3G: A Generation in Waiting
hen you sell geared scooters in two colours and make pots of money on that, it is hard to believe that anyone would ever want to buy a motorcycle. When you sell packaged software at a premium that the whole world has to buy, it is hard to imagine that one day a rival that sells ads on its free email service could be as profitable.
The Indian mobile operators who have sold nothing but voice find it hard to believe that they could ever make money on selling Internet services. You can’t blame them. For all its clever marketing, the number of Blackberry users — a proxy for absolute top-end customers — is not more than 350,000 in India. In itself that number justifies mobile firms’ pessimism about 3G. Now consider another number: 33 million. That’s the number of people who access the Internet frequently on their mobile phones. Consider another fact. The number of phones that can truly handle high-speed Internet is 25 million. A year ago the number was 10 million.
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Image: Amit Verma
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These 25 million people are thwarted by the double whammy of slow-speed connections and high prices. With 3G, the prices would be high to begin with but at least the connectivity will be high-speed.
Firms like Tata Indicom, BSNL, MTNL and Reliance Communications have shown that getting even one part of the equation right can translate into significant gains. These firms have managed to provide faster services, but the price is still very high. Collectively, they already have 2 million subscribers that enjoy 3G speeds, says Kanwalinder Singh, the head of Qualcomm’s Asia-Pacific business. These subscribers have all been built up in the last six months. Rajesh Patnaik, a consultant with consulting firm PRTM, says current EVDO (wireless) services are broadly accepted as 3G technologies. Ironically, India’s regulator, TRAI, does not see EVDO services as 3G. All this shows that the least the mobile operators can do is to prepare for a world beyond voice.
If there is one fear that unites telecom operators in rich countries and poor, it is the fear of becoming a “dumb pipe” to the Internet. In the US AT&T, the exclusive network for the Apple iPhone, saw its data traffic exploding nearly 50 times (that means 5,000 percent!) over the last three years, crowding out its regular users. Unfortunately, there was no proportionate increase in revenue. Besides, operators also lose the potential revenue of the services and applications they provide as the user only pays them for the bandwidth.
Instead, operators can focus on marketing to business users and government. Just 46 percent of businesses across the top 22 cities are connected to the Internet. Enterprise software companies like SAP and Oracle are already creating applications that work over wireless networks.
The government is now a major user of IT and Internet connectivity. Over 100,000 Common Service Centres (CSCs) are being put up across 600,000 villages to provide a range of everyday services to citizens. Some of these CSCs will become anchor clients for mobile operators to put up 3G base stations in remote villages which might otherwise not be economically feasible.
The other area that operators will have to focus is on learning how to build an ecosystem to deliver content and services. Arvind Rao, chief executive officer of OnMobile, India’s largest telecom value-added service (VAS) company, says, “An operator in the long run cannot make money to cover network and operating costs by being a pipe, period. Their fortunes are going to be in VAS.”
Apple has shown the value of this argument. While mobile operators around the world were concentrating on their networks, handset companies built advanced technology platforms atop their phones which allowed developers to write and market applications to end consumers directly. Apple, with its iPhone Appstore, deserves most credit for popularising this model. Its applications store contains close to 140,000 applications made by over 28,000 developers, collectively generating $500 million in new revenue. Its competitors, like Nokia, Google (with its Android operating system) and BlackBerry, have their own platforms too. Such platforms “let consumers figure out what they want,” say analysts Emeka Obiodu and Amit Gupta of telecom research firm Ovum, and trying to second guess that would be pointless for operators.
In India though none of these platforms have been commercially quite successful because of their reliance on credit cards for purchasing apps — there are very few credit card users in India. This offers a small window of opportunity for other platforms to emerge. Infosys and Aircel recently partnered to launch an exclusive developer platform targeting Indian developers. OnMobile launched its own developer platform over a year back.
But Ovum’s analysts are wary. “Operators have historically failed to get developers to work with them. Vodafone tried it with Vodafone Life and it didn’t work. Apple’s success lies in transparent revenue-sharing, everyone gets the same. Operators instead prefer to negotiate one to one and pay one less versus another,” they say.
Both Apple and Nokia share a flat 70 percent of any app sales through their iPhone and Ovi stores with the applications developers. That ratio is usually inverted in India, with operators keeping the bulk of what a customer pays.
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