3G: Users may find data services too costly

For hand-held devices, the current bandwidths are excellent to carry voice and a limited amount of data, but it takes a far bigger spectrum for individuals and businesses to transfer large amounts of data over them.

And over the next few years, data transfer through mobile devices is expected to balloon. So, it's no surprise then that the bidding for the 3G (third-generation networks) spectrum lasted 35 days, and fetched the government Rs 67,719 crore (Rs 677.19 billion), which is Rs 37,000 crore (Rs 370 billion) more than what it budgeted for.

While no company won the pan-India license, it was Bharti Airtel which followed a national bidding strategy and won 13 circles across India, which cover about 65 per cent of Bharti's subscribers. It can easily fund its $2.6-billion (Rs 123 crore) bid for licenses as it managed to raise enough resources through debt.

Says Akrant Bhardwaj, senior research analyst, Bonanza Capital: "Bharti benefits the most from the auctions, but Idea has not done too badly either, as it has managed to cover a large portion of their subscriber base."

Idea has won 11 circles, covering 77 per cent of its subscriber base for a cost $1.2 billion (Rs 56.7 crore), while Vodafone has covered 60 per cent of its subscribers for a cost of $2.5 billion (Rs 118 crore).

Reliance Communications had an aggressive bidding strategy for the metros, where it bagged 3G licenses, and 13 circles covering 49 per cent of its subscriber base.

While the licence fee is a huge cost, the actual capital cost for the rollout on a pan-India level could be around Rs 2,000 crore (Rs 20 billion). Analysts expect that over the next 4-5 years, companies will break even on an operating level.

What is 3G? 3G is a family of enhanced mobile standards that allows transfer of voice (calls) and data (downloads, SMS and emails) at higher speeds than the existing 2G network.

Now that the auction is over, private operators will eventually start offering 3G plans that offer voice and data services separately or in a blended form. One can now expect much faster content downloads, live-streaming, video calls and online gaming.

Probable tariffs

With private operators having to shell out huge sums to get their 3G licenses, "3G tariffs are likely to be expensive, if not prohibitive, for the masses in the early years," says Shiv Putcha, principal analyst, Ovum Telecom, a telecom advisory firm.

One can expect voice tariffs to remain same. Data services would, however, come at a premium. "Data plans could also get usage caps. We may also see tiered plans for data consumption," he adds.

State-owned BSNL, which currently offers 3G services, has data plans starting from Rs 249 a month for 0.5 GB free download and Re 1/MB for additional usage, to Rs 2,499/month for unlimited usage, excluding taxes.

"Plans offered by private operators could cost slightly higher based on a differentiation of services, content and applications offered" says Jaideep Ghosh, director, KPMG.

Also, since no operator has got a pan-India coverage, tariffs for data-roaming services on 3G could be on the steeper side.

The situation elsewhere

Japan, which launched commercial 3G services in 2001, currently has a 3G penetration of over 90 per cent, with monthly unlimited download plans being very popular. 3G services were next launched in Europe, followed by the United States.

China introduced 3G services in 2009 and is already seeing a war in 3G tariffs, with 0.5 GB usage plans available for 50 Yuan (Rs 347/month.)