In Business Model, Internet Access, Mobile, News, Spectrum

India is on track to surpass half a billion mobile subscribers by the end of the year, according to a new GSMA Intelligence study. By 2020, India will account for almost half of all the subscriber growth expected in the Asia Pacific region.

The Mobile Economy: India 2015 notes that 13 percent of the world’s mobile subscribers reside in India. At the  end of 2014, India’s mobile subscriber penetration rate was about 36 percent of the population, compared to a 50 percent global average.

But that is going to change, fast.

The subscriber penetration rate in India is forecast to reach 54 per cent by 2020 as many millions more are connected by mobile.

India had 453 million unique mobile subscribers at the end of 2014, but is forecast to surpass 500 million by the end of 2015 and add a further 250 million subscribers by 2020 to reach 734 million.  

That matters for reasons beyond the ability to communicate using voice and text. Fixed broadband penetration in India is about 2.5 percent, and will not increase much more than that, for business model reasons.

In contrast, 60 percent to 90 percent of the population have access to at least a 2G mobile service.

That means the mobile network will become the dominant means of getting access to the Internet. The number of individuals accessing the internet over mobile devices had expanded from less than 100 million subscribers in 2010 to nearly 300 million at the end of 2014.

Although India only launched 3G services in 2009 and 4G deployments are at an early stage, the move to mobile broadband networks is set to gather pace over the coming years.

Mobile broadband networks (3G/4G) accounted for only 11 percent of Indian mobile connections in 2014, but are expected to make up 42 percent of the total by 2020.

One factor driving the migration to mobile broadband networks is the increasing adoption of smartphones, made possible by low-cost devices.

More than half a billion new smartphones connections are expected in India between 2015 and 2020, bringing the total to 690 million, up from 149 million in 2014.

The penetration of mobile Internet has reached 24 percent of the population by mid-2015.

This figure will almost double again in the next five years to reach 44 percent of the population by 2020, with around 600 million mobile internet subscribers.

Increasing use of the Internet in India will be driven by smartphone adoption, higher use of 3G and 4G networks, lower devices costs, more-affordable subscription prices and greater understanding of the value of Internet apps.

Policy, Business Model, Technology Innovation

But higher rates of Internet use will require investments and innovations both in the policy, business and technology realms.

By 2020, more than half of India’s people still will not regularly use the Internet. Most of the excluded population will live in rural areas.

The gender gap will remain, as well. Women in India are 36 percent less likely to own a mobile phone than men, which equates to 114 million Indian women.

Also, nearly 70 percent of the Indian population lives in villages, where network costs are higher than in urban areas, and sustainable business models are more much more difficult.

According to the Ministry of Communication and Information Technology, nearly 10 percent of Indian villages had no mobile coverage from any of India’s mobile operators as of March 2015.

A combination of a difficult terrain, characterised by mountains and sparsely populated farmlands, high energy costs and low income levels often makes it uneconomical for mobile operators to expand coverage to rural communities using conventional network deployment strategies.

A recent report by the GSMA analysed three broad strategies to address the coverage gap, namely network sharing, government support and alternative technologies (such as drones, balloons or satellites). The first two are particularly relevant to the Indian market, GSMA argues.

A study organized by a major mobile trade association might be expected to say that.

The cost of ownership of a mobile phone (which covers all the costs associated with both owning a phone and accessing mobile services) is a key factor in mobile internet adoption, particularly in India where nearly one-third of the population (360 million people) lives below the poverty line.

Data tariffs in India, at 0.5 to 0.7 cents per MB, are among the lowest in the world, but a significant proportion of the population is unable to afford this for regular internet use due to low disposable incomes.

A recent report by GSMA Intelligence found that many non-users lack awareness of Internet uses and available content. They do not feel the Internet is relevant or useful to them.

Creating awareness around the benefits of the internet and the availability of useful services covering a wide range of subjects, such as agriculture, education and healthcare, is crucial to bringing more people online.

Not coincidentally, that is why Facebook’s “Free Basics” program is viewed as so significant by Facebook and many others.

Most agree that mobile will be the primary Internet access platform in India. But that does not mean mobile will be the only platform. Fixed networks will have a role to play, both for access and backhaul, while new backhaul platforms might be more significant than some assume.

Need for More Spectrum

India’s mobile operators still have access to only a fraction of the spectrum that has been identified globally for mobile services, GSMA argues.  

GSMA’s research suggests that, on average, a total of 1600 MHz to 1800 MHz should be identified for mobile services.

“Unlicensed spectrum is not an adequate substitute, as it creates an uneven playing field and can quickly become congested, leading to interference between services,” GSMA argues. That is a predictable mobile industry argument.

The thesis is not without foundation, but also is congruent with the industry’s business model. Others might argue we have not yet explored the degree to which license-exempt spectrum can provide “carrier grade” service, and to what extent.

Still, by 2020, more than half a billion mobile connections in India will be running on mobile broadband networks. The bigger issue, beyond the number of users, is the intensity of capacity demand on networks supporting smartphones.

Video will be key,  according to Cisco. Globally, mobile data traffic will increase 10-fold between 2014 and 2019, for example.  

Mobile data traffic will grow at a 57 percent compound annual growth rate between 2014 and 2019, Cisco predicts.

Devices also matter. A single smartphone can generate as much traffic as 37 basic-feature phones; a tablet as much traffic as 94 basic-feature phones; and a single laptop can generate as much traffic as 119 basic-feature phones.

For such reasons–more subscribers, using more bandwidth intensive apps, on faster networks–mobile operators will need additional spectrum, especially in the 2100 MHz band, GSMA argues.

In India, freeing up 700 MHz band for mobile services also is necessary.  This low-frequency spectrum, structured in line with the Asia-Pacific Telecommunity (APT) band plan, can enable cost-effective coverage of large geographic areas, so will play an important role in extending mobile broadband coverage.

Contrary to most markets, in India this band is not occupied by broadcasting and can therefore be made available for mobile usage relatively quickly.

A key constraint for operators is that reserve prices in India have historically been set on the high side, GSMA argues. Lower spectrum prices will mean lower retail prices for Internet access users.

In India, consumer taxes also are 23.3 percent of the total cost of mobile ownership, while mobile-specific taxes account for 10.3 percent of the total cost of mobile ownership. Lower taxes also would improve affordability, GSMA argues.

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