PDF: 2962 pages, 5.2 MB - Bay Area Council Economic Institute

Computing/Networking/Internet
The wireless phone market, meanwhile, has grown dramatically: the number of mobile subscribers
was 362.3 million at the end of January 2009. India has been adding close to 10 million subscribers
a month. Still, the market penetration rate remains below 35%. Huge demand is coming
from rural users, typically earning less than $1,000 a year, who have not been affected by falling
property and share prices or tight credit.
It is estimated that 100 million of the country’s next 250 million subscribers will come from rural
areas. Phones cost in the $60 range and prices are falling. Growing numbers of rural customers
buy their phones through microfinance and pay the loans off by renting time to fellow villagers.
Basic services run from $2.50–$12.50 per month, and many phone users have found creative
ways to keep calls short to save money (e.g., auto rickshaw drivers give out their phone numbers
and customers call but hang up before the driver answers; the driver checks missed calls and
makes pickups).
The Internet and Mobile Association of India put Internet use at 45.3 million people in September
2008, up from 36 million a year earlier. Only 3.3 million users are in rural areas, and only 5.65
million are broadband users. It’s not surprising, then, that a race is on to grow the Internet market
by extending broadband Internet technology to the mobile phone and the PDA screen.
Short message service (SMS) text services have already sprouted on sites for news, email, travel
reservations, real estate, job searches, sports and concert tickets, online lotto, and matrimony.
Global search portals have established partnerships with Indian carriers—Google with Bharti
Airtel, Microsoft’s MSN with Vodaphone, and Yahoo! with Bharat Sanchar Nigam Ltd. (BNSL),
BPL Mobile Communications Ltd., and Aircel.
Nokia, Motorola, Samsung, and other manufacturers have established product development and
marketing presences in India, focusing on low-cost phones for the Indian market. Handset prices
fell by half over 2005–07, according to Gartner Research, and 90% of phones sold in India now
operate on the General Packet Radio Service (GPRS) system that enables wireless Internet
access.
Revenues have been declining since 2006, due to competition and saturation in major urban centers—90%
in Delhi and Chennai, 70% in Mumbai—along with failure to grow the rural market
segment quickly enough. But features are helping to improve margins. The market for ringtones in
India, for example, is about $45 million annually, accounting for nearly half of non-voice revenue.
Government has been slow to respond to soaring demand with adequate spectrum. Large incumbent
operators on the GSM wireless standard bought early licenses at low prices after the
National Telecom Policy took effect and now say they need more capacity. At the same time,
relatively new entrants on the CDMA standard, like Reliance, have also bought licenses and see
spectrum grants as a zero sum game. One answer the government is considering involves charging
the military, the railways, and the space program market rates for spectrum they underutilize,
encouraging them to free some of it up. Smart antennae and towers built closer together could
also maximize spectrum capacity. These issues, in turn, push any decisions about awarding 3G
licenses further out into the future.
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