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… is that while the country is the world’s second-fastest growing telecom markets (an astounding 5 million new connections per month), its adoption of high-end mobile technology is far behind the rest of the world. Here are two contrasting articles from BusinessWeek and The Financial Express, that highlight the growing divide between growth at the low end and the high end.

Part of the problem lies in incomplete reforms in the telecom sector: New Delhi has allowed private players to offer both fixed line and wireless services, and has recently permitted upto 74% foreign ownership of telecom companies. That has resulted in the world’s cheapest call rates - 2 cents per minute in India, as compared to 33 cents in Japan, 11 cents in Brazil, and 24 cents in Australia. At the same time, there appears to be an inexplicable delay in policy formulation and spectrum allocation for high-end 3G communications technology. As the Financial Express article points out, other economies are building high-speed wireless networks, entrepreneurs are leveraging this to construct new business models, and exciting new services (Mobile TV, mobile gaming) are becoming widely available. India risks being left behind with only voice and text-based services.

The other part of the problem might be India’s own spectacular growth. At this point in time, there is very little incentive for India’s telecom providers to provide 3G services: the existing (and potential) voice market is too compelling in terms of sheer numbers. In the foreseeable future, it is rural India which will drive these growth numbers. It is a high-volume, razor-thin margins game. Urban markets are fairly saturated now. Telecom service providers,then, are better off investing in setting up new network infrastructure, bringing more of the country under wireless coverage (only 30% today), than in high-end services.

Dithering on 3G policy by the Department of Telecom suits India’s telecom companies just fine -for now. There’ll be a time when these growth figures won’t be so rosy -and that’s when telcos will feel the pinch from lack of these value-added services to add to their margins.