service providers can also save on cost of antennas, RF Feeder cables, and TMAs. Using Radio Designs' filter combiner technology, one can combine multiple 1,800 operators and/or 1,800 and 2,100 operators onto a single feeder cable and antenna and save on infrastructure cost.

3G operators also need to work or create city based Wi-Fi players which can offer complementary services along with 3G. This can act as an incentive and also help in cost reduction.

Handset: Focus on Reducing Cost

Presently, there are 8-10% 3G phones and 2-3% of smartphones available in the Indian market which is not a good booster for increasing 3G subscription in the country. Even people who have 3G phones are not aware about 3G features since awareness with respect to 3G handsets and its features are not up to the mark.

“Neither the customers nor the salesmen in mobile retail outlets are much aware of the usability of the 3G handsets. So even if people buy 3G handsets, they are not making much use of it. The in-store demonstrators (ISDs) needs training and in our part, we have started it for our retailers,” says Ajay Sharma, country head, HTC.

Unfortunately many of the high-end handsets equipped with 3G are expensive and is the range of `7,000 and above and even most of the handsets are not HSPA enabled thereby restricting people to subscribe for 3G services.

Kumar Ramanathan, CMO, Vodafone Essar says, “In spite of better affordability options investment in the mobile handset is still a costly investment for low income earners.” To make 3G handsets affordable, operators are working with Chinese handset vendors to reduce cost of 3G handsets and smartphones. Currently the prices of smartphones are at around `4,000 and plans are to bring the price to around `2,500 for which service providers are initiating talks with Chinese vendors.

“Of course, as the prices come down you will see this part become the most significant aspect,” says Prashant Gokarn, head of 3G, Reliance Communications.

3G handsets are not bundled with operators 3G tariff and should be started at an early stage so that 3G handset bundled with operators 3G tariff will bring down cost and increase subscriber base.

Operators are even thinking of bundling 3G services along with handsets thereby locking the customer for a definite period of time.

“As the handset market improves and services get better, customization of internet happens; industry will see a better business case for 3G,” says Elango Thambiah, president GSM, TTSL.

From vendor side, efforts should be made to aggressively push for embedded content in their handsets with the help of VAS/content players.

“We believe that bundling will become the essential necessity of an operator whether it is through them or through OEM (original equipment manufacturer). The pricing has already hit the bottom and revenue models for 3G have to be well built to tackle the users at the bottom of the pyramid. With MNP operators will have no claim on users and handset will be the answer to lock in the consumer,” explains Ramanathan, CMO, Vodafone Essar.

Content: Needs Overhauling

Presently, VAS contributes around 10-12% and data contributes around 5%. For 3G to succeed, data needs to contribute around 20-25% of total operator's revenue in 2 years' time and for data services to take off, focus should be on media content, education, health and other services. With respect to 3G services, mobile operators are offering video streaming, email, web browsing or unlimited data services like unlimited downloads of wallpapers, MP3 ringtones, themes and games as per the plan.

The first few operators that launched 3G focused a lot on mobile video but did not deliver the right experience as there were bandwidth issues and did not have segmented content targeting different user segments.

According to Prashant Gokarn, head of 3G, Reliance Communications, “The technical testing is on and very soon we will have interoperable agreements where you will see video calls happening from one network to another. On roaming, a Reliance subscriber can make call to another Reliance customer. However, to other networks we are trying to have agreements.”

Mobile is more suited to snacking-type content, for eg, 3-4 minute mobisodes that can be watched when you have a few minutes rather than watching longer shows (mobile TV) where the user is more likely to look for a bigger screen option.

“Till now we have no clarity on video in roaming. We are seeking some significant clarity soon on the same,” says Elango Thambiah, president, GSM, Tata Teleservices.

Currently, operators are focusing on vanilla applications like high-speed data, video call, mobile TV, and gaming but they need to focus on innovative content.

ome operators are focusing on different applications w.r.t. different age groups. Focus should be on quality of experience and providing enriching experience and all operators should focus on different applications w.r.t. different age group of customers like youth, professional, and housewives.

Explains Kuldeep Singh, CMD, MTNL, “When we started, content or value-added services ecosystem was not ready. Even if service providers offer 3G services, there was not much content that a user would like to subscribe. The current state of VAS is not much different.”

When it comes to quality of experience of these services currently offered by operators; most of the operators are laggards. Services like Mobile TV, video calls, and video-on-demand still lag behind in quality of reception and buffering issues.

“I will also say that applications like Mobile TV are running decently with the available spectrum but are likely to do better if additional spectrum is provided,” says Thambiah, president, GSM, TTSL.

Service providers should increase tie-ups with content aggregators and create a large ecosystem of innovative VAS players.

Kumar Ramanathan, CMO, Vodafone Essar says, “At this initial stage we are trying to induce customers to try out this new service and understand the mobility it will offer to them.”

In countries such as India, first there has to be an ecosystem of value-added services for 3G to take off. It takes time for the ecosystem to develop because there will always be teething problems such as revenue sharing and who takes responsibility in case the service fails.

Consumer Awareness: Needs a Push

In last 3 to 4 months, where we saw maximum number of operators launching 3G, but aggressive advertising and marketing was missing. People know operators are launching 3G, but very few are adopting it. Even though operators have made 'Kiosks' and 'Experience Centers' at various stores, but not much has contributed to the consumer awareness and uptake of this technology with their help.

“For promoting any service technology at any particular time there are many commercial considerations that go. May be we can leverage more on the opportunities that come our way,” states Gokarn, head of 3G, Reliance Communications.

“With 3G the challenge will be to be relevant and simple in content for the consumers,” says Gurdeep Singh,COO, Aircel.

For increasing awareness handset players should increase in store demonstrators and they should be properly trained.

Kuldeep Singh, CMD, MTNL insists, “Lack of awareness is also another very important factor which hampered the desired growth of 3G. People still do not know what to do with 3G.”

All the stakeholders of the industry like operators, VAS players and device manufacturers should work in tandem to see the real fruit of 3G. Everyone also should take up their responsibility in creating awareness regarding the service and its usability.

interoperability: Still Testing

Operators are doing technical testing of inter-operator 3G calls. Operators have presently limited roaming tie-ups. Presently, qualities of experience for inter-operator calls are being tested. Operators are testing all services related to interoperability.

Kuldeep Singh, CMD, MTNL says, “If a 3G customer of a certain operator moving to a different service area where the operator does not have 3G services, then it is a restrictive practice. And you can not stop someone from roaming, neither would you like to. This way we can get an extra revenue stream for our unutilized resources. For this model, we have asked for 20% revenue share and a fixed cost of `140 crore per city per year. We are very optimistic that something positive would turn out in this quarter.”

“In 30-40 days or in a time span of 1-2 months we are going to have interoperable agreements for video calls,” explains Thambiah, president, GSM, Tata Teleservices.

“Vodafone is exploring opportunities to tie up with other operators to provide high quality 3G services in other circles as well,” says Ramanathan, CMO, Vodafone Essar.

Interoperability services should provide enriching experience. Therefore to have seamless 3G coverage and user experience, operators should agree in tandem for interoperability issues and help develop this vertical flourish for 3G success.

Conclusion

When 3G was launched in developed economies, the operators paid huge license fees and the partner ecosystem was not in favor of the operator. Things have changed, though Indian operators have paid huge license fees, the partner ecosystem is in their favor and they need to just sit together with operators, IP-1 players, handset vendors, and VAS players to get everything in sync and also to reduce their cost of operations. This along with innovative applications will help 3G gain foothold in the Indian market. In the current Indian scenario, all the stake holders of the industry like operators, VAS players, and device manufacturers should work in tandem to see the real fruit of 3G. Everyone also should take up their responsibility in creating awareness regarding the service and its usability.

Akanksha Singh,
Archana Singh & Ritu Singh
akankshas@cybermedia.co.in