8/4/2019 17471997-Future-of-3G

1/26

2009

GROUP - 7

IBS PUNE

7/8/2009

Future of 3G in Indian Telecom sector

8/4/2019 17471997-Future-of-3G

2/26

Contents

Contents ..................................................................................................................... 2

Telecom Industry ........................................................................................................ 3

Major Players .............................................................................................................. 6

What is 3G? ............................................................................................................... 6

Evolution from 2G to 3G .......................................................................................... 7

GSM evolution to 3G ............................................................................................... 8

What will 3G mean to users? ...................................................................................... 9

Features of various services ..................................................................................... 10

How is 3G different from 2G and 4G? ....................................................................... 10

Limitations of 2G ...................................................................................................... 11

How 3G works? ......................................................................................................... 11

The Advantages of 3G Technology ........................................................................... 12

USER BENEFITS ........................................................................................................ 13

OPERATOR BENEFITS AND MEDIA HOUSE BENEFITS ................13

Guidelines for 3G Services:...................................................................................... 14

Issues of 3G ............................................................................................................. 14

Current status and Impact of 3G in India ................................................................. 15

Roll-out strategies .................................................................................................... 16

Market opportunity .................................................................................................. 17

Getting subscribers on the 3G bandwagon .............................................................. 17

3G Applications in your life................................................................................... 18

Future of 3G ............................................................................................................. 20

Which companies have applied for 3G license? .................................................... 20

What is the pricing issue in India? ......................................................................... 21

What about the security in a 3G network? ............................................................ 21

2

8/4/2019 17471997-Future-of-3G

3/26

Where was 3G spectrum first introduced? ............................................................ 21

Looking Ahead...................................................................................................... 22

BSNL and MTNL are very differently placed in comparison to other private players. It

is not yet known when 3G auctions will happen and which companies will be in the

spectrum run. With a huge amount of investment only to acquire license, a lot of

other costs would be involved when it comes to network building and

implementation........................................................................................................ 22

Dispute over foreign Telecom companies ................................................................ 24

How will 3G policy unfold? .................................................................................... 25

Telecom IndustryObjective: Future of 3G Technology in Indian Telecom Sector.

3

8/4/2019 17471997-Future-of-3G

4/26

The Indian telecommunications industry is one of the fastest growing in the world and India is

projected to become the second largest telecom market globally by 2010.India added 113.26

million new customers in 2008, the largest globally. In fact, in April 2008, India had already

overtaken the US as the second largest wireless market. To put this growth into perspective, the

countrys cellular base witnessed close to 50 per cent growth in 2008, with an average 9.5

million customers added every month.

According to the Telecom Regulatory Authority of India (TRAI), the total number of telephoneconnections (mobile as well as fixed) had touched 385 million as of December 2008, taking thetelecom penetration to over 33 per cent. This means that one out of every three Indians has atelephone connection, and telecom companies expect this pace of growth to continue in 2009 aswell.

The overall cellular services revenue in India is projected to grow at a CAGR of 18 per centfrom 2008-2012 to exceed US$ 37 billion. Cellular market penetration will rise to 60.7 per cent

from 19.8 per cent in 2007.

The Indian telecommunications industry is on a growth trajectory with the GSM operatorsadding a record 9.3 million new subscribers in January 2009, taking the total user base to 267.5million, according to the data released by COAI.

India is the fourth largest telecom market in Asia after China, Japan and South Korea. TheIndian telecom network is the eighth largest in the world and the second largest among emergingeconomies. At current levels, telecom intensiveness of Indian economy measured as the ratio oftelecom revenues to GDP is 2.1 percent as compared with over 2.8 percent in developedeconomies.

Indian telecom sector has undergone a major process of transformation through significantpolicy reforms. The reforms began in 1980s with telecom equipment manufacturing beingopened for private sector and were later followed by National Telecom Policy (NTP) in1994 andNTP'1999.

Policy reforms can be broadly classified in three distinct phases-

4

http://www.iimahd.ernet.in/ctps/pdf/ntp1994.pdfhttp://www.iimahd.ernet.in/ctps/pdf/ntp1994.pdfhttp://www.iimahd.ernet.in/ctps/pdf/NTP1999.pdfhttp://www.iimahd.ernet.in/ctps/pdf/ntp1994.pdfhttp://www.iimahd.ernet.in/ctps/pdf/ntp1994.pdfhttp://www.iimahd.ernet.in/ctps/pdf/NTP1999.pdf

8/4/2019 17471997-Future-of-3G

5/26

"The Decade of 1980's saw private sector being allowed in telecommunicationsequipment manufacturing. Mahanagar Telephone Nigam Limited (MTNL) and VideshSanchar Nigam Limited (VSNL) were formed and a Telecom Commission was set up togive focus to telecommunications policy formation.

"In 1990s, telecommunications sector also benefited from the general opening up of the

economy. NTP 1994 was the first attempt to give a comprehensive roadmap for theIndian telecommunications sector.

Availability of telephones on demand (targeted by 1997) Universal service covering all villages and one PCO per 500 persons in urban

areas at the earliest (targeted to be achieved by 1997) Telecom services at affordable and reasonable prices World standard quality of services

"NTP 1999 brought in the third generations of reforms in the Indian telecommunicationssector.

India is one of the fastest growing telecom markets in the world with an addition of morethan 6 million connections per month. FDI inflow in Indian Telecom sector is the highestamong all sectors. It is emerging as telecom manufacturing hub. Year 2007 was declaredas "Year of Broadband" in India.

It is projected that the industry will generate revenues worth US$ 43 billion in 2009-10.

Rural India had 76.65 million fixed and Wireless in Local Loop (WLL) connections and 551,064Village Public Telephones (VPT) as on September 2008. Therefore, 92 per cent of the villages inIndia have been covered by the VPTs. The target of 80 million rural connections by 2010 islikely to be met during 2008 itself. Universal Service Obligation (USO) subsidy support scheme

is also being used for sharing wireless infrastructure in rural areas with around 18,000 towers by2010.

The Indian rural market is going to be the next big thing for wireless telecom providers. With thetele-density in rural areas being still about 10 per cent against the national average of about 21per cent, there seems to be huge untapped potential for mobile phone penetration in rural India.The government also plans an investment of US$ 2 billion, during 2008 to 2009, for thedevelopment of around 100,000 community service centers in rural India to provide broadbandconnectivity.

Additionally, by 2010, the government targets:

80 million rural connections Mobile coverage of 90 per cent geographical area Internet Protocol Television (IPTV) in 600 towns Quadrupling manufacture Two-fold increase in telecom equipment R&D from the current level of 15 per cent.

5

8/4/2019 17471997-Future-of-3G

6/26

Major PlayersThere are three types of players in telecomservices: -State owned companies (BSNL and MTNL)

-Private Indian owned companies (RelianceInfocomm, Tata Teleservices,) -Foreign invested companies (Hutchison-Essar,Bharti Tele-Ventures,Escotel, Idea Cellular, BPL Mobile, SpiceCommunications)

Market Shares of Key IndiaMobile Operators, 2008

What is 3G?3G (Third Generation) is the latest wireless technology. It is also known as UMTS (Universal

Mobile Telecommunications System), an improvement over 2G (Second Generation) providing

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 Cellular (2004) as being a generic name

for the most of mobile technologies.

3G cellular phones were first launched in Japan in October 2001. This 3G phone was designed

so users would be able to surf the Internet, view pictures of the people they are talking to, watch

movies and listen to music on their handsets .

6

8/4/2019 17471997-Future-of-3G

7/26

International Mobile Telecommunications-2000 (IMT-2000), better known as 3G or3rd

Generation, is a family of standards for wireless communications defined by the International

Telecommunication Union, which includes GSM EDGE, UMTS, and CDMA2000 as well

as DECT and WiMAX. Services include wide-area wireless voice telephone, video calls, andwireless data, all in a mobile environment. Compared to 2G and 2.5G services, 3G allows

simultaneous use of speech and data services and higher data rates (up to 14.4 Mbit/s on the

downlink and 5.8 Mbit/s on the uplink with HSPA+). Thus, 3G networks enable network

operators to offer users a wider range of more advanced services while achieving greater

network capacity through improved spectral efficiency.

Mobile telephony allowed us to talk on the move. The internet turned raw data into helpful

services that people found easy to use. Now, these two technologies are converging to create

third generation mobile services.

In simple terms, third generation (3G) services combine high speed mobile access with Internet

Protocol (IP)-based services. But this doesnt just mean fast mobile connection to the world wide

web. Rather, whole new ways to communicate, access information, conduct business, learn and

be entertained - liberated from slow, cumbersome equipment and immovable points of access. It

will enhance and extend mobility in many areas of our lives.

Evolution from 2G to 3G

7

http://en.wikipedia.org/wiki/Video_callhttp://en.wikipedia.org/wiki/2Ghttp://en.wikipedia.org/wiki/2.5Ghttp://en.wikipedia.org/wiki/Megabithttp://en.wikipedia.org/wiki/Megabithttp://en.wikipedia.org/wiki/Spectral_efficiencyhttp://en.wikipedia.org/wiki/Video_callhttp://en.wikipedia.org/wiki/2Ghttp://en.wikipedia.org/wiki/2.5Ghttp://en.wikipedia.org/wiki/Megabithttp://en.wikipedia.org/wiki/Megabithttp://en.wikipedia.org/wiki/Spectral_efficiency

8/4/2019 17471997-Future-of-3G

8/26

GSM evolution to 3G

8

8/4/2019 17471997-Future-of-3G

9/26

What will 3G mean to users?

"Mobility" will be offered with many services that we currently regard as "fixed" indeed,Mobile operators believes that mobility will become the norm for many communication services.Well be able to make video calls to the office and surf the internet, or play interactive gameswith friends at home - wherever we may be. But 3G is not just about applications that requirehigh speed data rates. Its about convenience and speed of access.

There are various technology comes under various forms of services like under 1G its AMPS,2G its CDMA, TDMA, GSM, PDC & 3G its W-CDMA, CDMA-2000,TD-SCDMA

TECHNOLOGY FEATURES

1G AMPS Advanced Mobile Phone Service -Analog voice service- No data service

2G CDMA Code Division Multiple Access - Digital voice service- 9.6K to 14.4K bit/sec.- CDMA, TDMA and PDC offer one-way data transmissions only- Enhanced calling features like callerID- No always-on data connection

TDMA Time Division Multiple Access

GSM Global System for MobileCommunications

PDC Personal digital cellular

3G W-CDMA Wide-band Code Division MultipleAccess

- Superior voice quality- Up to 2M bit/sec. always-on data- Broadband data services like videoand multimedia

- Enhanced roaming

CDMA-2000

Based on the Interim Standard-95CDMA standard

TD-SCDMA

Time-division synchronous code-division multiple-access

9

8/4/2019 17471997-Future-of-3G

10/26

Features of various servicesServices Features Speed Time to Download 3Min Mp3

song

2G Phone Calls, Voice

Mail, Receive SimpleEmail Messages 10kb/sec 31- 41 Min

2.5G Phone calls/fax- Voice mail-Send/receive largeemail messages- Web browsingsNavigation/maps- New updates

64-144kb/sec 6-9min

3G Phone calls/fax- Global roaming- Send/receive largeemail messages- High-speed WebNavigation/mapsVideoconferencing- TV streaming

- Electronic agendameeting reminder.

144kb/sec-2mb/sec 11sec-1.5min

How is 3G different from 2G and 4G?

While 2G stands for second-generation wireless telephone technology, 1G networks used areanalog, 2G networks are digital and 3G (third-generation) technology is used to enhance mobile

phone standards.

3G helps to simultaneously transfer both voice data (a telephone call) and non-voice data (suchas downloading information, exchanging e-mail, and instant messaging. The highlight of 3G isvideo telephony. 4G technology stands to be the future standard of wireless devices.

10

8/4/2019 17471997-Future-of-3G

11/26

Limitations of 2G Designed mainly for telephony application

Circuit-switched

High BER (Bit Error Rate)

Low data bit rate (< 14.4kbps)

Too many standards globally

GSM, CDMA, PDC, PHS etc.

How 3G works?

11

8/4/2019 17471997-Future-of-3G

12/26

The Advantages of 3G Technology

Perform all those functions that they perform at present with their mobile devices but at

much higher speed than before.

Provides them with faster connectivity, faster internet access, and music entertainment

with improved quality.

Can avail the benefits of video calling.

Clarity is better and the facility can be enjoyed as long as both of are using the 3G

technology.

Access any site on the Internet by using your phone as a modem for computer or laptop

and mail the important documents.

Downloading games and songs is much faster with this technology

Can be also used for favorite search engines to find information on news headlines, get

information about the evening weather. Provide with the data transmission speed of up to 2Mbps when the users are using the

phone on stationary mode.

Provides significantly faster data transfer rates of connectivity and increased networking

and most importantly the resistance to noise.

Increased the bit rate thus enabling the service providers to provide high speed internet

facilities, increased call volumes and host of the multimedia applications to their

customers.

All these services can be provided 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 making the services

cheaper. Beneficiary to the service providers as well as the intermediaries like the content

providers and the media houses who are looking for an additional platform market their

products. Basically it holds three way benefits to all the parties involved.

Improved performance over 2G, including:

Will ease spectrum constraints on the 2G networks and accommodatesubscriber growth

Will improve data opportunities as spectrum constraints are a major barrier toadoption and usage; Indian consumers already own c2m 3G devices

3G spectrum will allow incumbents to differentiate services from new

entrants and regional players Improved capacity

Improved coverage, enabling migration from a 2G deployment.

A high degree of service flexibility, including:

12

8/4/2019 17471997-Future-of-3G

13/26

Support of a wide range of services with maximum bit rates above 2 Mbps

and the possibility for multiple parallel services on one connection;

A fast and efficient packet-access scheme.

A high degree of operator flexibility, including:

Support of asynchronous inter-base-station operation;

Efficient support of different deployment scenarios, including hierarchical cell

structure and hot-spot scenarios;

Support of evolutionary technologies such as adaptive antenna arrays andmulti-user detection.

USER BENEFITS

OPERATOR BENEFITS ANDMEDIA HOUSE BENEFITS

13

8/4/2019 17471997-Future-of-3G

14/26

Guidelines for 3G Services:

The 3G (3rd generation) mobile telecommunications is the generic name for the next

generation of mobile networks that will combine wireless mobile technology with

high data rate transmission capabilities. The 3G networks will be capable of

providing higher data rates and will also be capable of supporting a variety of

services such as high- resolution video and multimedia services in addition to voice,

fax and conventional data services.

3G spectrum will be permitted in the 2.1 GHz band.

The 3G licenses would be granted through a controlled, simultaneous ascending e-

auction, by a specialized agency to ensure transparency in the selection process.

Besides the initial, one time spectrum charge, it has been decided that the successful

service provider would pay additional spectrum charge of 0.5 % of their total

Adjusted Gross Revenue (AGR), as the recurring annual spectrum charge. Thisadditional revenue share is proposed to be 1% of AGR after 3 years from the date of

spectrum assignment.

The roll out requirements, including rural roll-out, as well as stiff penalties for non

compliance of the same has been stipulated.

Mergers will not be allowed during the initial five years. No trading/ reselling of

spectrum is allowed.

The CDMA spectrum in 800 MHz band for EV-DO applications would be treated

separately from 2.1 GHz spectrum. If the CDMA based service provider(s) ask for

the EV-DO carrier of 2 x 1.25 MHz, they would have to pay an amount proportionate

to the highest bid for spectrum in 2.1 GHz band.

Issues of 3GAlthough 3G was successfully introduced to users across the world, some issues are debated by

3G providers and users:

14

8/4/2019 17471997-Future-of-3G

15/26

Expensive input fees for the 3G service licenses in some jurisdictions

Differences in licensing terms between states

Level of debt incurred by some telecommunication companies, which makes

investment in 3G difficult

Lack of state support for financially troubled operators

Cost of 3G phones

Lack of coverage in some areas

High prices for 3G in some countries

Demand for high speed services in a hand-held device

Battery life of 3G phones

Current status and Impact of 3G in India

The success of 3G is going to depend on demand for superior quality voice services and dataheavy, media rich content. The initial pricing has been on the higher side and it will have to dropif mass adoption is to ensue.

Spectrum policy in India has been the victim of slow decision-making, which has left thecountry lagging behind many others.

The delay in auction over three years has deprived Indian subscribers of the benefits of high-speed mobile data services available to over 300 million subscribers residing in over 125countries with significant concentration around the Americas, Europe, and South East Asiancountries.

This is also an opportunity for Indian software companies to join hands with service providers todevelop applications that will meet the needs of the Indian mobile user. At a later stage, thesecould be rolled out into other emerging markets..

3G in India is initially expected to provide additional spectrum for voice services. This would

pave the way for data usage on mobile phones. This is vital as operators are focusing oncustomer acquisition as well as sticky offerings to prevent churn. 3G enables better VASservices due to the higher levels of bandwidth that it can accommodate. The technology isexpected to drive data card adoption. Currently, Tata Indicom and Reliance are the only playersin the data card segment. With more players coming into the market, sales are expected to boomwith competitive prices and attractive schemes.

15

8/4/2019 17471997-Future-of-3G

16/26

Poor broadband penetration, a large untapped rural market, and the challenge of providing highbandwidth in rural areas using landlines are all factors favoring a 3G rollout. With 3G, networkoperators can offer wireless broadband services. Moreover, many operators are starved ofspectrum and as 3G offers four to five times the voice capacity of 2G spectrum, it is a cost-effective tool to deliver voice. Services beyond voice and text can be offered; 3G offers a

platform which can offer true multimedia services.

The technology will be critical for operators in enabling the differentiation of their serviceportfolio, by providing a far richer service experience than is currently availableparticularly inthe deployment of audio-visual services.

The fundamental driver for 3G in India is to serve the countrys demand for broadband services.From a technological point of view, in areas where no fixed-line infrastructure exists, deployinga mobile network is much cheaper and it can be rolled out a lot faster than wired infrastructure.

Revenue from Value added Services

Roll-out strategies

Starting in February 2009, BSNL and MTNLthe state-run operators who were pre-awarded3G licenseshave rolled out 3G services in 70 (BSNL) and two (MTNL) cities nationwiderespectively. The private telecom operators are in the process of planning their 3G networkinfrastructure and awaiting final approval from the DOT auction to start rolling out theirnetworks; they are ready to go fully operational within six months of spectrum allocation.

Despite the hype around 3G, MTNL and BSNL have attracted a few thousand subscribers forthese services. Lack of attractive applications and content, the high monthly charges and theanticipation of private players entering the 3G arena soon are the likely reasons for the lowuptake of 3G services. Meanwhile, Frost & Sullivan estimates that the number of 3G subscriberswill be around 7-8 million by the end of FY 2009-10.

In the first year of 3G operations, the operators are expecting 3G subscribers to pay about fivetimes the current 2/2.5G tariffs. 3G-enabled handsets and data modems for laptops are also likely

16

1752

27123708

5000

7252

11096

0

2000

4000

6000

8000

10000

12000

2005 2006 2007 2008 2009 2010

Rs Cr

8/4/2019 17471997-Future-of-3G

17/26

to be expensive. This is a steep increase and will target only niche demographics, but in thecoming three-four years the operators will see higher subscriber volumes and better operationalefficiencies and consequently the prices will drop to attract a wider audience. The challenge foroperators will be to offer wide coverage (including roaming), high quality service and attractivecontent in the initial years to sustain high-paying subscribers long enough to reach the tipping

point of growth.

Market opportunity

According to the Federation of Indian Chambers of Commerce and Industry (FICCI), in India,the 3G subscriber base is expected to hit 90 million by 2013, accounting for 12% of the overallwireless user base. By 2013, 3G service revenues are expected to generate $15.8 billion,accounting for a share of 46% in overall wireless service revenue. Due to the 52% contributionmade by the replacement market, annual sales of 3G devices are projected to reach 81.3 millionby 2013.

There will also be an increase in the share of non-voice services, including data card access, andshort messaging service. The Average Revenue Per User (ARPU) from these services will risefrom the present 9% to nearly 23%.

3G would be initially deployed as a voice technology. The ARPU is not expected to risesignificantly in the initial years. The overall impact on ARPU will be determined bypricing/bundling strategies that operators adopt. In some markets, where 3G services havealready been provided, operators have adopted a penetration pricing strategy, aimed at building astrong base of 3G users by pricing 3G services attractively.

Indian mobile operators already generate significant revenues from non-SMS data services and3G will see new, exciting data services available to the Indian public. Its worth noting that Indiaalready has a dynamic mobile content industry.

However, some experts think that apart from data cards, there are no other killer applications inmobile data services. In the enterprise, e-mail may be a major driver for this market. As far asretail is concerned, video streaming could be a driver. This depends upon the pricing of videoclips and the download speeds that 3G can guarantee. 3G services are at a nascent phase withonly state owned companies offering 3G services in limited pocketsso real price cuts cannotbe seen

Getting subscribers on the 3G bandwagon

In urban regions, telecom carriers are facing declining service quality and decreasing marginsper minute. With 9% of the subscribers contributing 45% of carriers margins and 29% of

17

8/4/2019 17471997-Future-of-3G

18/26

revenues, 3G will certainly enable the carriers to transfer high ARPU customers to thecongestion-free 3G network.

A combination of better services, innovative applications, and smart handset bundling coupledwith right pricing can attract a large base of users to 3G. Besides, many Indian customers already

have 3G-enabled devices. These people will be the first movers.

In order for the customers to know and get the feel of 3G, MTNL is initially offering a trial packfor 15 days. The customer can get a first hand feel of exactly what 3G is all about. They canexperience the service, and MTNL is sure that after getting the feel of the same the customerswould not like to go back to 2/2.5G data services.

To improve overall service experience, operators will need to allocate spectrum for 3G toprovide improved voice services. However, this is unlikely to impact the ability to provide richerVAS services. The eventual cost of deploying 3G networks may deter operators from rolling out3G networks to the entire existing customer base, meaning that some segments will not have

immediate access to 3G. The cost of deploying the networks may impact the pricing strategiesfor service packages offered to the market, with operators adopting different strategies to attractnew subscribers and cover their investment costs.

3G Applications in your life.Basically, 3G opens the door to anything you can imagine. You will be able to do a multitude ofthings while going through your daily schedule, whether at work or at leisure. The scenariosbelow demonstrate just a few applications for 3G and only hint at what will be on offer in thefuture.

Scenario1:An executive at a client meeting realizes that he has brought an outdated version of hispresentation. Its no problem though because one of his colleagues back at the office emails theupdated PowerPoint file directly to his 3G terminal. He transfers it to the laptop (wirelessly ofcourse) and is in no time ready to start the presentation.

Scenario2:This scenario is about three women who are trying to find a gift for their friend. Two of them areout shopping, but they are out of ideas and use a web site that generates gift suggestions based onpersonality profiles. They decide to buy a handbag at a shop situated somewhere near the citycentre (but at an unknown address to the women).

Not knowing exactly where the shop is, they use a map and positioning service to find it. Themap is displayed on their 3G terminal and shows them the shop location and their currentposition.

At the shop, they want to make sure that the third woman (who was unable to make it) likes thegift. They take a digital picture of the bag and send it to her with a hand written note seeking her

18

8/4/2019 17471997-Future-of-3G

19/26

approval.

Scenario3:The grandparents are out travelling in Europe. Here you see them in front of the Eiffel tower.

(The tour guide took the picture of them admiring the magnificent building).In order to sharetheir experiences with their friends and family, they have created a virtual photo album on theirpersonal web site. This way, anyone with access to the Internet can follow them on their trip.

But what about those without Internet access? Well, that's been taken care of by the WalkMailnetwork. The pictures are printed, together with the text, on high quality paper and delivered asregular postcards within 24 hours.

Scenario4:

A busy executive doing her grocery shopping hasnt had time to queue at a teller machine, butcash is not needed. At the check-out, she uses her 3G terminal to pay for the groceries. Itautomatically debits her bank account, and gives her an updated balance on request.

Scenario5:In this scenario, we see two men talking on their way from a meeting. They decide to go out todinner, but one of the men would like to invite his wife along so he checks her calendar on his 3Gterminal (their calendars are constantly in synch).

Scenario6:So far, there has not been an easy way to electronically communicate with character basedlanguages. But this drawback is over come with the white board application.

The person in this scenario is actually handwriting a message when a friend of his initiates avideo call with him.

This way of creating a message makes the communication more personal than a regular e-mailwhether in Chinese, Japanese, English, French or any language.

Scenario7:This guy would like to catch up with his friends for a coffee. He uses the SeekYourFriends

service to find out who's on-line, and then sends a message telling his friends to meet him in agroovy new caf that hes just discovered.

19

8/4/2019 17471997-Future-of-3G

20/26

Future of 3G

The good news for mobile users is that now 3G has been uploaded in all the latest handsets fromthe leading manufacturers including Sony Ericsson, Samsung, LG, Nokia and Motorola. Inaddition, a new technology called HSDPA has been upgraded with the 3G system which worksfaster than 3G. The latest gadgets are well-equipped with power-packed features, enabling you tocommunicate and enjoy loads of fun.

Today 2G is booming, one of the big reasons is the low-priced handsets. This, however, is notthe case with 3G. Opportunities are big, but we will have to make it happen.

The success of 3G will depend on innovative business models. The most certainly needed thingis favorable regulations in terms of spectrum fees. It is creation and competition that are the twomantras for the success of 3G in India. There is a need for creating an enthusiasm of technologyamong the consumers, and 3G portals need not be the only goal of the operators.

The big challenge set before us is the affordability of the 3G devices. Educating the customer on3G is another challenge. 3G is most certainly going to be exciting, but also challenging. We needthe infrastructural support and the handset, too, would be at an affordable price. The stakeholders

should come together in order to see some good development. There is an opportunity totransform the society, which is possible as long as all of us can work together.

One of the advantages of 3G network is that it would give better voice clarity. It will shift theInternet largely to the mobile space and we can ensure a 3G success

A matter of concern before us is the kind of bidding that would take place. It is equallychallenging to attract consumers to 3G. The reason why ARPUs are on the decline is because theconsumers are not able to see value for money. We need to concentrate more on customers. Aproper working strategy will lead to the success of 3G services.

Which companies have applied for 3G license?

3G spectrums has been provided to GSM players like BSNL, MTNL, Bharti, and Vodafone andsome international companies have also shown interest to carry out an interface check on a non-commercial basis ahead of the start of 3G mobile services.

20

8/4/2019 17471997-Future-of-3G

21/26

Apart from PSU majors, spectrum for carrying out 3G trials has been given to all those who haveapplied under the National Frequency Allocation Plan on the 2.1 GHz band. GSM playersoperate on 900 MHz and 1,800 MHz, while CDMA players operate on 800 MHz.

What is the pricing issue in India?

While Tatas have welcomed Trais Rs 1,400-crore (Rs 14 billion) base price for a nationwiderollout of 3G services, the rest of the players find the price too exorbitant.

Bharti-Airtel is disappointed with the pricing as they were expecting it to be Rs 300-400 crore(Rs 3-4 billion). The reserve price is a disincentive for telecom companies in India. Bharti hasappealed to lower the prices especially for rural penetration.

What about the security in a 3G network?

3G networks offer a greater degree of security than 2G predecessors. By allowing the UE toauthenticate the network it is attaching to, the user can be sure the network is the intended oneand not an impersonator. 3G networks use the KASUMI block crypto instead of the older A5/1stream cipher. However, a number of serious weaknesses in the KASUMI cipher have beenidentified.

In addition to the 3G network infrastructure security, end to end security is offered whenapplication frameworks such as IMS are accessed, although this is not strictly a 3G property.

Where was 3G spectrum first introduced?

Japan was the first country to introduce 3G on a large commercial scale. In 2005, about 40 percent of subscribers used only 3G networks. It is expected that during 2006 the subscribers wouldmove from 2G to 3G and upgrade to the next 3.5 G level.

The success of 3G in Japan also shows that video telephony was the killer application for 3Gnetworks. Downloading music was the biggest draw in 3G services.

There are about 60 3G networks across 25 countries.

For infrastructure providers 3G will be a value-add during slowdown, as they would get to put ina lot of new developments. Layout of next generation networks that are 3G compatible will help

in better manageability of services over the networks. Even service providers believe that 3Gwould make the entire mobility space much more accessible. The broadband connection, as theyhave not reached the set target, will also benefit with 3G coming to India.

3G will help service providers manage their existing infrastructure better and remain competitivein a mobile number portability (MNP) regime. It will also generate a more addressable market tothe GSM service providers. They can go back to their existing customer base and provide themwith enhanced data services

21

8/4/2019 17471997-Future-of-3G

22/26

3G will not only make its presence felt in cities and towns but also bring in better and fasternetworks to rural India.

In the years to come 3G would make a lot of difference in making business models moreinnovative. 3G and WiMax will help solve the problem of low broadband penetration in India to

a great extent. It is high time the government realizes the need and use of 3G. In a fast growingeconomy these technologies have the power to change the development roadmap of the country.

Looking Ahead..

BSNL and MTNL are very differently placed in comparison to other private players. It is notyet known when 3G auctions will happen and which companies will be in the spectrum run.With a huge amount of investment only to acquire license, a lot of other costs would be

involved when it comes to network building and implementation.

But the high costs will lead to new services making its way into the market, especially the urbanareas. Unlike 2G, in 3G one has to come up with very innovative applications and tariff plans.

The penetration level of 3G, however, is still uncertain. The new technology comes with costsattached, and while the upper-middle class business professionals might be able to utilize theseservices, a major part of our population is still far from the levels of affordability that theseservices ask for.

With a per capita income (national average) of as low as $950 per annum (Rs 38,000

approximately), access to these technologies shall remain for the select few. Rs 8,000, theminimum amount required for purchasing a 3G handset, is a luxury that most can't afford. Also,other gadgets such as laptops, which can use 3G-run broadband access, are yet to make inroadsamong the large population.

Even as most handset manufacturers see a tremendous growth opportunity in the realm of 3G-enabled mobiles, it is certain that price will play a key role in deciding the fate of the newtechnology. To tackle this concern, mobile phone manufacturers are making efforts to come upwith phones as cheap as Rs 3,500, against the currently available minimum price of over Rs8,000. Mobile makers in India are also expecting prices to dip, and thus are contemplatingaggressive plans to come up with affordable handsets in this category.

Analysts say that 3G first needs to be popular with the middle class segment if it is to bring themuch talked about broadband revolution. For such kind of change to take place, the price ofthe handset and the services will play a crucial role.

About 15-20% mobile phones in India are already 3G-enabled, but they have to be madeaffordable. The availability of reasonably priced phones has already made many experts rework

22

8/4/2019 17471997-Future-of-3G

23/26

their estimates of the size of the 3G market to grow from the present 40-70 mn to 100-150 mn by2012.

3G is one of the most cost effective ways to deliver mobile broadband to the masses. Expectedly3G can single-handedly achieve far more in terms of bridging the digital divide than any other

way of mobile internet connection introduced by the government.

Because of its higher voice capacity, 3G could also facilitate the delivery of far more cost-effective voice services. However, this will happen only if operators do not have to payexorbitant prices for 3G spectrum. An auction of 3G spectrum could lead to irresponsiblebidding resulting in high costs and tariffs, which would completely negate the tremendouscapacity advantage that 3G has to offer.

Auctions also have another downside - by their very nature, they entail a selection amongstbidders, which would result in discrimination between existing cellular operators as it would

deny some operators their legitimate expectation of evolving to 3G. Also, it would not be in thenational interest if the 3G policy ended up being disruptive, creating uncertainties, leaving thesurvivors with the winners' curse and others with the prospect of gradual collapse of businesses.

Therefore, the answer to the question raised is that, yes, 3G has a future in India and that it isrelevant and important, but the key to the success of 3G will lie in its price, that is, if it has tobecome a mass service. 3G did not take off in the west because of the exorbitant prices attachedto its spectrum, which made the service unaffordable and restricted to a niche market.

The 3G service can also help to alleviate the severe spectrum crunch that is currently being

experienced by various operators, especially those in the big cities and metros. There simply isnot enough 2G spectrum that can fuel the aggressive growth in services.

Also the 3G spectrum has a voice capacity that is four-five times higher than the 2G spectrum.This could actually play a crucial role in helping to overcome the limited availability of the 2Gspectrum. It may be helpful in achieving a national telecom target of 250 million by 2009 and500 million by 2010.

3G networks enable network operators to offer users a wider range of more advanced serviceswhile achieving greater network capacity through improved spectral efficiency.

23

8/4/2019 17471997-Future-of-3G

24/26

Dispute over foreign Telecom companies

Overseas, 3G has failed to deliver on the hype that often led to frenzied license auctions.

In South Korea, SK Telecom Co and KTF Co have been offering 3G services for more than ayear, but high costs associated with subsidies for new phones and marketing has been a worryfor 2G market leader SK.

Singapore, Indonesia and Malaysia are few examples where 3G mobile broadband has given aboost to its revenue growth. Investment and the capacity of the investment possess a toughchallenge before India.

Foreign telecom firms could gain access to India's booming mobile market through a global

auction of 3G licenses this year, but low call rates and established players mean it could take

years to turn a profit.

Foreign telecoms with 3G experiences are allowed to bid at the auctions, opening the way forfirms such as AT&T, Etisalat, NTT Docomo to gain a foothold in the world's fastest-growing

mobile market.

But India's 2G operators, including Bharti, Airtel, Reliance Communications, Vodafone Essarand TM International -backed Idea Cellular, are not going to cede their territory easily.

Five 3G licenses will be available for most of India's 22 service zones, although limitedspectrum means there will be a maximum of three in large cities such as New Delhi andMumbai.

24

8/4/2019 17471997-Future-of-3G

25/26

Next-generation high-end 3G services give users a chance to enjoy fast Internet access, gamesand a host of multimedia content from maps to music on their cell phones, areas where 2G hasbeen handicapped by a slower data transfer capability.

India has set a base price of 20.20 billion rupees ($435 million) for a national license. Actual

bids are expected to be higher, especially in lucrative centers such as Mumbai and New Delhi, asthe government is looking to raise up to $9 billion.

Importantly for new entrants, a winning 3G bid does not automatically get a bread-and-butter 2Glicense. Foreign operators will have to look for an Indian partner that owns a 2G network.

New 2G licenses such as Unitech, Datacom and Loop Telecom could be targets for foreigners,although Indian policy at present does not allow two 2G license holders to merge their licensesfor three years from issue.

A huge untapped market beckons in the rural areas, which currently accounts for only a third of

total mobile users in India. If the government's plans to connect every village to a broadbandnetwork are fully implemented, this market could see an explosive growth.

TRAI and DoT disagree on the issue of permitting foreign telcos to bid for 3G spectrum. DoTthinks the present competitive intensity (14 existing telcos) is not enough for competitivebidding in the 3G space and as such has been exploring the idea of allowing foreign telcos to bid.Meanwhile, TRAI thinks existing operators are in a better position to deliver 3G servicesefficiently and quickly. According to TRAI, any foreign telecom player who emerges as asuccessful 3G bidder via international auctions will have to acquire a Unified Access ServiceLicense (UASL) before they can begin operations. The issue of a UAS license will entitle themto 4.4MHz to start 2G operations. This will mean more players in the crowded 2G space which

already has 14 players. Another option is to allow overseas bids for 3G spectrum but not allowforeign players any rights to 2G spectrum. This will involve creating a new license category,which may delay the 3G auctions. As we stated earlier, while bidding for 3G makes no sensefrom the business perspective, it does represent an indirect way to obtain 2G spectrum. It is thisthat is creating a lot of interest. We believe the queue for 2G spectrum will discourage the Indianregulator from holding international 3G auctions. But the regulator is unpredictable and wecannot rule out further surprises.

How will 3G policy unfold?

Our analysis suggests that international players will not be allowed to bid for 3G spectrum.

The key constraint for the regulator is the limited availability of 2G spectrum, which is availableon a seniority basis. Any foreign player becoming eligible for 2G spectrums via international 3Gauctions will have to wait until the new entrants and existing players receive their share of 2Gspectrum. Any attempt to modify the seniority based rule would lead to litigation and delay the3G spectrum auctions (which the Indian government wants to avoid). This poor visibility is amajor deterrent for any foreign player wanting to bid aggressively for 3G spectrum

25

8/4/2019 17471997-Future-of-3G

26/26