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Roti, Kapda Aur Porn

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As 3G rollouts in other countries show, adult content is definitely a big driver of consumption

It has been just over a year since Indian telecom companies left observers gasping by bidding over Rs 60,000 crore for 3G spectrum, which enables download speeds of upto 200 kbps on mobile phones. That so much money could be generated by the Government from thin air left a deep impression on many (not least the CAG, who then asked why 2G spectrum should’ve sold so much cheaper).

But as nationwide 3G—‘third generation’—services get rolling, the big question is: how do telecom companies expect to recoup their investment? Are they suffering the ‘winner’s curse’ of an auction process (where the winner inevitably ends up overbidding)?

The answer might lie in what 3G does to the market. “The way to think about 3G is from a customer segment perspective,” says Kunal Bajaj of the telecom consultancy Analysis Mason. Right now, most customers spend under Rs 150 per month for simple phone services. “But if you concentrate on high-end users, you get users whose ‘average revenue per user’ is well above Rs 900-1,000 [per month],” Bajaj says. These customers would likely pay more for fancier services, and can be found in the country’s biggest cities. The Delhi market was split three ways, with Vodafone, Reliance and Airtel each paying Rs 3,316.9 crore for 3G.

The same players paid Rs 3, 247.1 crore each for Mumbai spectrum. Often, higher-end consumers also have second and third devices with Sim cards like tablets and laptops. Those spell add-on revenue, given all the 3G-enabled data services on offer.

For telecom firms to boost average Indian bills across India, however, audio-visual internet feeds—involving heavy data usage—will need to become a mass phenomenon. This requires the prices of 3G handsets to crash (very likely in the near term).

As 3G rollouts in other countries have shown, one content category is king. “Adult content is definitely a big driver of consumption,” Bajaj says. “We are already seeing a lot of 2G data traffic being driven towards that type of consumption pattern.” In a crowded country so given to shared entertainment on larger screens, a device as personal as a phone serves a special purpose. “Even where the PC exists, it is in a public family area,” observes Bajaj, “The mobile gives a level of privacy not otherwise available.” In fact, statistics that Bajaj has seen show that porn even outpaces that other great Indian male passion. “I would say from the data [on aggregates],” says Bajaj, “it’s probably more porn than cricket.” Expect a market transformation.