Europe is all set to hang up on 2G or second generation phones in two years. As Indian operators get ready to rollout 3G networks next year, mobile companies are expecting a wave of conversions here too. While the government expects private operators to be in the market by early 2009, Bharat Sanchar Nigam Ltd (BSNL) is planning to introduce its 3G services by December this year. Analysts like Gartner predict 3G services will start rolling from the middle of 2009.

In western Europe, subscribers will stop using 2G phones by 2010 and GPRS, 3G and 3.5G phones will dominate, according to Forrester Research. Simple 2G GSM phones, which have a 5% market share as against 78% of phones with GPRS technology, will gradually vanish from the western European markets by 2010, it says.

Will a big chunk of the India mobile subscriber base that is expected to swell to 750 million by 2012, buy 3G phones? For P Balaji, vice-president (marketing and strategy) of Ericsson India, even a conservative number of a minimum of 100 million-plus conversion from 2G and 2.5G to 3G by 2012 will make the latter a success in India. Gartner?s Asia-Pacific senior analyst (telecom) Madhusudan Gupta says by 2012, every fifth phone sold in the Indian market will be a 3G one. That means around 150 million 3G phones.

Vivek Mohan, managing director of Alcatel Lucent for the India region, thinks that it is the number of subscribers that would make the difference for Indian operators and technology service providers like his company vis-a-vis the US and European counterparts.

Today, the total mobile phone subscriber base in India is 287 million with a penetration level of around 25%, as against a subscriber base of 326 million with a penetration of 81% in western European countries. ?For some time, 3G in India would remain a city-based phenomenon. But at the same time, it would narrow down the rural-urban digital divide by providing broadband connections in areas where there is no wireline? says Balaji.

One of the ways this could happen is by using 3G to access broadband to download heavy files in remote areas where there is no wireline. Silk weavers of Murshidabad district in West Bengal, for instance download design files using the GPRS service sent by their clients from Mumbai. ?The extent of use of data service depends on how innovative is the tariff offer of the service provider. We have come up with a daily package of Rs 25 for unlimited data service. This has helped weavers access the internet. Otherwise, they would have to wait to get the design,? says Bharti Airtel Kolkata and West Bengal CEO, Ajai Puri. He has seen a large number of mobile subscribers from hill areas like Darjeeling and Sikkim use the GPRS service to access mails.

It is not easy to predict which applications will be more relevant to 3G consumers. PricewaterhouseCoopers (PwC) telecom practice leader, Usha Rajeev says it depends on the availability of an application and how much close the application is to satisfy the daily needs of the users.

Though operators are not yet ready to comment on the right tariff for 3G, all of them agree that it would depend on the data tariff structure, along with other parameters like handset prices. Majority feels that the price of sending a picture in the 3G-era should come down to what we pay for a SMS within the circle. Forrestor reports that the European operators now prefer flat-rate data plans, replacing the unpredictable and complex tariff plans. Mobile operators like T-Mobile, Telefonica and Vodafone have now moved from volume-based pricing to flat-fee for data services.

While Indian mobile operators refuse to comment on the future tariff model of a 3G service, some analysts feel it should follow the internet pricing model of a fixed and variable tariff rate, which will make 3G more attractive to users.

Mohan of Alcatel Lucent says that the right pricing of data services, low cost of handsets and the use of 3G to access broadband will make the new standard popular in the Indian market. Nupur Singh Andley, senior research analyst (connectivity) of Springboard Research, thinks that once the third generation service starts, sales of high-end phones will swell. ?We do not expect pricing or availability of handset models to constrain the adoption of 3G by Indian consumers. On the other hand, the launch of 3G services will influence a downward price revision of 3G-capable handsets, on account of increased adoption and intense competition.?

The craze for iPhone?a 3G one?may be just the beginning. Though nobody is sure how many of the high-end 3G phones will be Chinese fakes. Vodafone Essar East CEO, Sridhar Rao expects a fairly good conversion from 2G and 2.5G to 3G in the urban areas. ?Already, we are experiencing a large number of corporates and self-employed using BlackBerry to access the mail, which has become one of the most sought-after applications in the mobile space,? observes Rao. 3G will increase internet surfing because of faster speed of uploads and downloads. ?This will make the handsets like BlackBerry and iPhone as devices to access the internet,? he adds.

Telecom analysts believe that besides handset pricing and tariff, 3G will change the way content is delivered in the communication and entertainment industry. Gartner?s estimate is the value added service market, where content is one of the most important constituents, will have a total revenue of $5.5 billion in 2012, as against $1.5 billion in 2007.

Senior vice-president, interactive services of Star India, Viren Popli is hopeful that 3G will make the relationship between the operators and content providers a more balanced one. ?Today when we deliver a song clip, our revenue sharing is around 30%,? he says. Popli thinks the revenue share for the content companies will substantially go up once the 3G service starts demanding premium contents. ?We will have more say in the business as customers will start demanding content, which today may not be possible to deliver owing to technology constraints,? says Popli.

But Madhusudan Gupta of Gartner disagrees with Popli that content companies will realise better value once 3G services start. ?Content companies in India are the white label ones. For a subscriber, they are no brands. For them, it is Vodafone or Airtel which delivers the content.?

Gupta says that content companies and aggregators would be able to charge premium prices only when they have a definite content delivery policy with a content to back them. ?At present they don?t have anything like that,? he says.

For technology service providers like Ericsson and Alcatel Lucent, the opportunity lies in the creation of a mobile service delivery platform that will take care of 3G complexities. For example, Alcatel Lucent is implementing mpower, a content management platform, for Bharti. It will take care of delivery of various content services, billing and quality of service. Balaji says that Ericsson not only has its delivery platform, it is also hosting ringback tones for BSNL in some of the circles.

?We may later see some of the technology service providers take the responsibility of sourcing games and music from the content companies and delivering to the handsets over their intelligent network,? says Balaji of Ericsson.

Clearly, 3G will change the telephony landscape but don?t expect the Indian mobile sector to morph overnight.

?We should remember that 93% of the Indian subscribers are prepaid and sometimes they don?t have more than Rs 15-20 left in balance to make a call,? sums up Gupta.