If Bharti Airtel shuts off its 3G services in the next 3-4 years, as MD & CEO Gopal Vittal has said it will, and migrates all customers to the vastly more efficient 4G services, this will probably be the fastest death of a new telecom technology. While it is too early to talk of the death of the older 2G technology, how long it lasts will depend upon how fast the low-cost 4G phone revolution spreads. When India started off on 3G, in 2010, its promise lured telcos into a nasty cost spiral for which they are still paying today. 3G offered dramatically higher internet speeds and so, with the government also restricting the number of spectrum slots on offer, telcos bid madly—in the Delhi circle, for instance, while the reserve price for a 5MHz slot in the 2100MHz frequency band was Rs 64 crore per MHz, the winning bid was for Rs 663 crore. With that becoming the benchmark for future auctions, when, in 2012, auctions were carried out for 1800MHz spectrum that telcos were planning to use for primarily voice traffic, the reserve price was at 3G-type levels of Rs 554 crore per MHz.
While the government will have to relook how telecom spectrum is being valued if it wants the industry to survive—as the Inter-Ministerial Group (IMG) has recommended—the maturing of 4G technology and the industry response has set the stage for the next telecom revolution. Even when RJio came out with its aggressive offers, there were just that many people who could afford to subscribe to them. RJio’s plans were mainly accessible to those who had 4G VoLTE phones and that number was limited due to the fact that the cheapest phone cost Rs 4,000-5,000.
That’s when RJio changed the paradigm by offering its “effectively free phone” for those who paid a monthly bill of Rs 153 for three years. Since Kotak analysis showed there were 210 million subscribers who spent an average of Rs 140 per month, this was a market ready for RJio’s offering. In response to this, Bharti Airtel tied up with Karbonn to provide a VoLTE smartphone—Rjio’s offering was a feature phone—at effectively Rs 1,399 if users agreed to pay Rs 169 per month for three years; while the phone costs Rs 2,899 if bought with an Airtel subscription, users get a Rs 500 refund after 18 months and another Rs 1,000 after 36 months. Others like Vodafone and Idea are also looking at similar 4G phone offers.
If the low-cost 4G phones catch on, telcos like Airtel, Vodafone and Idea will be able to use their 3G spectrum in the 2100MHz frequency to offer 4G services. Between Airtel and Tata which have tied up, there are 11 circles in which they have 10MHz of 2100MHz spectrum; they have 5MHz in nine circles and 15MHz in one. Vodafone and Idea, which will merge soon, have 5MHz in 11 circles, 10MHz in six, 15MHz in four and 20MHz in one. As 4G phones get even cheaper, even 2G technology can be phased out and the 900/1800MHz frequency bands used can also be moved to 4G, paving the way for India to offer vastly greater amount of data and at dramatically higher speeds—while this will require a lot of work from the government in terms of ‘harmonisation’ of spectrum, the pay-off will definitely be worth it.