Next-gen networks to bridge India's digital divide

Amid its celebration of the Festival of Lights next week, India will also welcome the launch of more 3G services as it moves toward a new era of high-speed connectivity, which analysts say will play a crucial role in bridging the country's digital divide.

The Indian telecom market is expected to see more operators rolling out 3G and broadband wireless access (BWA) services over the next six to nine months. Today, only state-owned operators--Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL)--offer 3G services.

Come Nov. 5, however, as the Indian community celebrates Diwali, the country's first private operator--Tata Teleservices--will launch its 3G services in nine services areas.

Bharti Airtel, India's largest mobile services provider, also plans to launch its services in 13 circles before the close of 2010. Vodafone Essar will do likewise in nine circles between January and March next year.

Sanjay Kapoor, Bharti Airtel's CEO for India and South Asia, said in a statement: "3G services have the potential to transform the lives of millions of Indians by taking a variety of life-enhancing services on high speed broadband to the remotest corners and bridge the digital divide."

Alongside 3G, India will also see the proliferation of BWA services. Market player, Tikona Digital Networks, has already launched its service and recently unveiled a new 2Mbps wireless broadband plan, priced at US$11.2 (INR 499). Others players are expected to roll out their BWA offerings in coming months.

While most operators prefer the Long Term Evolution (LTE) platform, they are likely to start with WiMax because the former is not commercially available and mass adoption is expected only in 2012.

According to reports, Reliance Infotel--which is the broadband services arm of Reliance Industries--will launch WiMax in the first quarter of 2011. The company has a pan-India BWA license.

Although the BWA spectrum was allotted before 3G, India is seeing a slower rollout of BWA.

"While in the case of 3G where only incremental investments need to be made, BWA rollouts require substantial investments," Kamlesh Bhatia, principal research analyst at Gartner, told ZDNet Asia in a phone interview.

Bryan Wang, associate vice president of connectivity at Springboard Research, cited the cost of customer premise equipment (CPE) as the main reason behind the delay in Wimax rollouts. According to various reports, WiMax CPE could account for 50 to 60 percent of an operator's capital expenditure and is likely to remain high for the next two to three years.

Next phase of growth
With the launch of both BWA and 3G, India--where broadband penetration remains among the world's lowest--is moving into the next generation of networks. This, Bhatia said, will improve the reach of several e-government services and bridge the country's digital divide, with these high-speed networks impacting two key areas: data and broadband adoption in rural areas.

The Gartner analyst said BWA and 3G will open up the rural market for banking and retail including mobile-commerce (m-commerce). BWA, in particular, will bring more people into the addressable market.

According to Kasturi Bhattacharjee, associate director of infocomm advisory at PricewaterhouseCoopers, 3G and BWA will drive the proliferation of data in the form of email and other office-related applications, as well as new infotainment services.

Application developers and software companies are also actively engaging operators and handset manufacturers to bring in more local applications that fulfill different business and consumer needs in the market.

"Operators are looking at the next killer-app, like the SMS, to generate additional revenues from 3G," Bhattacharjee told ZDNet Asia in a phone interview. "Consumers could find it easier to view movies, sports channels, news, songs and other forms of digital entertainment [on their mobile devices]. In fact, operators may reach out to large housing complexes [to build] their own private virtual private networks (VPNs) that offer Internet, television and telephony."

3G will also build a new content and service business, creating an environment for value-added services (VAS) in which providers develop innovative and affordable offerings.

For instance, Bharti Airtel plans to introduce a suite of products in areas such as m-commerce and mobile health. It is also in discussions with other operators to offer 3G services to its customers across India, as part of efforts to ensure seamless roaming and 3G broadband to its subscriber base.

Bharti will be deploying high-speed packet access (HSPA) networks provided by Ericsson, Nokia Siemens Network and Huawei, which will plan, design, deploy and maintain a HSPA network in Bharti Airtel's 3G circles.

Vodafone Essar also plans to offer a variety of applications via its 3G network.

Affordability the biggest challenge
3G is expected to boost operators' revenue amid falling call tariffs for basic service, but these players will need to first meet the unique traits of the Indian market. Often described as many markets in one, India will need a high level of localization so services can be available at a low cost.

According to Bhattacharjee, operators may face several challenges including price-points of devices such as 3G-enabled CPEs as well as services, and the ubiquity of devices.

"At the end of the day, how many people can afford to pay US$45 (INR 2,000) or more a month for a mobile service?" she questioned. "In a market like India, affordability will remain a big issue."

Given the high entry cost of 3G spectrum and the capital expenditure involved with infrastructure rollout, the tariffs for 3G are likely to be on the higher side.

Wang noted: "This is expected to impact the adoption of services in the first two years, especially in the B and C-class circles."

According to the Springboard analyst, 3G and BWA subscriber uptake may pick up after 12 to 18 months when operators and other vendors in the ecosystem avail more affordable 3G devices.

Bhatia, though, believes 3G will be affordable soon. Initially, operators are likely to target premium consumers in the metros but once BWA is launched in mid-2011, competition will pick up and prices will come down, he said. He also expects to see more innovation in how services and devices are packaged and marketed.

Swati Prasad is a freelance IT writer based in India.