With over 9 million 3G connections within months of launch of this service by several private operators, we are hopefully seeing the picking up of growth of broadband services. Till sometime ago, broadband services depended almost entirely on DSL-based services using landlines, with relatively small contribution coming from the 3G services launched by the public sector operators.

It is possible that the current spurt is coming from the existing high-end users with the private operators turning to wireless-based broadband service for greater flexibility and mobility. For this growth to sustain and accelerate, it is essential to bring in new users of broadband, for which several things must happen.

Consumer expectations

Consumers clearly expect to be able to access useful multimedia applications. Such applications will work better with 3G connections. They would require feature-rich handsets that are affordable. They would also demand ubiquity of the network. The present 3G networks face several challenges to be able to meet these expectations of consumers.

For 3G networks to become ubiquitous, they will have to expand substantially. 3G networks have a granularity of 5 MHz and, therefore, for geographical expansion, they require substantial capital infusion with initial low customer base, implying low returns in the initial years. For the service to become viable, rapid growth of consumer numbers is essential. The trend of the recent months is promising, unless it has indeed come from existing high-end users.

A mix of such users and entirely new users would be the ideal situation and development and offering of useful new applications would help in achieving this objective.

In 2G services, a clear market demand existed because the usefulness of plain vanilla voice service with mobility was well understood. However, 3G service providers will additionally have to invest heavily in developing newer broadband applications that catch the imagination of consumers. Then competition shifts to amongst 3G operators rather than with 2G services.

4 factors on tariff front

In terms of the tariffs offered to consumers for 3G services, four factors have to be considered.

First, the cost at which the operators have bought the spectrum. Clearly, these costs are high and there is little that service providers can do about it except to try and accommodate as many consumers as possible without impacting the quality of service so that this large fixed cost is distributed over as large a base as possible.

Second, 3G applications are high-bandwidth-consuming and therefore in comparison with 2G services, the backhaul bandwidth costs are higher. This is where government and regulatory intervention to lower the backhaul bandwidth costs and permission to share bandwidth is highly desirable.

The third factor relates to tariff plans. It is quite evident that unlimited download plans cannot work since the revenues from data services are still small and available bandwidth is small. In this connection, the experience of AT&T in the US is relevant, where the network got overloaded and congested soon after the introduction of smart phones with unlimited download plans.

The fourth important factor is the need to rationalise licence fees and spectrum charges to encourage the growth of 3G services.

We have seen the tremendous advantages of a competitive market in the 2G service domain. Competition is highly desirable for better quality and low tariffs. At the moment, however, the competition is coming from 2G services rather than from among the 3G operators. This will change when service differentiation of 3G services manifests itself with development of newer applications.

computer-based applications

There is tremendous growth prospect for 3G and 4G services as consumers at large are realising that they can achieve substantial improvements in the efficiency of their operations through the use of computer-based applications. Consumers face huge limitations in using general-purpose computers due to their high cost and poor availability of commercial power.

This is where 3G services could score easily with falling trends in handset costs. For success in India, these price levels have to come down further while retaining richness of features.

The initial tranche of 5 MHz is also a major limitation. It impacts an operator's ability to achieve a large customer base, to ensure high data speeds in the network and the achievable quality of service. Already, there are complaints about the quality of 3G services being provided presently. Government will have to quickly find new blocks of 3G spectrum for achieving a high growth rate for 3G services while retaining low enough tariffs.

Quality of handsets

An aspect often not understood — and therefore not given enough importance — is the deterioration of the network performance of 3G services due to the use of poor-quality handsets or data devices. This is a well known phenomenon of coverage area shrinkage in CDMA networks. In the presence of poor quality handsets, creation of high-quality network with ubiquitous coverage requires unnecessarily high capital infusion on equipment.

Paying attention to the need to follow standards, creating testing facilities and insisting on testing before introduction of a handset are aspects that require government and regulator's immediate attention for the success of 3G services.

The author is Former Member, TRAI.

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