3G in India to be a privilege for the rich

While many developed nations are planning 4G roll out, India is yet to see full fledged 3G across the nation. When 3G comes it will be pricey.

While many developed nations are planning 4G roll out, India is yet to see full fledged 3G across the nation. After much delay the government finally pulled off what is widely regarded as an open and transparent auction for the 3G spectrum. The auction was a pricy affair, the government made a staggering Rs 67,718.95 crore which is close to $15 billion.

Given the amount of money involved it was evident that while the government will rake in quite a handsome amount for its various national activities, the telcos will be recovering this investment from the customers.

Sunil Mittal, head of Bharti Airtel, a company that spent Rs. 12,295 crores for spectrum in 13 circles which include Mumbai and Delhi, acknowledged this predicament. According to Mittal, to recover their investment (in Mumbai and Delhi) the company would have to charge somewhere close to Rs. 800 to 900 per month for a 3G connection, presumably with outrageous data caps much like GPRS, data cards and broadband. To put this in some perspective, an unlimited* broadband connection (from Airtel) with variable 512kbps-1Mbps speeds costs Rs. 1,250/- a month.

Other service providers will have a similar cost structure and the chances of a price war to the bottom is highly unlikely since any such move would result in huge losses for the companies. A cartel perhaps? That would be too strong a word since the economics of 3G are complex.

The Indian mobile market is probably one of the fastest growing and this is due to the competitive and aggressive pricing by the handset manufacturers and carriers. This however, wasn’t the case a few years ago where cell phones were affordable but people used give “missed calls”. (Unlike the United States, operators here don’t dictate terms, the consumer does. Of course this doesn’t mean we have great service.) The same is expected to be the case with 3G, initially the service will be for the rich till that one operator comes along and slashes prices for everyone to follow suit. I await that day.

Both, content creators and advertisers are hoping to provide a rich experience to the consumer. Given the widespread use of smart phones, a lot of hopes are riding on 3G services.

*Subject to Fair Use Policy