Rajan S. Mathews Issue: India 2011
Article no.: 1
Topic: India’s 3G challenge
Author: Rajan S. Mathews
Title: Director General
Organisation: Cellular Operators Association of India (COAI)
PDF size: 249KB

About author

Bio Rajan S. Mathews is the Director General, Cellular Operators Association of India (COAI). Prior to joining COAI as DG, Rajan served as COO of US Operations and Corp.CFO and VP of Telargo Inc, overseeing all of the company’s Financial, Treasury, Accounting, Tax, Administrative and Human Resource functions. Prior to joining Telargo, Rajan was President of Afghan Wireless Communications Company, establishing it as Afghanistan’s largest and most profitable telecommunications company. Before this, Rajan served as VP and CFO of Call Sciences Inc., a premier provider of Unified Communications Services. Immediately before this, he was at A T & T Wireless, where he held a number of executive leadership positions, including Divisional CFO, Corporate Controller, President and CEO of one if its largest joint ventures – Birla-AT&T in India (now IDEA). Earlier in his career, Rajan was a finance executive at such companies as Beatrice International, Tri-Star/Columbia Motion Pictures and senior consultant at Pricewaterhouse Coopers. Rajan served on the boards of several for-profit and non-profit organizations. He earned both his Master of Business Administration and Master of Arts degrees from Rutgers University and he is a CPA from the State of New Jersey.

Article abstract

Mobile broadband demand in India, the world’s second largest wireless market, has been quite low – only 274 million wireless data subscribers. The introduction of 3G mobile broadband will drive the mobile market and, for the first time, bring a new range of services to rural India – services at par with those their urban counterparts enjoy such as tele-medicine, e-education, weather reports, farming practices, market and commodity prices – services that can lead to a substantially better standard of living.

Full Article

INTRODUCTION From a position in 1994, where teledensity was 1% to the present where it has just crossed 60%, and in rural India 30%. It is to everyone’s credit that India has come a long way. This transformation has been brought about by the aggressive and sustained growth of the mobile industry, which has gone from strength to strength in recent years. COAI members are now gearing up to launch third generation (3G) services in the country, which involve high-end data offerings on mobiles. We believe that all citizens of India should have access to broadband and the transformative opportunities it offers. In fact, broadband represents an enormous opportunity to provide a platform for improving an individual’s quality of life by providing increased opportunities for income generation and fostering innovation across all walks of life to our citizens. They help businesses reach new markets and improve efficiency and they enhance the government’s capacity to deliver critical services. Availability of broadband services will attract new investment, create jobs and provide a larger more qualified labour pool, and increase productivity through infrastructure creation and access to new and improved services. The demand of broadband in the country has been dismally low because of penetration of broadband through fixed lines. In India, as of June’10, the number of internet subscribers was 18mn, whereas the number of wireless subscribers who have subscribed to data were around 274 mn. We believe that wireless is therefore the preferred route to get the desired broadband penetration in the country as it will enable faster roll-out. Higher bandwidth coupled with technology innovations will bring about a radical change in the country’s mobile market, as it would facilitate higher speed and data throughputs, enabling the delivery of a wide array of multimedia services, such as video streaming, music, movie downloads and mobile TV. I believe that the introduction of 3G is both desirable and exciting for rural India also. It is desirable as it will provide benefits of connectivity to a large population residing in these rural and remote areas. It is exciting as it will provide them a whole new gamut of services which will significantly improve their quality of life and will bring them mainstream at par with their urban counterparts through services like- tele-medicine, e-education, weather reports, farming practices, market & commodity prices etc. Introduction of 3G will thus not only provide operators an opportunity to enhance their service offerings and expand service to rural areas, but in the process, will also generate new revenue streams for the operators – which is much required in a scenario of rock bottom tariffs and ever falling ARPU. KEY CHALLENGES a) Availability of Vernacular Content Local language content will be a key enabler for the uptake of mobile broadband amongst the rural masses. b) Increase in Demand – Perceived utility lies in the amount of economic value that users are able to derive from the availability and use of Mobile Broadband. It is also dependent on awareness levels and how broadband usage can enhance productivity, quality of life and benefit society. – Moreover, the availability of various applications on the move will attract more users. – There is a need to develop applications and content that is relevant, usable and understandable by the local people. – Various stakeholders like service providers/ vendors have started investing heavily for the creation of application stores which allows users to browse and download applications with no or minimum costs- This trend is likely to increase. c) More Spectrum Globally, mobile operators have adequate spectrum to enable them to promote data services aggressively. However, in India, so far, only 2X5 MHz of 3G spectrum has been auctioned. Operators would therefore be cautious about how aggressively they offer data intensive services. Looking at the exponential growth of mobile data services in other countries, we believe that there is also a need to allot more bands/ spectrum for mobile broadband services in the near future. d) Financial Burden Further, telecom sector is burdened by High Cost Structure and levies and duties are the highest in India as compared to global benchmarks. There is thus a need to rationalize the cost structure of the sector for providing affordable services. e) Uniform Tower Policy At present, there are different policies / guidelines in place in various states / municipal bodies / civic authorities, which act as an impediment for the growth of the mobile communication in the state. There are also incidents of State government, local civic or municipal body putting ban on installation of towers in residential or other critical areas. For 3G services to be successful, it is essential that uniform guidelines and policies are in place, which will help in the installation of towers / laying of cables / optical fibers, etc. f) Right of Way – The exorbitant RoW charges being levied by various municipalities are impacting the business plans of the service providers. In other cases, operators have to approach multiple agencies for obtaining RoW clearance, which not only delays the rollout plans of the service providers but also increases the cost. The situation is worsening as many municipalities have recently started imposing additional levies. – The RoW permissions should be granted “ON PRIORITY” in a time bound manner & at an affordable cost. g) Availability of Power Supply – Availability of uninterrupted power supply is of paramount importance to ensure quality service in mobile broadband. – Thus, it is suggested that there should be a suitable policy for provisioning of power supply to service providers at subsidized rates instead of commercial rates. – Keeping in mind the lack of power supply in rural areas, special support from USOF for power supply to BTS’s and BSC’s, should be considered by the Government. Further, USO should devise scheme to provide subsidy to service providers who deploy alternate energy sources in rural network. h) Creation of Broadband Fund The Government has earned far more from the 3G and BWA auctions than was originally anticipated and thus it would be both desirable as well as appropriate that at least a part (say atleast 20-30%) of the funds received from auction of spectrum for broadband are channeled back into the sector for achieving the broadband objectives. Even in the future, whenever spectrum is auctioned for broadband usage, a part of earnings from those auctions should be transferred to the National Broadband Fund to support national level broadband activities. FUTURE PROSPECTS The Indian 3G market has huge potential, considering that India is the world’s second-largest wireless market. The presence of over 600 million users, availability of low cost handsets, limited availability of broadband services, growing number of 3G enabled handsets, India’s young demographic profile, growing demand from the enterprise sector and higher use of VAS, would help in driving uptake of 3G services. The government is investing heavily in social sector schemes such as the – Employment Guarantee Scheme (MGREGA) , National Health Mission, Sarv Shiksha Abhiyan – all these are infusing significant amounts of funding and the rural livelihoods and spending powers are on the rise. With this we are going to witness a higher ability to absorb technical facilities such as broadband in the coming days. With 3G coming in, we expect the following trends to emerge: – Web browsing is expected to be the most used service among mobile broadband users in India. Music and video related services are likely to be next most popular services. – Data will be segmented and the plans will be tailor-made for different segments of the population. – Price will be one of the most important determinant of take up of 3G services, followed by content. – The tariff plans are expected to be competitive and innovative. – Initially, take up of 3G services will be concentrated more among urban subscribers. Rajan Mathews Director General Cellular Operators Association of India (COAI)