If India with its huge population base cannot provide cheap 3g, no one else in the world can do it. The causality should run the other way and not how you wrote it. More customers should lead to more investment and better connectivity. And not the other way around, that since connectivity is bad people are not buying it. I see even rickshaw pullers in Delhi having cheap Chinese smart-phones these days. It is not difficult to imagine that they would have switched to 3g if it were cheap. And telecom firms would have offered it cheap to entice new customers if they could.
But read my post above to understand why telecom firms have not ramped up infrastructure because govt. screwed them up by making them pay huge money upfront for 3g. This depleted their cash holdings and loan taking potential to make new investments. No surprise that they are not improving the services even after charging super high price.
Its not just Govt which screwed them up in first place. They themselves got screwed up by indulging in some unorthodox back door business. During the onslaught of 3G many operators started there service here without license and offered very cheap rates (I am talking about NE). Prominent among them were TATA and Idea. Others include MTS, Uninor, S-tel and such. But once these telecom scam came into light, all got rebuked and one of the major player, Vodafone got fined, as it did allowed these operators to use its bandwidth using back door policy. Now we have the situation that, we don't have the service of TATA in the whole region. In the first place itself, if they would have done it in a fair manner, the story might have been different and the user base too have been a lot more and cheaper due to steep competition.
Now lets talk on technical term. Auction or no auction, 3G tech in itself is costly then 2G. We all know that 2G does work in 200KHz whereas 3G does work in 1.2MHz it means, 2G having a low frequency does cover a large area and does have a good penetration compared to 3G. Now when you compare voice call on 2G and 3G, there is no difference. The difference is only there in data transfer. Now me myself being a traveling professional, do use three SIMs. One for voice calls, and other two, one 3G and another 2G, for accessing net. And the thing is, I do use 2G SIM more often then 3G. In case of using 3G SIM too, it works fine outdoor, but once I check into hotel room or in any closed space, I have to select 2G to work on. To add on this dismay, there has been a regulation passed out that they have to cut down on there radiation level due to growing health hazard. The result being is again the patchy voice calls. Now each and every operator is asking govt to allow them to increase the number of towers to counter this call drop prob.
Now speaking of consumer, you have to take into account the usage type too. You cant expect a rickshaw or handcart puller to keep on checking his Facebook or Instagram account. Majority of mobile net user as of today are college or school students followed by other professionals. But in case of professionals, they do still rely mostly on fixed line net then mobile, which they use as secondary means. There too the websites they do visit are all social media sites and hardly 1 out of 1000 does use a video call using 3G. The large portion of mobile user still uses it only for voice calling purpose.
But again when you speak about operators having to pay hefty sum in auction, its a point well taken and agreed upon. But along with it, if there has been some decent investment in infra, the picture might have been different. When I quoted Reliance in my earlier post, they invested so heavily here initially, when there were no other operators, that they already harvested there profit within a period of 2 years and now a days giving away every thing for free.