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Experts: emerging markets ready for 3G

Quick. How can you tell when a particular market is ready for its own 3G rollout?

Look what happened with 2G, says Ovum researcher Nathan Burley:

Mobile operators brought voice services to the masses and now, as wireless technology has developed, they have the same opportunity with data and broadband.

There is a huge differential between the investment of time, effort, money and risk to put fixed networks in the ground, and the deployment of a wireless base station. Where there is a lack of existing fixed broadband alternatives, we expect wireless to increasingly provide more broadband in the mass market. As with voice, it is generally the mobile operators that are best placed to control these networks and deliver broadband services.

Primarily due to scale, we see the mobile network as becoming the standard vehicle for broadband provision, meeting pent-up broadband demand in these markets and growing market share from fixed players.

3G already in some emerging markets, despite issues with ARPU

According to many analysts, the conditions are now right for deploying 3G services in emerging markets. Most of these markets have a low national penetration of fixed broadband, often below 10%. And in urban areas PC penetration is at least double that. These urban areas have relatively few fixed internet connections: there is often no feasible connection method other than mobile broadband (dongles). Another factor is the increasing availability and rapidly declining prices of low-end 3G handheld devices.

Several communication service providers in emerging markets have already launched 3G networks, and these first-movers have met with real success.It took TEF Chile six years to get the EDGE traffic volume to its present level of 450 GB/day, but it took them only 60 days to get to 4 TB/day in 3G. Interestingly, most of TEF’s 3G traffic is coming from outside the urban areas where there is no fixed infrastructure.And when Smart in the Philippines offered a prepaid 3G dongle for computers, their subscriber base increased by 600% in just nine months.

What’s more, 3G can provide high voice capacity at a much lower cost than older technologies, helping to remove capacity and spectrum restrictions, particularly in urban areas. But the real key to opening up emerging markets to 3G is cutting the user’s Total Cost of Ownership (TCO), defined in this instance as how much of a consumer’s income is required to enable them to be connected. Keeping TCO to a minimum can be achieved by cutting the operating cost of the network while marketing low cost devices to encourage the user to take up services.

No mere replacement for 2G

In their report 3G mobile networks in emerging markets: The importance of timely investment and adoption, members of the consulting firm LECG argue that 3G is no mere replacement for 2G networks. 3G does things that 2G could never do, particularly with respect to stimulating economies:

[…] the rollout of 3G networks will provide consumers with more than just a few additional features that are not inherent in existing 2G networks.  The promise of mobile broadband services in the emerging economies is very substantial, given the under-development and limited prospects for fixed-line broadband deployment in the near and medium-term.  Thus at least in the emerging world, the significant additional value that consumers derive from 3G networks will be related to the mobile broadband capabilities of these networks; in this sense, 3G services are substantially “new.”

The fact that many people in emerging markets will access the internet for the first time on mobile devices cannot be understated here. Says Abdul Razzak, the chief technology officer of Egyptian CSP Etisalat, “The mobile handset is becoming the most important means of accessing the internet in Egypt.”  And this is true in other countries, as well.

For both economic and social reasons it makes sense for all stakeholders to prepare mobile networks for this rapid uptake of mobile internet, especially in markets where potential consumers number in the hundreds of millions.

The population of India, for instance, is more than 1.2 billion. And China, too, has 1.4 billion people – these two countries alone represent close to 40% of the world’s population.

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