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India Auctions Third Generation Phone Licenses

India is auctioning so-called "third generation," or 3G, wireless phone licenses. Analysts say the new technology could unleash an online revolution by providing greater access to the Internet through mobile telephones. Only a fraction of the Indian population owns computers. The government is expected to raise $10 billion from the auction.

In recent weeks, nine telecommunication companies have placed bids for licenses to offer faster data services on wireless networks.

India's long awaited auction of so-called "third generation," or 3G, mobile phone licenses has attracted huge interest in a country considered an information technology hub, but where millions of people still do not have access to the Internet.

Telecom analysts say faster digital connectivity will allow people who do not have computers to peruse the Internet from their mobile phones.

Kunal Bajaj, India director of the consultancy firm Analysys Mason, says mobile phone users presently can run only basic applications for sending and receiving data. But 3G services will give these users access to more sophisticated applications and data oriented services.

"The Internet in India for the mass market is going to be via the mobile devices and via the mobile handset, and so what that means is that everything that people in more mature markets are used to doing via their desktops or their laptops, things like banking, or shopping, or transactions, those things are more likely going to happen via mobile devices for the average Indian," said Bajaj.

India is the world's second largest mobile phone market with about 550 million subscribers, and is growing at a fast pace. Millions of new customers, particularly in far flung rural areas, are expected to buy new connections in the coming years.

Successful bidders will be allowed to offer 3G services on a commercial basis from September this year. Bajaj says these services will significantly transform lives for a vast segment of the population.

"Because we have such a major gap in socio-economic stratas in India you are going to find that the lower end, the lower socio-economic buckets are going to be enabled and empowered because they will have access to information, access to commerce, access to education, access to government services, the ability to do transactions really for the first time ever in their lives, and that is really going to play a transformational role in bringing about an equilibrium to societies," said Bajaj.

The auction of 3G spectrum will also generate much needed funds for the government. According to estimates, the auction could raise $10 billion - higher than original estimates of $8 billion. The money will help the government cut its fiscal deficit.