Wednesday, September 19, 2012

State of 3G in India

Every couple of weeks over the past several months, I wake up to an article talking about how 3G in India isn’t really taking off. Some of these articles aren’t even that well researched and don’t seem to have a grasp of even the basics of the technology. They most certainly lack a global perspective. I've had enough and I'd like to put across hard data that most seem to miss out and try to give you the right picture on 3G in India.

To begin with, let me highlight how the way we understand 3G in India is different from the way the rest of the world understands 3G.

What is 3G
Simply put, 3G as defined by the global standards body (ITU) is technology that will provide (amongst other things) minimum data speeds of 384Kbps (while in motion) and 2Mbps when stationary.

Broadly speaking there are 2 ‘kinds’ of 3G technologies globally. Each has sub-variants which are listed below in order of evolution/launch (oldest first):
  • UMTS
    • WCDMA
    • HSDPA
    • HSPA
    • HSPA+
    • DC-HSPA
  • CDMA 2000 (yes, globally CDMA is 3G, shocking as it might be to us people in India)
    • EV-DO Rev A (rev = revision)
    • EV-DO Rev B

Before we get into the details, a bit of telecom history - about 15-20 years ago (disclaimer - I’m not so old so may be wrong about these dates) when CDMA was first invented, it was so revolutionary that people actually said it defied laws of Science & Math (total hyperbole obviously) and that there was NO WAY it could be made to work as a communications medium for the masses. This was ofcourse wrong because the world over there are more than half a billion CDMA subscribers and below are some key features that are important to this writeup:
  • Much better quality of voice
  • Much superior data experience
  • Extremely secure - so secure that it was infact a military technology for a long time before it was made available to the public

Then, in 1991, a revised version was created called CDMA2000 (CDMA2K for short). This was codified in the standards as 3G. Further, as CDMA2K evolved, it also became the basis for the technology called WCDMA. WCDMA became the bedrock for 3G technology on the UMTS side and this is the upgrade path for the world when they move up from GSM (and no, 3G in no way is an evolution of GSM, but I digress).

So in principle, CDMA2K (and in turn CDMA) is basically the starting point of 3G. The standards body (ITU) agrees with this and therefore all CDMA technology from CDMA2K onwards is termed as 3G.

Coming to India, there are various legal/regulatory reasons (which I don’t want to get into) that prevent operators from calling CDMA as 3G in India. So then, what really is the definition of 3G in India?

In India, the 3G subscribers are classified as those who are on the UMTS technology bandwagon (and CDMA guys are not included). This means that India stats are only counting 3G subscribers from operators like Vodafone, Airtel, Idea etc but not counting CDMA subscribers of RCOM, Tata, MTS, BSNL etc. Note that RCOM and Tata have both UMTS and CDMA technologies deployed so their UMTS subscribers are captured in India 3G projections but CDMA subscribers are not.

Compare this with global 3G subscriber data. Lets take the example of U.S - the top 2 carriers that dominate and have the lion's share of subscribers are AT&T and Verizon. I will ignore all the other operators for simplicity and assume these 2 are the only operators. I will also neglect the VLR debate for now.

Q2 2012 data:
  • AT&T:
    • Total subs: 105M
    • 3G(WCDMA/HSPA): 89M

  • Verizon:
    • Total subs: 111M
    • 3G (CDMA2K, EVDO, Rev A, Rev B): 100M

Going by global standards, if you look at this and say that in the US, there are 189M 3G subscribers, you would be correct. However, if you were to count the way we count in India, you would say that US has only 89M 3G subscribers. You would completely ignore the 3G subscribers (a whopping 100M) on Verizon!

Now let’s reverse this and look at Wireless Intelligence (WI) data for India and count India subscribers the way we count global 3G subscribers (including CDMA2K family)
  • Total subs: 934M
    • CDMA2000 family
      • CDMA 20001X: 89M
      • EVDO RevA: 11M
      • EVDO RevB: 1M
      • Total 3G CDMA: 101M
  • UMTS Family
    • WCDMA: 22M
    • HSPA: 15M
    • Total 3G UMTS: 37M

If you were to add up India 3G subs, you will find that they are 138M - which is WAY higher than the 30-35M figure we see quoted everywhere -which is UMTS only number and hence does not convey the full picture.

Now let’s look at how fast did 3G penetrate in the developed markets. Keep in mind that the developed markets have much higher economic power and much higher capacity of consumers to pay - this directly translates into new technology being adopted faster.

For the sake of consistency, I will first take up the example of US and will only take up the example of 3G UMTS and will ignore CDMA. Since in India it is the the UMTS numbers that are touted, the discussion is more relevant for those numbers.

In US, ATT launched 3G in Q3 of 2004. Below is the 3G penetration in the first 3 years:
  • Q3 2004: .01%
  • Q3 2006: 1.2% (2 years later)
  • Q32007: 6% (3 years later)  

At the same time, the total 3G penetration of USA: was about 11% in Q3 2007. 4 years after launch, it was 11% only. This btw, includes the CDMA subscribers of Verizon thus skews the data. If you remove Verizon, and only count 3G UMTS subscribers, the US was at 1.5% penetration in Q3 2007. It was 12% in Q3 2009 - after full 5 years of launch.

All this begs the question - how is India doing?

Strictly speaking, Tata announced their 3G network on 5th Nov 2010 so lets take that as launch date of 3G in India.
  • Nov 2010, 3G launch: 0%
  • September 2012 (less than 2 yrs later): 4%for 3G UMTS.
And remember, this 4% is at about 3x the subscriber base of US so, adjusted for that, its about 12%. In less than 2 years

Now lets look at the ‘real’ 3G launch. When did the big operators really launch? If memory serves me right, Airtel and Vodafone launched by April 2011, which means that their 3G networks have been up for about 1.5 years- so in 1.5 years of all players having deployed 3G, we are already at 4% penetration. This is despite high tariffs and ‘expensive’ devices (people think so, I think prices are ok).

I will let you digest that for a minute. In 1.5 years, india is at the same penetration levels (base adjusted) as the US was - which is a FAR more developed market and far less price sensitive. I think this is a huge achievement and if it was upto me, I’d call 3G progress so far as - “pretty good”. Can more be done? ofcourse, but we have got a good start.

The case is the same whichever market you look at. Some more examples below:
  • Philippines -
    • Q1 2006: 0.2%
    • Q1 2008: 3.7%
  • Brazil -
    • Q4 2007: .07%
    • Q4 2009: 4.6%
  • China -
    • Q2 2009: .02%
    • Q2 2011: 2.64%

Note that in the first 2 countries, the subscriber base (and population) is MUCH lower than in India so base adjusted, India is doing much better here.

Now from subscribers, lets move to usage. Those of us who have 3G, are we really using it? how much? and how does it compare to the global consumption on 3G.

If you look at this chart you will find that in Q4 of 2011, ATT subscribers on average consumed 500MB of data. This is when they have had iPhone at affordable prices for 4 years, there is much more content available (for example iTunes, netflix etc) and the audience is significantly more tuned in to data consumption than when you compare to India.

Again, how is India doing? if you believe Idea’s CEO, (PDF, link to earnings call transcript, look at page 8) his consumers are using 375MB of data EVERY MONTH. So clearly, there is a strong demand for data and India users are pretty much in the right ball park when benchmarked against the world.

I think its easy for people to take a negative view and say that 3G is not doing well or that uptake is not good etc. but if you really look at the data, this line of thinking is clearly unsubstantiated.

Further, considering that smartphones now outsell ALL PCs sold in India and 3G subscribers are already about 2-3x more than fixed broadband subscribers (14M as per TRAI) it is clear that for most people in India, just like they made their first voice call from a cellphone, their first internet experience will also be from their cellphones. For a large number of people, their phones will be the ONLY means of internet and if this is not the very definition of demand, I dont know what is.

Note: unless otherwise stated, all subscriber data is wireless intelligence, various public statements and operator websites 
Update: links were missing for some reason. Added them back.

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