Can cheap tablet PCs revolutionize Internet use in India?

After 15 years of public access to the Internet, India’s user base stood at 100 million last year, a largely inflated figure because of duplicate counting and inactive users. Also, there were only 5.3 million broadband users. Clearly, these are dismal numbers in a country of 1.2 billion. Contrast this with cellphone usage. Over the past decade, we have seen a cellphone revolution in India. Today, over 700 million Indians own a cellphone and by 2014 an improbable billion are expected to.

Today’s tablet PCs are tantalizingly like yesterday’s cellphones – cheap and plentiful, with the promise of getting cheaper and better. Some of the world’s lowest-priced tablets are already here in India as telecom operators hope to capitalize on nationwide availability of high-speed 3G connections and the growing popularity of the hand-held, touchscreen computers.

First we heard of a $66 tablet produced by Bharat Electronics Limited, a state-owned company. This solar-powered Android tablet is being produced only for use by government officials but surely the technology can be licensed to a private player. Then Reliance Communications, one of the largest cellular providers, unveiled a $289 tablet; Beetel, a group company of Bharti Airtel, India’s biggest provider, rolled out one that costs $222 and a Bangalore company, Lakshmi Access Communications Systems Pvt. Ltd., outdid all the private players by unveiling a $99 tablet.

None of these tablets, all based on the Android operating system, can be called the cheapest in the world for the simple reason that Hewlett Packard has begun selling off its ill-fated tablets – based on the webOS it bought from Palm – for $99 in order to clear a huge inventory and also because it plans to exit the market for all PCs. But that is largely irrelevant. Regardless, tablets are priced lower than many high-end, and even medium-priced, cellphones. That is a huge invitation for a large number of Indians, notably the middle-class and students who cannot afford a full-fledged PC.

But what next?

I pose this question because we cannot assume that the tablet market will zoom on its own. Telecom operators may have been smart in developing the low-cost tablets but 3G pricing is still beyond the reach of many. Affordability is a big factor in India’s market, as we already know.

Telecom operators need to be a lot smarter to develop the market for mobile Internet, especially tablets which, unlike the cellphone, are a new product.  In the cellphone market, they needed to do little except cut tariffs to dramatically expand the market. With 3G, this obviously isn’t going to work, simply because the operators have paid far too much for spectrum and 3G still doesn’t have the scale that can lead to sharp tariff cuts. In fact, even call rates have hardened in the past few months, signaling probably the end of tariff wars, if not cheap calls.

Can we expect the telecom operators to come up with true Innovations including innovative pricing?