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MADHAV RAGHAVAN

Mobile price wars make consumer king

t's funny, isn't it, how we wait years to see a fantastic innovation, only to find that within six months the market is flooded with various alternatives. Where was everyone hiding? Over the past few years, Apple has set the trend repeatedly, with the iPod, iPhone, and now iPad, but the competition has quickly followed suit and released variously versatile versions of music, touch, and type. These are signs of a healthy competitive industry. If the market expands as well, it usually results in falling prices. Happily, the mobile phone and services industry in India is a classic example. Just look at what has happened to tariffs in the past few years. We might cringe every time we hear the dreaded DoCoMo tune, but Tata's joint venture is just the latest in an impressive trend of expansion in this industry. In fact, in contrast to the old days of two main providers (and even older days of only one), the latest wars are between a large number of players in the services market – Vodafone, Airtel, Reliance, Tata, Idea, Virgin, BSNL, Aircel – to name just a few. There are many, many more in the mobile handset market – think cheap and Chinese. The consumer today is king (or queen), and tariffs are low by any yardstick, domestic or international. Of course, all this is thanks mainly to you, and, more to the point, to your cousin who is thinking about getting a phone. Firms can afford to cut rates, betting that the increase in customer volumes will compensate. This is why Tata DoCoMo's campaign, bold as it is (they've virtually reinvented the structure of packages and pricing), should do well for a time. But it is worth wondering what will happen when markets are saturated. If the West is any guide (indeed, if economics is any guide), saturated markets start consolidating. The smaller, fragmented, overstretched companies get bought out, the number of market players reduces, and prices begin their slow march upwards. The consumer of tomorrow is more a non-playing captain.

By any account, this is still some way away. In any case, these companies have barely yet revealed their biggest weapon. Hang me if I'm wrong, but voice is only a part of what is to come. The future, instead, is in data.

Data transfer technologies, particularly through mobile phones, currently hover between second- and third-generation – the 2Gs and 3Gs of this world. 2G contains both the technologies that we are principally familiar with – GSM, which is mostly the default one, and CDMA, which is smaller in market share (They differ, by the way, mainly in the way they allocate frequencies, or bandwidth, to users, and Wikipedia cleverly explains the difference with an analogy of picking out different conversations in a crowded room. Go check it out.). 3G is for the most part just a souped up version, allowing many more uses of bandwidth. So a 3G-enabled device allows you unprecedented applications, such as mobile TV, video on demand, video conferencing, and location-based services such as route directions or weather reports. And now there is 4G.

You can see why this is the future.

The remarkable thing, if there is only one, is that by moving to 3G directly as we are doing, we are effectively leapfrogging almost the entire phase of ground-based technologies, skipping years of intermediate steps. It is so much more cost-effective to put up towers in remote locations and connect them via satellite than it would be to wire the whole place up. Remember what happened to Spectranet? We can pretty much say goodbye to broadband and land lines. There is one more remarkable thing about the future. Within twenty years, India's entire literate population should be online. Internet-enabled mobile phones and data rates are only going to get cheaper, and access easier. We are about to get super-connected. What a ride that will be.

 
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