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Coming soon in India - world’s fastest growing mobile market - 3G services by the dozen. And what that means is a looming free-for-all in a market where competition is already fierce, prices super low, profits even lower and consumer is the ultimate winner.

Indian Department of Telecommunications (DOT) is getting all set to introduce about a dozen 3G licenses in some of the more densely populated regions including the South Indian states of Andhra Pradesh, Tamil Nadu (including Chennai), Karnataka, and Kerala. The information comes to us from our friends at Packetology, a Telecom research firm focused on the Indian market.

Other states getting 3G will include North Indian state of Haryana (right next door to Delhi and home to many outsourcing outfits), while ten licenses will be up for grabs in Kolkata (Calcutta) and Madhya Pradesh. In other large markets such as Mumbai (Bombay) and Delhi, the number of licenses available be far fewer because the available spectrum is in limited quantities. Delhi will have only four licenses while Bombay can accommodate upto eight licenses.

According to initial DOT 3G policy, each carrier was going to get 5 MHz of spectrum and only 25 MHz of total spectrum was available. However, more spectrum has become available, hence the boost in the number of players who can bid for the spectrum.

The availability of such a huge amount of spectrum and licenses makes India one of the few unique places to have aggressive and highly competitive 3G market from get go. Most countries have between 2-to-5 players. UK has five, US has four, Brazil has four and most Asian countries have two or three. With this kind of liberal licensing of spectrum, and the existing 2G operations in place, some regions might get over a dozen operators offering phone services.

Thanks to fierce competition in the 2G services, India continues to be one of the fastest growing mobile markets - about 300 million at last count - mostly because prices are seriously low. Still, the presence of such a high number of players makes you wonder if there will be anyone who will be able to make money. The looming WWF style competition is going to keep large US and European carriers out of the market, though there has been news that AT&T and Verizon are very keen on entering the Indian market.

The new 3G players in India will be looking to build their networks very cheaply in order to compete and offer ultra low prices to end consumers. This would mean despite a huge buildout, companies like Siemens, Nokia, Nortel, Alcatel-Lucent and others should forget about making any real profits. The Chinese vendors - Huawei and ZTE - can mop-up, because they are willing to sell at a loss in their bid to gain market share. Infonetics Research, a Campbell, Calif.-based market research firm recently said that China and India are two major drivers of telecom equipment sales.

So who wins in this? Qualcomm & Nokia! The spread of 3G technologies brings a lot of royalty money into Qualcomm’s coffers. Similarly, Nokia is the strongest mobile brand in India and has a 3G portfolio of phones to match.

The big question that looms large in my mind: by introducing so many players in the market, is DOT killing the golden goose? In other words if there are too many players - dozen odd - and no one is making money, it would (and could) lead to a situation where they start shutting down. It could in the end the competition would decline and might result in an increase in prices. 

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The Indian cell-phone boom isn’t showing any signs of slowing down. Indian mobile operators are adding around 8 million new subscribers a month; February’s tally of 8.46 million brings the total to 246 million, making the country second only to China. Sure the ARPUs are low compared to those in the West, but I find it amazing how quickly the market has grown. I remember going there in 2004 and being amazed by the mobile frenzy. At the time, there were 34 million subscribers and hopes of hitting the 100 million-subscriber mark. They are clearly way past that. I wonder, how long can this growth continue? What is the natural limit to the market? Any theories, people? [via Unstrung]

After a long wait, the Indian government has decided that it will auction 3G spectrum, and will allow foreign players to participate in the bidding. The spectrum is going to be released in the 2100 MHz band, which would make it compatible with rest of the world, barring a few countries such as the U.S.

Here are some specifics:

• Winners will be required to pay 0.5 percent of total adjusted gross revenue to the state on an annual basis for the first three years of operation, rising to 1 percent thereafter.
• Winners will not be allowed to trade or resell the spectrum and they will not be allowed to merge in the first five years after the grant.
• About 30MHz of spectrum will be sold in total.
• India will also auction licenses for broadband wireless (WiMAX) services, with the reserve price fixed at 25 percent of the amount for 3G spectrum.

The spectrum is going to be plentiful; our sources say that it will be enough to accommodate six carriers. The carriers we expect will make it to the finish line include the current leader, Bharti Airtel; Idea Telecom; Reliance and Vodafone (VOD). The two international cell phone companies likely to win the spectrum bid include AT&T (T) and Sistema.

If the rollout of voice services over past decade is any indication, this is a big opportunity for equipment makers. Ericsson (ERICY) and Nokia (NOK) have done well in India, and there is little reason why the situation would change, though one suspects the Chinese equipment vendors are going to act as deflationary counterweights to their Western counterparts.

The 3G services in India will eventually have to compete with WiMAX, which is being seen as the wireless broadband technology of choice by lawmakers. More importantly, this auction is a way for the Indian government to keep the telecom sector specifically and the economy overall growing at a healthy clip. India’s economy was catalyzed by telecom and call center businesses, then spread to other sectors.

The truth about Indian start-up scene is that there is more money than actual start-ups. We have talked about it before, and we will say it again. Venture Capitalists - both local and US-based are showering money on start-ups, some of them quite marginal.

Google is adding to the money-shower by becoming an institutional member of the Band of Angels (BOA), a group based out of New Delhi.

It doesn’t mean that there is going to be an investment - since BOA is not a fund - but it opens up the potential of an investment for start-ups that catch BOA’s fancy. This is not the first time Google has taken an institutional approach. It had previously invested $3.75 million in Ventureast TeNet Fund. It has also taken a limited partner (LP) role in Erasmic and SeedFund. In a related announcement, Cannan Partners of Menlo Park announced first round investment of $5 million in techTribe, India’s Career Networking portal. Cannan’s New Delhi man, Alok Mittal is also a founder of the Band of Angels.

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The first quarter of 2007 has been good for DSL, thanks to higher than expected growth in China and other Asian economies, according to Dittberner Associates. China contributed more than a third of the total 12 million new DSL connections in the first quarter, which also helped Chinese equipment makers, Huwaei and ZTE, who took the top spot from Alcatel-Lucent. In Japan, VDSL made a strong come-back, in the quarter.

While China is zooming, the Indian broadband market seems to be stuck in neutral, even though the government had declared 2007 a year of the broadband (or whatever passes for broadband!) Andthat should be a cause of concern for venture capitalists who are placing multi-million dollar bets on consumer Internet start-ups.

There has been a strong demand for broadband, but apparently there is a shortage of modems and other gear, according to Light Reading. The problems are particularly acute at two state owned phone companies, BSNL and MTNL, who control nearly 64% of the total Internet access market. There are about 2.3 million broadband connections in India. There are about 8 million Internet subscribers in India. MTNL had planned to add a million new subscribers this year, while BSNL had a target of 5 million.

The government was hoping to get 20 million broadband subscribers online by 2010. The problems at MTNL and BSNL come at a time, when the local telecom regulator is trying to change its policies that favor the incumbents, who are allegedly using their copper-control to beat out rivals.

This should be a major concern for US based venture capital firms that are investing at a break neck speed in India, especially those who favor consumer Internet start-ups. Lack of broadband is going to become a major roadblock for the growth of their investments.

While broadband is unlikely to bring the social change brought upon by mobile phones, it is nevertheless crucial for India. From an economic growth standpoint, broadband is crucial for India’s future, especially if the country wants to be taken seriously as a technology powerhouse.

On a more mundane level, broadband could, for instance, provide a major lift to one of India’s biggest assets - Bollywood. Broadband deployment, and sending video over those pipes can help formalize an industry that currently exists in shadows. The television content business could get a major boost, leading to more companies like UTV and NDTV.

On a more personal level, availability of broadband - faster speeds at lower prices could help me iChat with mom, which means better cooking lessons, that would lead to a healthier lifestyle. I know, sounds narcissistic, but then you want me around longer for these long rants.

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