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How can 3G unlock the internet?

For many people in emerging markets, a 3G connection will be their first experience of broadband internet.

With falling prices for consumers and lower costs for operators, 3G can meet the demands of any market. The technology is well-placed to bring fast connectivity to the internet for millions of users in emerging markets.

After a slow start, the 3G train has quickly become an express, racing across the globe to bring faster mobile connections to consumers. The technology has reached a level of maturity and cost effectiveness that makes it the predominant choice for operators in emerging markets looking to open up access to the mobile internet.

There is clearly huge demand. Take Peru, for example. In 2007, 12.9% of people had access to a PC, 50.8% had access to mobile phones, but just 2.5% had internet access. It is a situation repeated in many emerging markets, and 3G is the key to unlocking huge business.

Many operators have already recognized the potential of 3G mobile broadband. After deploying 3G technology, TEF, the most successful 3G operator in Chile, saw traffic soar to 4 TB a day from 450 GB in just 60 days.

Interestingly, the majority of this new data traffic came from outside urban areas. In South Africa, MTN and Vodacom joined forces to launch 3G. The two networks now serve close to five million 3G customers.*1 Similarly, when Smart Communications introduced a USB broadband dongle to provide PCs with access to its 3G network in the

Philippines, subscriber numbers shot up six fold in nine months. For operators, another main driver for 3G is off-loading voice traffic. With the massive uptake of mobile phones in increasingly urbanized populations, many operators are simply running out of 2G spectrum and need to install 3G overlay networks that can handle much more voice traffic, and do it more cost effectively.

Widely recognized benefits

The social and economic benefits of broadband internet access, for individuals, communities and nations, are substantial and being increasingly documented. As GSM Association (GSMA) chief Rob Conway told the Mobile World Congress earlier this year: “Mobile broadband, in particular, can be an engine for growth if governments set the right framework.”

The release of new spectrum for mobile broadband services in 2009 will ultimately add the equivalent of 211 billion US dollars to China’s GDP, and could add the equivalent of 95 billion US dollars to India’s GDP, according to a 2009 report by Professor Leonard Waverman and consultancy LECG for the GSMA.

More recently, in a World Bank report in June 2009, Ms. Christine Zhen-Wei Qiang, a World Bank economist said: “The mobile platform is emerging as the single most powerful way to extend economic opportunities and key services to millions of people.”

Such recognition has led to a range of initiatives, such as the International Telecommunication Union’s Wireless Broadband Partnership project, which is the flagship of its Connect the World program. The GSMA is also active through its Development Fund, which promotes mobile solutions for people living on less than two US dollars per day.

3G beating the affordability challenge

With its proven track record and a well-developed global ecosystem behind it, 3G can overcome the affordability challenge that operators face when extending their services to lower income consumers. First, there is the rapidly falling price of 3G handsets and USB dongles. The cost of entry-level 3G handsets has fallen to less than 100 US dollars. One of the most recent examples of the new generation of affordable 3G devices is the Nokia 2730 classic, announced in May 2009. And it is the mobile phones that are emerging as the main device to access internet in emerging markets. According to extensive Nokia consumer research, nearly half of emerging market customers state that they would rather connect to the internet over a mobile phone than a PC.

And Mr. Abdul Razzak, CTO of Egyptian provider Etisalat, says: “The mobile handset is becoming the most important means of accessing the internet in Egypt.”

Infrastructure costs have been dropping too, largely thanks to economies of scale, as 3G shipments continue to grow; although technological innovations are also playing an important role. The use of lower-frequency spectrum at 850-900 MHz, for instance, increases the reach of individual base stations and thereby slashes the number of network sites needed by three quarters.
The more remote and sparsely populated a region is, the more likely it becomes that 3G will beat fixed broadband on deployment costs.

Flexible charging and billing is almost as important as absolute costs in these markets: as many as 80 percent of subscribers in emerging markets have a prepaid plan, compared to 60 percent in Europe. Thanks to the arrival of micro-payments, low cost top-ups of as little as half an hour of unlimited access are now possible for people on low incomes, while those on a higher income can invest in alternative plans, such as monthly contracts.

Mobile broadband can be an engine for growth. To find out how, please click here to read the rest of this article and other Expanding Horizons stories.