Large metros and tier one cities will be the initial beneficiaries, with service launches expected by January 2011. However, the launch of services in tier two cities and beyond will take some time. Rajat Mukarji, head of corporate affairs for Idea Cellular, says, "3G will follow the pattern of 2G. Like 2G, which started with cities and slowly reached rural India, 3G will also take time; however that time can be shorter than that of 2G."
Even players such as STel who are present in circles where the population is predominantly rural, will follow the city first approach; though STel also says that it will work towards bridging the digital divide.
"Rural markets are traditionally characterised by low ARPU (average revenue per user) and low tech awareness which means that 3G services might not give the return on investment that will justify the roll out," says Anshul Gupta, principal analyst, Gartner.
But government agencies and the World Bank are extremely positive about the growth of broadband in developing countries, and believe it can be extremely beneficial in spreading services to distant villages, thus making these far flung villages more efficient.
The Department of Telecom plans to connect 2.5 lakh villages through wireless broadband and third generation (3G) mobile services by 2012.
Sachin Pilot, Minister of State for Communications and Information Technology, has already announced that the government will connect every village in the country with high speed broadband access in the next three years. Gujarat chief minister Narendra Modi has also promised that all villages in Gujarat will soon get broadband.
However, the reluctance shown by private operators might mean that the onus of carrying out these promises will be on BSNL, which is already in deep financial trouble and might resist sharing this burden.
BSNL's union is already up in arms against the preferential allotment of 3G airwaves, for which the company has now paid around Rs 16,000 crore together with MTNL, saying that it should have got an opportunity to choose the circles rather than being forced to take spectrum in all. BSNL so far has launched 3G services only in urban centers.
The way outGiven the government's intent and the immense socio economic benefit that 3G is expected to bring, it is very important that these services reach the rural hinterland.
One of the ways out is to follow a public-private partnership model. As Rajan S Mathew, director general, COAI (Cellular Operators Association of India), suggests, "For 3G services to reach rural areas, government needs to initiate a programme which includes private players delivering services like e governance, e health, e education, E filling and m commerce."
The government has already shown keenness to support such initiatives, speaking at an event of NASSCOM, the Finance Minister Pranab Mukherjee urged the ICT industry to "connect the disconnected,รข€ by reaching out to tier two and three cities. The Centre was keen to provide incentives for companies that were willing to go to smaller towns and rural areas.
Rajat Mukerji of Idea Cellular also believes that e governance and e health type services will not only bring relevance to 3G services, they will also help create a business case for rolling out 3G.
The national e governance programme currently consists of 27 mission mode projects (MMPs) and eight support components to be implemented at the central, state and local government levels. These include projects such as income tax, customs and excise, and passports at the central level; land records, agriculture and e district at the state level; and panchayats and municipalities at the local level.
The egovernance market in India is worth $10 billion (more than Rs 46,000 crore). If used properly, this will make the roll out of 3G and BWA networks in rural areas viable.
The biggest hurdle that will need to be overcome will be time taken for implementing policy decisions. If rural India is to benefit from 3G, the government and private stake holders need to work in unison in a timely manner.
The effective use of ICT services in government administration has greatly enhanced existing efficiencies, driven down communication costs and increased transparency in the functioning of various departments. It has also given citizens easy access to tangible benefits, be it through simple applications such as online form filling, bill sourcing and payments, or complex applications such as distance education and tele medicine.
Other enablersThe speed at which government driven projects work is well known. So, relying on the government might not be the best way forward.
The Universal Service Obligation fund, most of which is still unutilised despite there being villages that still do not have connectivity, must be used.
There are changes that can enable private players to venture in the rural markets on their own. The biggest change is the emergence of Indian handset vendors, who have been instrumental in reducing the cost of handsets in India, making it affordable for the rural masses. These companies have forced even established players to look at reducing the cost of handsets and adding new features even in low cost entry level handsets.
Current subscriber additions can partly be attributed to the drop in handset prices. Most Indian players already have plans to launch affordable 3G handsets. Pranay Dhabai of AKAI, a low cost handset player, says, "We will be offering 3G handsets in time for the 3G services launch in the country. Lemon mobile, Micromax, Alcatel etc. have also announced plans to introduce low cost 3G phones in the market.
As Mrutyunjay Mishra, director, Juxt Consult, puts it, "We need lower handset cost, affordable data plans and relevant content in local language for the 3G services to succeed even in urban India. While handset prices have already shown southward trend, my worry is that data prices may still remain high and the content in vernacular language is still not available."
VAS industry is also gearing up to the opportunity in rural India. Milind Pathak, vice president, SAARC, Comviva, says, "Once 3G services are rolled out, we foresee potential for solutions such as mobile money and financial services, m learning, m medicine and m education. We want to develop applications that help people generate income from their mobile phones.
Utiba, which provides solutions for m wallet and m banking services, is also bullish about the prospects of rural market in the mobile banking space. "Traditional banks have not been able to reach rural areas. In that scenario m banking services will be a huge enabler," says Ritesh Andley, director, product marketing, Utiba.
However, everybody has doubts about the roll out timing and the VAS industry is no different. Comviva's Milind says, "It will take time to feel the full impact, especially in the rural VAS space."
ConclusionIn a report, PwC (PricewaterhouseCoopers) said that since the roll out is expected to be more focused in urban areas initially; the uptake of 3G services will therefore be concentrated among urban subscribers.
But gradually, with increasing coverage in rural areas, the uptake among rural subscribers will also pick up, it added.
By 2015, rural subscribers are likely to comprise up to 24 per cent of the overall 3G subscriber base. Overall, 3G subscriber penetration in India is expected to rise from 0.1 per cent in 2011 to 8 per cent in 2015.
Currently, only 21 per cent of Indians in rural areas have phone connections. There are still more than 500 million people that do not have phone connections in the country, and they are located mainly in rural areas.
The rural market is seeing a lot of growth. Since penetration is low, the rural market's growth potential is big. This will lead to the creation of a big market for both 2G and 3G services and will also address the growth need of the telecom industry.
But to tap this market, the industry will need to be innovative in introducing new value added services which have tangible benefits for the rural masses, and in their language.
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