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Why are 4G tariffs so high? — Column

The promise of 4G networks in India was to bridge the digital divide by making cheap, high-speed broadband available across the country.

In other words, wireless broadband was to be to landline broadband what the mobile phone was to the land phone.

However, going by the first such launch in India, very little of the promise seems to be shining through.

For example, according to Bharti Airtel’s offering, both the initial start-up price and the monthly tariffs are higher than what is currently on offer in the Indian market in the form of mobile broadband.

In India, a consumer can buy a 7.2 Mbps data card (such as the one from Micromax) for just Rs 1,800. Add another Rs 50 for a 3G SIM card and you can look forward to wireless broadband speeds of about 2 to 4 Mbps in most of the cities and towns in India.

In addition, operators like Vodafone offer even cheaper start-up options, in which you pay about Rs 1,500 to get a high-speed 3G data-card (USB dongle) and even get the first two months of data usage free.

Compare this to the Rs 8,000 that you have to pay for a similar TD-LTE based data-card (dongle) and you’ll get the picture.

In other words, at current device prices, TD-LTE is set to fail gloriously in the price-sensitive Indian market. Almost no Indian consumer, except a thin elite, will pay more than four times the money for a data card to go from a 2 Mbps connection to a 10 Mbps one.

This, however, is more of a temporary roadblock, mainly arisen due to the path-breaking nature of India’s 4G experiment. Bharti Airtel, which launched its 4G services today, is among a handful (if even that) operators in the world to launch commercial services on the TD-LTE technology.

The technology, developed in China and elsewhere, is so young that most USB dongle makers don’t have the technology to make it. Even when they do, they don’t have the scale to make the dongles cheap.

This too will change, as Indian operators get fully into the game. Like CDMA handsets that cost Rs 600 ($12), prices of TD-LTE devices too will drop sharply once the companies place orders in the millions of units. That said, it will take at least a year for dongle prices to come to the Rs 3,500-4,000 price range — where they can even hope to target the mass market, in the cities.

To truly go rural, device prices will have to dip even further, to below Rs 1,000.

Another limitation, though not that important, is that TD-LTE is currently being built only into ‘display-less’ devices such as data-cards and modems. Display-enabled devices with TD-LTE, such as phones and tablets, will take months, if not years, to be launched in India. While this will not limit the growth of the broadband oriented market, it will, however, restrict TD-LTE from entering the mobile device market.

In comparison, most of the mid to high end phones sold in the country can be connected to laptops and PCs to enable them with high-speed Internet at virtually no extra cost.

The second factor is the monthly prices or tariffs — though here the differences are not that stark.

While experts have repeatedly said that a monthly tariff of Rs 250-400 is what will work in the Indian market, Airtel’s starting tariff is a steep Rs 999 per month.

In comparison, a decent 3G data plan of about 1 GB can be had for Rs 400 per month.

Even on a like to like basis (excluding the speed factor), TD-LTE wireless broadband is actually costlier than the 3G based equivalent in India. 4G LTE is supposed to be between 10 to 100 times more efficient that 3G technologies (depending on who you ask), but the efficiency is not reflecting in the prices yet.

In addition, while 3G operators have only 10 MHz of spectrum in India, 4G operators have 20 MHz, effectively halving the latter’s network cost.

This too, is perhaps only a matter of time. As equipment prices tumble, let’s hope the analysts’ dream of ubiquitous wireless broadband at Rs 250 per month will materialize in India’s rural heartland.

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