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3G demand will be dictated by affordability

3G demand will be dictated by affordability
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First Published: Fri, Apr 02 2010. 09 28 PM IST

Expanding network: Qualcomm’s Singh says 3G will become the dominant route for Internet access. Pradeep Gaur/Mint
Expanding network: Qualcomm’s Singh says 3G will become the dominant route for Internet access. Pradeep Gaur/Mint
Updated: Fri, Apr 02 2010. 09 28 PM IST
New Delhi: The long-anticipated auctions for high-speed mobile spectrum are scheduled to begin on 9 April, kicking off the process that will bring third-generation (3G) phone connections to Indian subscribers.
Kanwalinder Singh, president of Qualcomm India and South Asia and senior vice-president of US-based mobile-phone chip maker Qualcomm Inc., is leading his company’s effort to increase adoption of high-speed technologies. Qualcomm is working with state-run Bharat Sanchar Nigam Ltd(BSNL) and Mahanagar Telephone Nigam Ltd(MTNL), which already offer 3G connectivity, as well as potential bidders for spectrum. In an interview, Singh talks about Qualcomm’s 3G initiatives. Edited excerpts:
What are the implications of 3G coming to India and what is the role of handsets?
Expanding network: Qualcomm’s Singh says 3G will become the dominant route for Internet access. Pradeep Gaur/Mint
3G phones go for Rs35,000 at the top end and we are trying to bring them to under Rs10,000. Because of our position in the ecosystem and as a technology provider, we are trying to increase the roll-out as that increases the affordability and increases adoption.
Another aspect is that India is primarily a voice market where it’s not enough to provide the service at an affordable rate. To bring the data advantage of 3G, we have to bring the entire ecosystem. Consumers need to see the benefit of 3G through applications—be it browsers, touchscreen, email client or any other application. These are part of the whole ecosystem we are working on to ensure that when they launch, the phones have good form factors, affordable pricing and provide the reason to go 3G other than just voice.
Why haven’t BSNL and MTNL seen much traction in 3G?
BSNL and MTNL have already announced about one million 3G subscribers. They are still rolling out.
BSNL has done around 300 cities and expects to do around 700 by July. MTNL is still filling out Mumbai and Delhi. They would have liked to have done more, but it is early.
How do you go about increasing adoption of 3G in India?
Today, everything above Rs20,000 is a 3G-ready smartphone. It doesn’t make any sense to bring anything else. We are targeting that everything above Rs10,000 should be 3G-ready to make the 3G market larger. People who may otherwise buy a Rs10,000 phone might jump that category because 3G is an enabler.
With the expanding network footprint, you need to go below Rs10,000 for access. Regular feature phones with 3G apps are clustering at around Rs5,000. And dongles (broadband wireless adapters that can be plugged into a computer), which started at around Rs3,500, are now trending towards Rs2,500.
As three (more) players join the 3G ecosystem with the public sector operators and CDMA (code division multiple access technology platform) operators, all levels of the ecosystem with affordable pricing and applications will kick into place. The competition for the consumer along with affordability would make 3G successful, we think.
What will be the impact of 3G on consumer behaviour?
From the Indian consumer perspective, the first and foremost thing that one has to look at is that PC penetration is low. This limits broadband penetration. We expect 3G and these phones becoming the dominant way for Internet access. Already in the youth demographic, the biggest amount of time on the Internet is spent on the mobile.
Internet access without giving up on voice is the value proposition of 3G.
Then there are applications. One youth trend is, social networking is becoming a key need—be it uploading pictures or tweeting. There is also entertainment content—music, Bollywood, TV on the go—that has already been launched. And also practical content such as maps, among others.
Then there is the rural application. Here we see not just the smartphone, but also the desktop being built on mobile chipsets in order to bring a computing experience that comes from the Internet to rural India. This is unlike the PC that came before the Internet and is complicated for a rural customer. You actually fear the computer as you don’t know how to use software and deal with a virus.
What is the mix of 2G and 3G you expect?
You have to look at 3G from the perspective of roll-out breadth and the affordability depth. Four CDMA operators and four 3G operators will fight for that incremental addition. Once the network is in place, then it becomes about how affordable the service becomes.
The most important thing is that the subscriber has to see value—they have to see that they can get on the Internet at an affordable rate.
The operators would do it as voice revenues have gone down to almost zero and data revenues have grown some 15 times the incremental voice revenue. As per analysts, the mix in the next three-five years could be 50:50. We don’t look at analyst forecasts. We look at what needs to be done.
When do you see a 3G being rolled out all over the country?
One hundred cities in terms of four or five operators... within a year is a possibility. The BSNL roll-out is clearly significant. Seven hundred cities by June and then the other networks will follow. And demand is really a function of affordability and value, so when would all of India become 3G—hard to predict. But I think I can just say that 10 years ago, when I started this business in India, people could not have imagined how much the current networks would have expanded. Back in those days, in the year 2000, one lakh subscribers (were) added to an operator in a whole year. Now a million is probably disappointing.
What kind of capital expenditure are we looking at, assuming that the roll-out happens in the top 15 cities first?
Probably the operators can answer better, but I can tell you in general. For an incumbent operator, which is already present in 900MHz, it is an incremental expense because the majority of expense is in opex (operating expense). The capex (capital expenditure) is incremental.
The initial roll-out will be a lot larger than 15 cities.
We are planning the affordability curve as well as helping the operators on the footprint, with the assumption that all of India would be able to consume broadband 3G because of the simple fact that Internet will exist for most people.
Qualcomm owns the technology behind 3G, so do you get royalty for every handset or every subscriber?
Handset manufacturers license the technology from us and pay us a licence fee for the use of the technology on a per-handset basis.
But our value proposition is not just the licensing fee. We also sell the chipsets, software as well as applications and application enablers that go into the handset. A phone requires a certain amount of horsepower to run applications such as Facebook and Twitter, which comes from the chipset. These chips are now approaching 1gHz (gigahertz, or one billion cycles per second) in clock speeds, making them computers in your hands. The software is needed to make features such as the touchscreen, among others, compelling.
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First Published: Fri, Apr 02 2010. 09 28 PM IST
More Topics: 3G Spectrum | Qualcomm | Telecom | Mobile | MTNL |