We have already written on why Indian Consumers are not ye jumping to the 3G Signal 🙂 Summarizing, here are the key challenges for adoption of 3G in India.

2.5G / Edge Data Connection Good Enough – Did you know that Accessing social networking sites such as Facebook.com drives a major chunk of demand for mobile internet in India. Since such websites can be accessed using 2G/EDGE networks reasonably well, demand for 3G would remain subdued until the gap between 2G and 3G tariffs is narrowed substantially. Indeed, we worry that the 3G story could be similar to that of VAS over the last decade, as both VAS and 3G are not essentials like voice, have cheaper substitutes and have smaller addressable markets compared to voice. Industry is consistently bridging the Gap of tariffs between 2.5G EDGE and 3G Data Services.

Mobile Device eco-system – 3G speeds are primarily useful when viewing videos, downloading applications, games, content, etc. However, availability of handsets that can truly leverage such speeds and enhance user experience with wide screen displays has been limited to > 8,000 price points. As handset availability in the country increases, 3G demand is expected to pick up. Industry Analysts expect demand to pick up only when devices that provide satisfactory user experience are available below 5000 price point. Currently, very few devices are available in this category and with the user experience from such devices far from satisfactory.

EVDO Dongle Market – 3G on handset devices would partially compete with the dongle market. 3G applications to are more attractive for mobility in laptops via data cards or dongles. However, the dongle market is currently dominated by CDMA EVDO dongles from Tata (Photon+) and Reliance NetConnect Broadband+. Indeed, as the above mentioned dongles provide reasonable user experience (robust video and audio streaming), 3G (even on handsets) would have to be price competitive vis-a-vis the dongle market.