Why 3G is so Expensive in India?

Once we turn on our TV sets, we get to see the emotional and heart-warming ads being run by leading telecom operators about sharing pics and data easily by using 3G data plans.

Undoubtedly, some of those ads are great and make a connection with the target audience by adding the emotional elements.

Well, now let's get practical. Despite the encouraging ads day in and day out, it is getting increasingly difficult for consumers to afford 3G data plans in India.

Leading telecom carriers in the Indian market such as Airtel, Vodafone, Reliance, Idea, Tata and BSNL offer various data plans as per consumers' requirement. However, they are mostly expensive, both for moderate and frequent users.

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The first question that may crop up, when the entire world is getting ready to embrace 4G technology, why Indian consumers are still getting charged loads of money for 3G?

Some Insights into 3G Pricing

One reason for high 3G pricing is the cost recovery by the operators. When bidding for 3G was opened by the government in 2010, the reserve price was set at Rs.3, 500 crore and winning bids were between Rs.6, 000 and 8,000 crore.

With the estimated population of more than 1.2 billion, the average monthly cost for 3G had initially translated into Rs.70 per operator. It was way below than the global average cost of $1,363 per pop across various countries.

Another key reason is the demand for 3G was expected to be limited to the metro and other large cities only. So, from the very beginning the market for data 3G data plans are not well spread out. Low market penetration forced the operators to set higher pricing to reach break-even or to earn revenues.

In addition, the infrastructure for 3G is still not up to the mark in India. Telecom carriers are spending more to become technologically equipped in order to resolve issues such as intermittent signal issue, breaking-up of voice calls and slow data speed. This is adding up to the overall cost of the data plans.

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The Takeaways

So, the bottom line is due to ever-increasing infrastructure and marketing cost of 3G to sustain in the fiercely competitive market, telecom operator have set steep pricing for data plans, which seems heavy on consumers' pocket.

On the other hand, 2G has already consolidated its position in India where most consumers still prefer 2G data plan, GPRS and EDGE. So, in order to create a niche for 3G, operators are pumping more money to establish the Unique Selling Propositions (USPs) of 3G technologies such as higher speed translating to faster work. However, the pricing factor has pulled it back from becoming popular and restricted its growth potential. So, by slashing rates, telecom companies can help to boost the data usage and increase the acceptability of 3G plans in India.