Apps, services key to 3G success

There's a gold mine waiting to be unearthed in 3G for operators across the globe. According to analysts, global subscriptions for 3G will cross the one billion mark in 2010. However, there's still plenty of headroom for growth - until last year, 3G subscriptions stood only at 15 per cent of all connections.

While there has been plenty of talk about the rollout of 3G services worldwide, the fact remains that Japan and South Korea are the only two markets where the vast majority of all mobile subscriptions are 3G (or 4G) subscriptions. In Korea and Japan, the key has been application-centric products that incorporate connectivity. Operators have focused on creating packages of applications and services for customer segments.

Photo sharing, dynamic video services, and mobile wallet are some examples. Connectivity has been bundled in these application packages. This approach has paid off handsomely, with operators recouping their 3G investments in around five years. In contrast, operators that have focused on connectivity-oriented services are years away from recouping their large spectrum and infrastructure investments in 3G. The value of a 3G network is in its ability to unleash mobile applications and services. Monetisation of 3G networks flows from applications and services that are provided over the network.

Devices with 3G capabilities are the other important piece. This piece is getting addressed as more affordable devices are scheduled to hit the market. So, success and competitiveness in 3G comes down to applications and services.

In India, the challenge facing operators is a little different. We have to keep in mind that the Internet here is largely experienced on mobile devices, not on PCS. Given the constraints of bandwidth and affordable devices, this experience has been rather stymied until now. 3G networks will address the bandwidth part of this problem. As affordable 3G handsets become available, we will see a sharp growth in data consumption among Indians.

Infrastructure does help but mobile networks have an opportunity to make up for otherwise poor infrastructure as they have done for voice communication. It is conceivable that 3G networks will make e-governance; ebanking and electronic versions of many such basic services possible - services that have been hampered by the poor state of physical infrastructure in India. One other area of attention would be legal reforms to rationalise liabilities for operators for carrying third party content and services while improving enforcement.

Indian operators should, however, be forewarned about the difficulties of profitably operating a 3G business. There are very few operators worldwide who have demonstrated unquestionable success in 3G. The common lesson to learn from these very few successes is one of business models. Charging for network usage and access gets commoditised and loses premium very quickly.

On the other hand, charging for services delivered on the network makes for lasting premiums, even if it is a slightly more complex business model to execute. We've imbibed many of these lessons at Infosys. Recognising the value shift in this business from networks to applications, we have invested in building an operator-centric application store platform called FLYPP, where trusted applications from multiple sources can be rendered on-the-fly on a multitude of handsets.

Besides opening up a new revenue model, this platform allows operators to differentiate through choice of applications and services these apps drive. It is also a rich platform for future innovation which has the potential for sustained market differentiation and consequently pricing power as 3G and next generation networks are adopted.

- Subhash Dhar is Senior Vice President and Member, Executive Council, Infosys Technologies