Making 3G work

After what seemed like eternity, the 3G auctions are finally done and over with. Most importantly, the government has already received Rs 67,719 crore ($14.6 billion)from nine telecom service providers including state-owned Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL). The broadband wireless access (BWA) auctions have already generated bids of Rs 28,567 crore for three bands. So the government is assured of at least Rs 96,285 crore from telecom spectrum auctions.

Interestingly, none of the private operators has 3G spectrum across India. So there will be a spate of intra circle roaming deals. To do that, every private operator is looking to woo BSNL and MTNL which already have 3G spectrum across India. That could end up being a boon for both operators whose books are awash in red ink.

So what is likely to happen now? Once the spectrum is released in September, operators will work towards migrating their high ARPU subscribers to the 3G bands. That in turn will ease the pressure on the 2G spectrum. That will allow the operators to add on more subscribers on the 2G network. Most of this action will be in the top 20 cities.

The availability of 5 MHz of 3G spectrum will definitely ease the spectrum crunch of the incumbent operators for the time being. It is quite likely that the bulk of the post-paid subscriber base will opt for 3G services. Operators will soon try to monetize their investment in spectrum and rolling out 3G networks. One way out would be to provide spectrum to mobile virtual network operators (MVNOs) to launch services.

Thanks to the high bids for 3G spectrum, it is unlikely that any of the operators will go in for cut-throat pricing. The focus will be on services relating to Bollywood, cricket, astrology and religion. However, the biggest driver for 3G will be internet access. After all, millions of Indians will be in a position to surf the net, check e-mail etc for the first time. And they will do so on a mobile phone and not on a personal computer.

However, 5 MHz of 3G spectrum could be just too little in the not-too distant future. As subscribers opt for data services in a big way, the next round of spectrum crunch will be in data. Hope that the government is in a position to provide another 5 MHz to operators by then. Or else it would be one more service that does not provide value for money thanks to the bungling of the powers that control the telecom sector in India.