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3G fails to gather speed in India

Launched nearly 10 months ago, 3G services not picking up demand amid customer complaints about slow speeds and patchy connectivity. Some subscribers have even returned to 2G networks.
Written by Swati Prasad, Contributor

INDIA--Introduced by private telcos nearly 10 months ago, 3G services in the country have failed to garner adoption amid customer complaints about slow speeds and patchy connectivity.

Udayan Bhatt, a manager with an IT firm in Mumbai and Airtel subscriber, signed up for 3G services but expressed his disappointment about the weak voice signal.

He told ZDNet Asia in a phone interview that he has yet to experience faster speed while browsing the Web on his mobile. "It's almost as good or bad as the GPRS [on 2G]," Bhatt said.

He noted, however, that the experience improves when watching videos. "And I do see better download speed when I am downloading apps on my phone," he said.

Kamlesh Bhatia, research director at Gartner, said in a phone interview: "Most consumers have found the 3G coverage to be patchy and the 3G experience, [especially with regard to entertainment and infotainment], to be inconsistent".

Subscribers have also noted that lack of 3G coverage in some pockets within the city, even after 10 months since 3G services were introduced. The installation process has yet to be completed, with many major towns still lacking 3G network coverage.

According to CyberMedia Research (CMR) estimates, as of Jun. 30, 2011, the number of 3G subscribers in India was approximately 10 million.

"It's a sluggish start, but is expected to improve in the coming quarters as 3G services are rolled out by operators in new cities and towns," Naveen Mishra, CMR's lead telecoms analyst, told ZDNet Asia.

Stats from the Telecom Regulatory Authority of India revealed there were 851.7 million mobile subscribers in the country in June 2011.

Operators paid a whopping US$14.6 billion in May last year to secure 3G spectrum.

"This has constrained operators' ability to invest in upgrading their networks," Mishra said in an e-mail, adding that this has resulted in low speeds, poor network quality and high pricing, and led to the slow takeoff of 3G services.

"In fact, some subscribers have reportedly moved back to 2G services due to the poor experience on 3G networks," he said. Other irritants slowing down 3G adoption include frequent call drops, the lack of network coverage in smaller cities and towns, low penetration of smartphones and fast battery drainout, the analyst added.

Cautious rollout over limited spectrum
According to Bhatia, the 3G auction last year had helped create curiosity about the technology. "Everyone was curious to know whether it can usher in a new experience to the user or not," he said.

Most of the operators started by offering free service subscription and starter packs to their subscribers. Simultaneously, they rolled out their networks, carried out testing and optimization on the network.

They also adopted phased implementation, for instance, calling Delhi a 3G-enabled area. However, doing so did not necessarily mean every corner of the Indian city would have access to 3G services. "Such an experience is detrimental to the value proposition of 3G," Bhatia noted.

More importantly, spectrum remains very limited in India, he added. "That's why operators have been cautious in rolling out value-added services," Bhatia said.

Romal Shetty, executive director and head of telecom at KPMG, told ZDNet Asia in a phone interview: "In India, the networks are getting choked so the operators are first focusing on voice."

He added that curiosity over 3G could only help telecom companies to a certain point. "The consumers see their signals change from 3G to EDGE network. They are not getting a consistent experience. Therefore, the excitement has not been there," he said.

Poor data traffic
To drive 3G usage, operators need to encourage more intensive data consumption, Shetty said. However, even in the case of 2G services, the ratio for subscriber consumption between data and voice is 8:92. "Content never really picked up in India," he added.

In comparison, the split between data and voice is nearly 60:40 in Europe, 35:65 in the US, and 40:60 in Japan and Korea, he noted.

Shetty believes India's data-voice ratio can reach 20:80, adding that this will help improve the margins of operators. "But here, we are [still] trying to implement 3G while giving 2G services," he said.

In addition, the industry has not really developed any killer app for 3G, the Gartner analyst said, urging operators to partner relevant content developers to introduce new mobile apps.

"In my view, 3G will pick up after two to three years," Shetty said, noting that worldwide, 3G service is also not known to fetch high returns for operators.

Mishra concurred: "Although a good number of apps are available, it will take some more time for a full range of value-added services to become available in India."

According to the CMR analyst, operators and content providers would do well to develop apps for video-driven content based on specific religious, socio-cultural and sporting events, which are very popular among large sections of Indian society.

And while the country's adoption of smartphones is currently low, Mishra said when demand does pick up, it will drive 3G usage which would further feed the development of new apps. "[This] leads to a virtuous cycle of increased adoption, higher usage and new apps in the medium to long term," he said.

However, Shetty noted that such innovations have yet to take place because there is little incentive for content providers to do so. "In Europe, the content provider gets 70 percent of the revenue from value-added services and mobile content, while the operator gets 30 percent.

"In India, the operator gets to keep 80 percent of the revenue, while 20 percent goes to the content firm. In some cases, the content provider gets only 12.5 percent," he revealed.

Uncertainty over network investment
The bigger question concerning Indian operators involves investment. 3G is a capital-intensive business that requires incremental investments, but operators here are unsure whether they should first roll out 3G service nationwide or wait for subscribers to come onboard.

As such, many have adopted the phased approach and the low service adoption has resulted in disillusionment among the early birds.

"The fear of broadband wireless access (BWA) lurks large over 3G operators," Bhatia said, noting that there has been talk of unified licensing in this market segment. The government may also allow voice over BWA in future, he added.

"Under such circumstances, can 3G compete with BWA?" Bhatia posed.

Ultimately, though, India's networks are clogged and operators need to make the investments, even when they remain skeptical about pumping further investments as their profits are slumping.

Shetty said: "There is pressure from the shareholders to reverse that trend."

India's largest mobile operator, Bharti Airtel, last month announced a 28 percent fall in net profit, in its April-July 2011 quarter results, to US$252.8 million from US$349 million in the previous year. It attributed the drop to investments in 3G services and costs incurred in the acquisition of Africa's Zain Telecom.

"There is a lot of uncertainty in the market," Shetty said, noting that voice-over-IP today remains illegal in India. "If voice-over-BWA is allowed, everyone will be affected."

The country needs to overcome 2G scams and other regulatory uncertainties, and work toward a new telecom policy that eases merger-and-acquisition regulations for telcos, he added.

Concurred Bhatia: "We need more clarity on regulations."

Swati Prasad is a freelance IT writer based in India.

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