Mobile Data Services in India

Posted on: January 7, 2011 – Filed under: Bangalore

With lots of hype about 3G and the opportunities it brings with it for data services in India, here are some thoughts of mine around it. After all, this blog is a place where thoughts can be poured without much worry on the ramifications

First of all, let us indulge in some crystal gazing to see how the data services market might evolve over the next few years in India:

o   3G service uptake will be slow: Current GPRS users will slowly migrate into 3G but only slowly. Enterprises might take it up faster but that is only ‘relatively’ and that might just be restricted to the top & middle management.

o   GPRS usage will increase: With reduced choking of networks and power users shifting to 3G, GPRS speeds would become tolerable and prices reasonable. That would mean more non-data users would join the data bandwagon through GPRS. 3G would still be at prohibitive prices for them. No-rental, pay-as-you-use models will thrive.

o   4G services will not compete with 3G: Leaving out the technicalities of what is 4G and which technology (WiMax or LTE) wins, the holders of BWA spectrum will begin their services soon. RIL will take the lead, obviously. They are planning to make ultra-cheap tablets already. Expect some smart surprises from them – they will once again try to control the eco-system and actually be fairly successful at that. A repeat of the R-World success is on the cards. However, they will pose no threat to the 3G holders. They will be a success with the tablet surfers and people would move out of fixed line broadband to these. Enterprises would lap it up. Already tablets are being lapped up by enterprises of all sizes and shape. 3G might be too slow for them – 4G would be the way to go! And yeah, broadband for rural India could be only through 4G but even in crystal-gazing, that area looks a bit weak.

It is told that the telegram triggered a revolution in communications post the pigeon days, to be followed by wired telephones and postal services which have long been replaced by wireless telephones, email and instant messages. The next set of services such as VoIP providers, Facebook & FourSquare are stepping into their toes. But, never underestimate the grand old data app, probably the biggest killer app on mobiles – the SMS. It will continue to play a major role but there will be a seamless transfer between SMS & GPRS/3G without much intervention by the user. What can be done through SMS, will be done through SMS only.

Will evolve and fragmentation issue weakened: Handset capabilities will obviously improve but the fear of fragmentation will die. Well, fragmentation is here to stay but we would have learned to live with it. Google will control the number of Android versions released and will ensure the compatibility of apps across device vendors. Same will happen with other platforms, including bada and the numerous other platforms we can expect (including from the chipset vendors). A developer will not be left worrying about this. He would of course need to build it on multiple versions of a platform but need not worry about different handsets with the same version of the platform (like the J2ME days). Who knows, with Oracle in command, fragmentation issues in J2ME also might also get solved. All browsers would get standardized too, around HTML5, BONDI & WAC standards. In short, the fragmentation issue would get weakened and solvable. We may have 2 versions of Android (low end & high end), 2 versions of bada and so on. We would have having about 7-8 platforms to target but that would be clear

Enterprises are going to take up tablets in large numbers and they need data services more than anything. Depending on the enterprise and the need, they are going to use 3G or 4G. However, this will not reduce the usage of smartphones – these will eat up into the data card segment (Enterprises giving a laptop and a Tata photon Plus) will start giving tablets with 3G capability. There will be a plethora of application development needs (enterprise mobility) around tablets from these enterprises

The need & behavior of the users would remain same. There would be significant demand for local content. We will suddenly not see users behave the way the models in TVCs for mobile devices behave – they will behave as they always have. There will not be a great demand for BBC news in India all of a sudden. It will remain the Sun TV and ETVs of the world that would be in demand. ABC of VAS will continue to rule the roost. Indian language content will be consumed a lot (though user generated Indian language content is questionable). The tradeoff between ‘perceived value’ & ‘practical value’ would remain. While companies keep launching ‘mandi prices’ services, it is the ‘bollywood wallpapers’ that would continue to be consumed. While mandi prices may offer tangible benefits, it is the bollywood siren wallpaper that provides the (much needed!) emotional benefit to the user. When we talk of local, we cannot immediately jump into ‘location based’, it is more like “native” than local. A North Indian in Bangalore might not be interested in “local” news or entertainment but only in his “native” language. Same with a Bangalorean in North India.

Applications would continue to be the way to reach out to a user. While the current hype around a few specific stores would die, reason would prevail and better ways of reaching out to users would arise – not always through an application store, but through various agents. When you buy a TV, the salesman in the CE Store would download the ‘remote’ app for your mobile. When you go to the dentist, she would download the app for notifying you about the medicines/next appointment etc. She may use BT/WAP Push or different mechanisms but it is SHE who will give you the app. You would not be going to an app store searching for it. Further, like the user has a “contact list” on the phone, there would also be an “app list”. The list will be added/removed as need arises/goes away. Not many might be interested in having a dentists’ app when not having a root-canal treatment, for example.

will be huge but Operator Billing will remain the most convenient mechanism:  Major infrastructure improvements are required for mass adoption of other payment mechanisms, involving several stakeholders – including the mobile operators. While that stuff happen in parallel, operator billing will remain the most convenient mechanism for users. However, billing share of more than 70% is not going to continue for long. Like the pay per second plans introduced by Docomo, someone is going to start off a “revenue share” war in the future and share is going to get much better for developers.

The forces in India that compete to provide “services” over mobile phones using SMS/GPRS/3G are as follows. Some of them may actually not really be “forces”, in the literal sense!

Needless to say, being first parties in the mobile services, it is in their best interest to offer services that use SMS/GPRS/3G (popularly called VAS). They have been successful in some areas like CRBT and miserable in several others. They have chosen to partner with select 3rd parties for long but recently, they are opening up and are offering a ‘store front’ to all developers, big & small. Airtel AppCentral, PocketApps by Aircel and the application stores of RCom, Vodafone etc are examples of this. However, no one has been successful as yet in offering a “developer program”. They have just been store fronts, operated by service providers. The operators’ role remains just in taking the revenue share.

Sure, operators have launched developer programs with a lot of fanfare but they have all been damp squibs, primarily because most of the work around it was “out sourced” – not just the implementations part but even the “strategy” part, if there has been one. The latest news about Airtel’s developer program too has the same issue – it is outsourced to Infosys. Similarly, RCom has been having “innovation labs” since long. There was a Dhirubhai Ambani Developer Programme, as early as 2002 that morphed into a 3G innovation lab recently. May be it had its successes when R-World was widely used but not anymore.

Apart from developer programs and applications stores, services from operators have only been partnerships with other providers and seldom their own. To say it again, the operators’ role remains just in taking the revenue share.

Already outwitted by Apple (in the developed world), handset makers started setting up their own developer programs and application stores (at least in the model of Apple) only in the last couple of years, worldwide. Quite a few of them have been replicated in India as well. Nokia’s Ovi Store (& Forum Nokia) is the prime example of this. While they have been successful in rolling out the service and having India as one of the top downloading nations, it is a pity that they still do not offer operator billing facility in India – and we know they might not be the party to be blamed for this.

Apart from the application store, Nokia has been trying to launch several services in India, including Life tools, Classifieds, Social Networks, Tej, CRM etc. None of them can be considered a success as yet. Though multiple reasons could be ascribed to it, the primary reason is that many of them do not have this option of micro transactions billing that only operators can provide. Multiple operator support for Life tools has been announced recently and we still need to see if that is going to make a difference.

These are the likes of OnMobile, Netcore etc. While their primary revenues have been from offering services to enterprises and operators, they do have a few services launched on their own but none have become sustainable mainstream businesses. It is early days for services offered by companies like Rocketalk, Mig33 etc. While there seems to be good traction, how sustainable they are is yet to be seen. Once again, without the support of operators for billing micro-transactions, they are out of business. With the monster revenue shares taken by operators, how good their margins would be, is anybody’s guess. The media outlets (like the TV channels) have been offering services but mostly in collaboration with operators.

Some of these players like OnMobile have their own developer programs too but they have not been widely successful as yet, at least in B2C segment.  Even Rocketalk is trying to be a ‘platform’ now, their success remains to be seen.

We already wonder if many of our handset makers and operators have become the advertising agencies for Facebook. Such is the amount of ‘Facebook’ present in their ads and the impact it has created in India. Google has been around in India for longer and has been taking definite steps to get to the mobile phones. They even have a long code for SMS based search (since a short code is going to mean customers pay more and operators gain) and introduced voice search in Hyderabad. However, their services have not been run-away hits like they have been in the US/elsewhere. They had difficulty even with Google Checkout in India till recently. For Android phones (more specifically, the Android Marketplace) to gain foothold in India, what they need is billing support beyond credit cards and the only set of people that can provide is the operators.

There are other players who offer services too but most of them have been in the non-profit sense – Either quasi-government bodies offering services or enterprises offering services to their customers (who will be charged by other methods).

While every one of the players mentioned above can do something to improve their data service revenue, we will focus on ‘operator’ here! Some of what we discuss can be come by others fully/partially but if there is one player that “owns” the customer in a mobile based service game, it is the “operator” and no one else. That alone is the reason why others have not been able to make a mark, and may not be able to make a mark in the foreseeable future. Sure, handset vendors have the access to phone’s idle screen and the menu-screens like no one else, the web services like Facebook are extremely popular and the media outlets have the power to reach the customer through multiple mediums but no one can match an operator. All of them are dependent on operators to act as middlemen and provide channels for communication and billing. Only an SMS, phone call or email pushed to a smartphone can interrupt their users in real time, not any other means. Further, the operator has one control that no one else has and it is the power of handling micro transactions.

And we dismiss them as bit pipes. But is that all, that an operator possesses? Not really. It is unfortunate that the operators are not doing more. Let us look at what else can an operator do in a minute. Bit pipes to smart pipes, if you will.

The biggest benefit an operator is going to provide to developers is going to be around “network services” – something that any other party cannot offer. Network services, not only offer better functionality & stickiness to an application but also significant business opportunity to the developer.

The following points should illustrate that better:

· Customer Data, a mine of wealth: When the customer data available with the operators is aggregated, analyzed and exposed, it provides a great raw material for application developers. For example, it would be of considerable interest to an enterprise CRM application to know that a customer is currently in a time zone that is not suitable for a phone call and intelligently decide to send a text message.

· Even a B2C application can perform a good amount of targeting, segmentation & profiling of the user based on network information. For example, travel profile (home worker, city-commuter, national traveler, international traveler etc); spending profile (based on their mobile usage bills and the payments made) could be of use to an m-commerce application in showcasing right kind of products.

· To the developers, usage analytics of the applications, providing information on the consumption pattern of the application/service would be very helpful. More importantly, information on other customers of similar profile would be a tremendous advantage for their marketing campaigns.

· While the capital barriers to develop applications are close to nil and any small company can build such an app, ‘information brokers’ who provide the needed raw material for successful usage of the application become the kings – The operators should play this role.  They should enable an app to initiate an action at the right time, on the right medium and to the right person.

· Yes, I know you have been thinking of privacy concerns right through this, but have we not learnt from Google & Facebook that users are ready to shed privacy for better experience (with an option to go private anytime, of course)? Actually, certain privacy compliance techniques and tools can be provided to the developers directly to address this

· Remember, we have not even spoken the beaten to death story of “micro billing” though Network APIs here which by itself is a huge thing

App Distribution is another area that operators can get innovative. While a store front through an application store (ODCs, WAP, Web etc) is essential, it should be possible to get apps from any customer touch point, including the smallest of the retail outlets where the re-charge happens. App distribution should become as easy as (pirated) songs-distribution.

Revenue Sharing: While it might be the simplest of the measures to offer more share of the revenue to developers, this is something that would affect increase the top line and decrease the bottom line of an operator. But that said, status quo cannot prevail forever. Before a bloody war starts on this, a smart operator should start sharing revenue in intelligent ways, including sharing a portion of the data charges and not only for the content. And remember, content includes software.

Some other unexplored areas by operators are the ad aggregation, converged device management, subscription billing and store-in-store model for local handset vendors who have no app store of their own. These could yield rich dividends in data services, as well.

If the operators remain aloof to all these, we will end up in a case like “You might buy the Apple iDevice in 2015 and it’s a device that comes with content and connectivity bundled in. You don’t need to go and buy a separate service from somebody else; you just pay your service money to Apple. But, of course, Apple’s buying wholesale data from operators in vast quantities” (quote from a recent insight report in Vision Mobile blog) sooner or later, in India too!

And at that time, if you are the company who is going to be buying data from operators in bulk, Congratulations, you are my best friend! Do remember this article & hire me