Mobile Broadband 3G Tariff Cuts Did the Magic!

Mobile internet and broadband witnessed phenomenal uptake on the back of tariff cuts, setting the tone for further growth

While wireline internet and broadband have continued to fall short of the targets set by the National Broadband Policy of 2004, the growth of mobile broadband has been promising if not phenomenal. According to the Telecom Regulatory Authority of India (TRAI), there were 219.92 million mobile wireless Internet subscribers, of which 40.66 million were broadband subscribers while the remaining (179.65 million) subscribers were on narrowband. The mobile broadband subscribers predominantly comprised 3G and 4G subscribers.

It may be noted that the definition of broadband was changed in 2013, and only connections with 512 kbps of downlink speeds were categorized under broadband, as against earlier definition that made connections with speeds of 256 kbps eligible for broadband.

Top 5 mobile service providers accounted for 33.83 million mobile broadband subscribers, which accounted for around 84 percent of the total mobile broadband subscriber base.

Key Players

Bharti Airtel, India’s largest mobile service provider, not surprisingly, was also the leading service provider in terms of mobile broadband subscribers at 9.70 million at the end of December 2013. Most of these subscribers were on 3G while just about 0.1 million subscribers were on 4G LTE networks. Airtel also

happened to be the only service provider with 4G mobile broadband subscribers, as all other players are yet to roll out their commercial 4G LTE networks. Airtel also led the narrowband mobile Internet segment at around 44.90 million subscribers. Overall, it accounted for a total of 54.62 million mobile Internet subscribers.

Reliance Communications, at 6.98 million subscribers, was the second largest mobile broadband provider, followed by BSNL at 6.08 million, Idea Cellular at 5.86 million and Vodafone at 5.20 million subscribers, as per a Voice&Data analysis of TRAI data released for the year ended December 2013.

However, when it comes to the more generic mobile Internet base then Vodafone was the second largest operator at 45.65 million subscribers, followed by Reliance Communications at around 36 million subscribers.

Airtel launched 4G LTE services in the tri-cities of Chandigarh, Mohali and Panchkula in March 2013, having earlier launched the service in Kolkata, Bangalore and Pune in 2012.

Key Developments &Challenges

In a bid to shore up its 3G subscriber numbers, Reliance Communications took the exceptional step of slashing its 3G data tariff lower than even its 2G packs. In mid2013, RCom announced 3G data packs at Rs 123 for 1 GB, Rs 246 for 2 GB and Rs 492 for 4 GB for both smartphone and tablet users. This was the telco’s second major 3G price drop within a span of a year.

The incumbent Airtel had also earlier cut its 3G rates by a significant 70 percent, bringing its prepaid browsing charges down from 10 paisa per KB to 3 paisa per KB. Others, including RCom and Idea Cellular, had also followed suite. Vodafone had gone a step further and slashed its 3G tariffs by 80 percent, thus effectively bringing down its browsing charges from 10 paisa per KB to 2 paisa per KB for prepaid users.

As it turned out, these price cuts were to provide a much-needed boost to the uptake of 3G data services in the country.

3G will continue to remain the growth driver for mobile broadband in 2014

According to a Nokia Networks (then NSN) study later, the 3G data traffic leapt by 146 percent, surpassing the world average that is roughly doubling every year. 2G data traffic, by comparison, grew 59 percent over the same period. Overall, 2G and 3G services taken together, an 87 percent rise in data traffic during 2013 was noted.

The impact of 3G traffic growth can be gauged by the fact that even though narrowband mobile Internet subscribers accounted for an estimated 80 percent of the overall mobile Internet subscriber base, it accounted for just around 57 percent of the total internet traffic.

According to the Nokia Mbit Index study, 3G drove mobile data growth in 2013 as it generated 43 percent of the total network traffic. This was when 3G subscribers formed less than 20 percent of the mobile internet user base during the year.

The Nokia MBit Index study confirmed the role of 3G as a catalyst for mobile internet, noting that 3G users continued to consume more data on average than 2G users. In December 2013, a 3G user consumed 532 megabyte of data compared to 146 megabyte consumption over 2G, it said. The study also pointed out that tariff reductions in 3G services in early 2013 led to an increased migration of high-end 2G customers to 3G.

While the impact of 3G tariff reduction was an industry positive, the industry still faced significant challenges when it came to ramping up 3G subscriber numbers in an accelerated manner. While the relatively low penetration of smart phones was a limiting factor, a continued tiff with DoT on the inter-operator 3G roaming pact further impacted the 3G growth. (Airtel, Vodafone and Idea had earlier entered into a pact to offer 3G services in the license areas common to the three operators.)

In a significant development in April 2013, a Delhi High Court panel quashed an earlier judgment that had brought respite to the three operators. The judgment had prevented the government from stopping 3G services of Airtel in circles where it did not have the license but was offering services by leveraging the tri-party agreement. The issue could not be resolved through 2013, which continued to impact the uptake of 3G.

What Next?

Smartphones are a key driver of 3G growth, and recent trends have shown that the share of smartphones in the mobile phone shipments has been on a steady rise. This trend is expected to further strengthen throughout 2014 and beyond as well.

Moreover, the 4G device ecosystem is also expected to develop further in India, albeit not very significantly until 2015, when the greenfield 4G behemoth Reliance Jio Infocomm has also scheduled its long-awaited launch.

3G will continue to remain the growth driver for mobile broadband in 2014, even as Airtel take some more baby steps to grow its 4G presence incrementally and other telcos thrash out their 4G network plans.

However, to realize the greater potential of 3G-based mobile broadband, operators would need to consider ramping up of their 3G cell site presence. The Nokia Mbit Index study had, for example, said that on average, 20 to 25 percent additional sites would be needed to cover the cities that are not yet covered in category A and B. In the metros also, additional sites would be needed to enhance coverage.

On the inter-operator 3G roaming pact front, however, the curtains are yet to be fully drawn. Although in April 2014, a telecom tribunal TDSAT bench upheld the plea of telcos on inter-operator roaming, DoT is reported to be seeking legal opinion on the TDSAT ruling. Meanwhile, in another development, RCom signed 3G roaming pacts with Tata Teleservices and Aircel.

It is also expected that once the clarity of spectrum sharing emerges, the uncertainties and ambiguities would go away, to the benefit of mobile broadband in the country.