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India Telco Scenario: Re-living 2005 in 2013

Looks like Airtel’s move to hike the price of its 1GB 2G plan by 25% will soon be aped by other operators. And thus continues the decimation of mobile data (and voice to a lesser extent) in India thanks to policies put in place by various governments of various formulations. We are now in the very unique situation where 3G is too expensive to be used in any reasonable quantities by the masses, so we are now marketing 2G in 2012, which should have been the case in 2005. What a mess.

Due to crazy amounts of money spent on 3G licences, the telcos have no choice but to eke out every possible paisa from the subscribers by hook or by crook. Even at the really expensive prices for 3G data, the telcos won’t recover the money they plonked into the licenses, so reducing the prices is no longer a feasible option for them, even though many attempt to do that by putting in place new plans that have minuscule transfer limits, after which the subscriber is billed at per Kb or per 10 Kb rate, which can easily throw up bills that run into the thousands for the subscriber.

The net result of such adventures is that subscribers get sucked into the trap one large group at a time. Such a scalding puts the subscribers off such services, while the telco balance sheets brighten up a bit for as long as they can keep finding more subscribers to die on the 3G data sword. The data billing process and plans are so convoluted now that we are seeing a new level of innovation in both pricing and products (even though some many alternatively call it dishonest business practices).

Some of the innovations:

  1. Capped high speed 3G connection with an ‘unlimited’ slower connection after the FUP which, for some reason, also puts a billing limit in place.
  2. Cheap volume plans with extremely low validity. Basically, you can’t use all of the data you have paid for within the given time. You’re actually paying more for less, even though it looks otherwise.
  3. 3G connections that bill fallback 2G connections on a per Kb or per 10 Kb basis. There’s no way to track this during normal usage as 3G tower footprint is dicey even within metros.
  4. Airtel also sells 2G plans which reduce in transfer speed after the plan’s limit is reached with ambiguous terms on how they define ‘unlimited’ after that.
  5. It is really hard to use even 1 GB of data in a month on a 2G connection. Most customers I know are underutilizing that data allocation every month. They were already paying more for using less, now they’ll pay even more.

What is even more troubling is that 2G cannot support bulk usage due to limited spectrum, you can already experience this in places that have a high concentration of people using mobile data over 2G in the area covered by the same towers. This is one of those spectacular cases that has failure built into it as a fact.

It is only the government who is capable of altering this terrible state of affairs, but being the party that came out smelling the sweetest of all the involved parties (other two being the telcos and the customers), it will be foolhardy to expect them to alter the course on this front. Which is a real pity as affordable 3G data had the potential to transform our internet penetration scenario. That said, we are in good company in the 3G mess. Over in China, the story is no different with 3G eroding margins for operators, thanks to lousy government policy.

The story, for me, as a consumer is different. I spent the last 3-months of 2012 streamlining my connectivity scenario. I was spending an average of Rs. 4000 per month on data and voice till then and a bit of moving things around has almost halved that amount. I switched to a Rs. 149 per month 2G plan on Airtel (2GB transfer & ‘unlimited’ slow transfer after the cap), changed my plan with a higher upfront payment but a lot of free minutes and messages, picked up a Tata Photon data card with a Rs 5000 for 32GB transfer (validity for a year) plan and stuck to a Rs 1200 plan for home broadband.


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