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Mohammad Chowdhury
Mohammad Chowdhury
I offer unfettered insights into the world of Asia Pac and India telecom
Indian Farmer checking growth of rice paddy farm and making call with smart phone, concept for technology help available to farmers in today's world ( Photo: Shutterstock)

Indian Farmer checking growth of rice paddy farm and making call with smart phone, concept for technology help available to farmers in today’s world ( Photo: Shutterstock)

Recently, a journalist from a prominent international newspaper asked me whether “traditional sectors such as agriculture” could benefit from the Internet of Things (IoT).  I found this to be a very interesting perspective.  For those of us who live in concrete jungles and are conditioned to conceive of GDP as consisting of producing “stuff” and services alongside, agriculture is easily forgotten. When remembered, it is assumed to be too old-fashioned for the internet. It is, of course, an assumption that is as erroneous as it is easy to make. For centuries, today’s most advanced economies have exploited bleeding edge technology to extract huge agricultural productivity gains, enabling their economies to free up millions of labourers to focus on producing new types of goods and services that rocketed their societies beyond the existence of subsistence, the beginning of what sociologist Thorstein Veblen famously coined as “conspicuous consumption.” The productivity gains in agriculture that resulted in the Industrial Revolution came from the application of successive waves of new tech: Ranging from seed and crop science, to irrigation and water pumping, to mechanisation of sowing and harvesting, and this technology often was proven in agriculture before it was scaled into manufacturing.

It’s worth thinking more about how much today’s new wave of internet-based technology can contribute to agriculture in developing countries, for perhaps three reasons:

1.     Agriculture in developing countries is big: According to the World Bank, 98 percent of the world’s agriculture labour force is in developing countries comprising 1.8 billion people and contributing $2.5 trillion of output annually.  Developed countries’ agriculture output is only 20 percent that of developing countries.

2.     Agriculture in developing countries lags in productivity: While the labour to capital mix in agriculture is understandably different between Europe and Africa or Asia (due to divergent input costs), what is less clear is why the productivity per hectare of land should still be so inferior in developing countries: Average output is 4.8 tonnes per hectare in developed countries, compared to only 3.3 tonnes in developing.

3.     Farmers are, by and large, business people, and they look for realisable value from the services they procure. Their behaviour in buying technology will be driven by seeking business benefit, which means that the services provided to them can be monetised immediately if they provide value at reasonable prices.

Reimagining the journalist’s question, what more can be done in developing countries to increase agricultural productivity and value, particularly through the uptake of easily implemented and high impact internet-based technology? If we are to see revolutions in the cities and factories of the emerging economies of Asia and Africa, we certainly need it to continue in the fields too.

Technology provides new options, and in the form of the Internet of Things, the solutions are coming thick and fast, affordable and accessible.  We are seeing the early signs of emergence of “Agri IoT” in a number of countries, where new services are cropping up which directly address specific market and farmer challenges. According to a report by the GSMA in 2015[1], there are already some 40 agricultural sector value added services in Asia, addressing issues such as:

  • Poor knowledge of agricultural practices (eg crop information), addressed through information services delivered to handhelds
  • Inability to real-time monitor field equipment (such as irrigation pump activity), being addressed through machine-to-machine (M2M) devices which provide read outs to farmers through apps onto their phone
  • Gaps in supply to demand for produce, being closed through real-time trading platforms which are mobile-accessible
  • Supply chain inefficiencies, being addressed through smart logistics such as monitoring trucking movements using GPS and carton location through RFID tagging or M2M Non-availability of insurance for farmers, now being addressed through services that enable micro-insurance and mobile money solutions



According to a PwC study[2] in 2013, the food output of Africa that could be saved (about a third) from rotting through smart transportation solutions could feed the population of Kenya. The GSMA report referred to above predicts that 50 million farmers could be using such services by 2020, spending some $480 million, double what it was in 2014. Given the size of the agricultural economy, and the speed of smartphone uptake and data usage, I am given to think (and hope) that this is an under-prediction.

I assert this bullish view because the farmer’s concept of service value is highly time and location-specific because the value of their output can change by the minute when it comes to timing the interventions they need to make. If you think about it, the farmer’s world is almost ready-made for mobile services which can be used outdoors and on the move, and for real-time data analytics that provides instant price, crop and livestock intelligence.

We still don’t see the emergence of widespread, agricultural IoT solutions that offer a compelling enough service for millions of farmers to adopt, across many markets. We need services that go beyond the gimmickry of crop pricing services that rely on a single source of information from one market, whereas farmers have several such markets to choose from in their area. One suspects that technology is not the constraint here, but the design and specificity of the business model, with more involvement and innovation coming from the farmers and fishermen themselves – they know the problems they need addressing better than most.

I am about to get a taste for what might be the real potential. Next week, at the Islamic Development Bank’s Annual Shareholder Meetings to be held this year in Jakarta, I will be facilitating a room full of Indonesia’s best young technology entrepreneurs at a Youth Development Seminar to see how many agricultural solutions we can come up with – payments, insurance, data, information, and anything else they care to think of (www.isdb-yds.org).  If the findings are interesting, I will report back soon!

The Didi Chuxing investment by Apple may turn out to show how to do digital investments right and.. if successful, provide an opportunity for Apple to extend its current business model  (Photo: Jason Lee / Reuters)

The Didi Chuxing investment by Apple may turn out to show how to do digital investments right and.. if successful, provide an opportunity for Apple to extend its current business model (Photo: Jason Lee / Reuters)

Last week, Apple acquired a $1 billion stake in Didi Chuxing, the Chinese ride-hailing business. This investment will let Apple look more closely at how to serve taxi riders better, and with a partner such as Apple, it will enable Didi to see how to use mobile technology more effectively. Didi has only 1 percent of the Chinese commuting market, but since China generates 1.1 billion journeys a day, Didi’s 11 million daily rides is already substantial and the number is set to grow. China has such potential: The number of rides hailed in Beijing is 5-6x what is done in New York City.

But while the behemoths of the technology and communications industries have proven to be great at building businesses, they have generally been weaker at investing in emerging areas. IBM, AT&T, Telefonica and Vodafone have all built global businesses through carefully executed steps over decades, resulting in huge revenue growth and healthy shareholder returns. But several of the world’s major TMT players over the past few years have undertaken investments that haven’t gone right, or they have not invested where and when they should have. Impatience, in one form or other, seems often to be at the root of such failures.

There are at least three patterns around digital investment not working for impatient capital:

1.    A bridge too far
Faced with stagnation in growth because markets are saturated, TMT companies are usually looking for new areas out of their current strategic comfort zone. In an attempt to do this, some go for a bridge too far, a good illustration being Vodafone’s foray into social media when it launched “360” in 2009, a service underpinned by a homegrown social media platform to compete with the likes of Facebook, along with apps, maps and other services and a dedicated range of devices. The company overstretched into businesses, such as apps development and social media, which it wasn’t fit for competing in, which required a brand and core skills that Vodafone didn’t have, and in specific market segments where customers were already happily wedded to other offerings.  The result was a rapid demise of the investment proposition, resulting in 360 being quietly withdrawn following the fanfare at launch.

A bridge too far is a form of impatience because the company tries too hard to change its fortunes, rather than taking a more sustainable, perhaps longer, route.

2. Bet small, win big
Some TMT companies have purposely decided to do the opposite which is to be cautious and keep their hands-off by investing small in high growth potential companies. Some companies have set up “ventures” arms which invest anywhere between $10 million and $50 million in targets, kept in a standalone entity at a distance from the core business. But ventures arms are notorious for not being clear about whether the investee is a pure laboratory experiment, a possible candidate for mainstreaming or a business to be integrated in the near term. Often investments start with the right idea, but then objectives drift as time goes on. There are countless examples of such ventures, usually run through a satellite office located in a technology hub by executives who have limited access to the mother ship’s senior board. Common examples are “extension” businesses invested in areas such as health care, education, logistics, and other IoT-related opportunities.

Bet small, win big is a form of impatience because investors expect big things from small investments, and the management can come under fire for not delivering when the growth or synergies expected don’t materialise. One example of such impatience is of a major European telecom operator’s decision a few year’s ago to sell of its minority stake in China Mobile, a fast growing telco with whom there could always have been future opportunities to collaborate.

 3. Putting the devil in the dashboard
TMT players are used to managing businesses which scale first and then provide stable, predictable returns against well understood metrics. And so they love creating management “dashboards” and “enterprise performance management” tools that show where the business is headed. These tools are essential for stable businesses in predictable times, but they don’t serve well new ventures in market segments which are not yet understood, because the operating patterns are not stabilised. Too often major players impose overarching management oversight on new ventures, where the investee doesn’t get an opportunity to breathe or prosper at its own pace and pattern, and often, doesn’t have the opportunity to fail fast either. Telefonica Digital in 2011 is a good example of this, where the mother ship placed unrealistic and impractical measurements on a number of small, emerging digital businesses it acquired.

Putting the devil in the dashboard is an example of impatience as it shows how the mother company is not willing to give space for a new flower to blossom.

The Didi Chuxing investment by Apple may turn out to show how to do digital investments right:

  • Apple is investing a substantial sum, $ 1billion, but not one which bets the company – it is less than 1 percent of Apple’s cash stockpile
  • The investment represents a 1.64 percent stake in Didi, so Apple will not be trying to run the company or impose KPIs on how it measures performance
  • Apple joins experienced investors such as Tencent, Temasek and Softbank
  • Didi itself is an investor in Lyft and in OLA – other ride-share businesses – giving Apple indirect access to other ride-share opportunities
  • If successful, it might provide an opportunity for Apple to extend its current business model
Whats App is unique because it sits in between, using the internet for communication but relying on numbering and device information to authenticate the user

Whats App is unique because it sits in between, using the internet for communication but relying on numbering and device information to authenticate the user

Image: Jakraphong Photography / Shutterstock.com

Last week, WhatsApp announced encryption on all messages across their billion-plus subscribers worldwide, meaning that users can send and receive messages without worrying about who might be intercepting the content. This has caused excitement with those who support improvement to free speech, and consternation with those who worry about national security being hampered by making interception of messages harder. How this lands in countries such as India and the US will be intriguing as they have frowned upon encryption by others, such as Apple and Blackberry.

Setting that particular debate aside, what is interesting about WhatsApp is how step by step it has carved out a niche for itself with clever functionality to enrich the messaging experience like no other. In general, messaging happens either over the internet or switched through the network. WhatsApp is unique because it sits in between, using the internet for communication but relying on numbering and device information to authenticate the user. Here is why WhatsApp has created a role for itself as a provider of very specific messaging functionality: Numerous OTT players offer messaging over an internet connection. As long as the user is logged into the app, they can send and receive messages. But sending a message requires logging in, opening up to all sorts of other distractions, and selecting the messaging function.  Messages can only be sent to users who are connected to you in the social medium itself. Conclusion: Messaging is laborious and time-consuming and more relevant to people using the app for social media who then decide to message, rather than message-sending in its own right. You may want to message all sorts of people, but not be on social media with them – the sets don’t coincide.

Telcos provide messaging over the network, known as text or Short Messaging Service (SMS). SMS has been a mainstay for over a decade now despite recent stagnation as WhatsApp, BBM, Viber and other alernatives substitute it. SMS has made operators lots of money (a European mobile operator once reported that 10 percent of its gross profit came from SMS, which represented only 2 percent of revenue), but it is shocking that little has been done to enrich the service. Conclusion: SMS works but it is cumbersome and outdated, requires opening up a phone book to locate users, and does not facilitate group messaging, sending videos, sound files or photos.

WhatsApp offers distinct advantages over both OTT and telco services. Here are six key differentiators: Messaging focussed, directly addressing our need to chat without distractions, intelligent information that enriches the service, such as letting you know when a message is delivered, versus when it is actually read easily lets us create and personalise groups, is mobile-enabled and not PC- or tablet-enabled, suiting users on the move or who want to message discreetly during meetings, or gatherings (ie most of the time), you receive far less junk than via SMS or social media, as there is no easy way you can be reached on WhatsApp without someone having your number. It is free, saving users money, especially on international communication and video sharing.

Being a core messaging tool now, WhatsApp should be looked at as an essential asset in any communications provider’s armory. Until it is evident what Facebook wants to do with WhatsApp, one question remains unanswered: Why isn’t the telco industry making a play to buy it from Mr Mark Zuckerberg, or at least to partner with him in delivering a specialised WhatsApp service to their customers? Telcos could monetise WhatsApp services to enterprises due to encryption, arguably better than Facebook ever could, and eat into intra-firm, principally PC-based messaging such as IBM Sametime from which telcos make little money today. They could also enable WhatsApp to more easily phase out SMS rather than watch it die, by looking for ways in which they could at least gain some sort of subscription revenue from it, and also by working to ensure more volume substitutes to WhatsApp rather than to alternatives such as Viber.

Mr Zuckerberg paid around $19 billion for WhatsApp just over a year ago. Analysts have said it isn’t worth that much to Facebook, by a long shot. But in my view, it should be worth considerably more than that to a consortium of the biggest mobile operators in the world who could either buy it outright or pursue options to run an enhanced version of it for their customers. But therein lies the conundrum – it is only worth that much to operators because they’ve got that much sitting in invested positions in the market already. Even if the industry wants to buy, Facebook might not be interested in making a quick buck today, for the prospect of really giving operators something to worry about in a few years’ time.

pwcEvery year, I feel a sense of anti-climax when I depart from a week of buzzing around in the noisy halls of MWC at Barcelona, the world’s mobile capital. But this time, when I stepped out of an event that draws almost 100,000 visitors to run to a client dinner across town, any feelings of sadness were scotched by the urgency of how much I have to do when I get back to office: The conclusion from MWC16 is that the Internet of Things (IoT) isn’t hype and hockey sticks anymore, but a real work in progress.

As a relief from the incessant waves of hyperbole that accompanied the advents of WiFi, 3G, 4G and mobile internet, there was virtually no discussion this year of numbers for the Internet of Things. All that was clearly done and dusted in 2015.  This year, numbers talk was replaced almost completely by an industry of use cases, experimental demos and real, on-sale objects which put the IoT into everyday use.

At the GSMA’s Innovation City (renamed from years of rapid evolution as the Connected City), you could look at Tumi bags ready-equipped with tracking devices (yes, I bought one), a beautiful Jaguar SUV connected car, and an Audi equipped with numerous machine-to-machine connected devices to help track its performance and safety. There was an intriguing teddy bear which I never got to test out, and the gimmicky mobile-enabled toothbrush of last year was gone. There were more stands hosted by auto manufacturers and appliance makers and telco executives spent more time walking around and less time standing at booths showing people how a network works.

At the MWC’s prestigious Ministerial Programme, my panel this year focussed on the Internet of Things. I hosted the Global CEO of Orange, the head of ARCEP (France’s telecom regulator), senior government leaders from South Korea and Brazil and the director of Jaguar Land Rover’s Connected Car programme. What an enlightening panel this was, with a number of important messages coming out of it:

  • The IoT is here to stay and is the biggest development the industry will see this generation
  • The IoT must not be “regulated” to death, but rather must be nurtured and supported to grow and transform our society in the way that its potential promises
  • Industries as we know them (including the telecom industry) will be overhauled and transformed by the IoT and we are starting with logistics, agri, cities and health
  • Industries are colliding into each other, disrupting each other’s value chains with new services being created for hungry customers and enterprises who want more functionality, in real time, and synchronised across multiple formats and devices
  • Vision is required from policymakers and regulators along with an openness to listen, learn and experiment
  • Every industry player must be given an equal chance to play in the IoT
  • Public-private partnership has to be the way forward for complex, all-encompassing projects such as smart cities
  • Policymakers are working together across industry boundaries and borders, and some are even providing tax incentives for high growth sectors to scale quicker
  • Industries (such as the auto industry) are getting on with it: Already deep in implementing new technology that connects the car and overcoming, one by one, the cross industry obstacles that have to be overcome to do so

text_boxFurther afield in the MWC, there was ample more evidence of how things in general are moving on. Mark Zuckerberg, the CEO and founder of Facebook, spoke passionately about how he wants to see the last few billion people on earth get connected to the internet and how Facebook is investing in drones, fibre and satellites to enable this. He hosted a private dinner with top telecom CEOs to discuss how they can work together to do this.

PwC hosted its first Digital Revolution Summit (DRS), with speakers from various industries grappling with the specific problems they see and possible solutions, to implementing the IoT. DRS took place in the once distant Hall 8, now emerging as a magnetic zone at the Fira where upstart innovators and kick-ass new developers have stands popping up showing off the latest innovations. In an era where the playing field is levelled between the behemoth MNC and the unknown SME, watch out as some of the Hall 8 vanguards become global businesses which take on the internet giants in the next decade.

IoT wasn’t the only acronym on show. How could it be? No matter how much the industry transforms, it doesn’t seem to be losing its letters and numbers yet. 5G was talked of a lot, as was LPWAN, Low Powered Wide Area Networks. Both are highly relevant to the next steps in the journey. 5G will put in place network architecture that enables more harmonisation across transmission technologies which today are still distinct (such as CDMA and GSM). LPWAN will enable network operators to repurpose some of the network to run on low power, carrying bits and bytes of data only, perfect for IoT uses over huge areas. Doing so will allow networks to reach up to 7x as far as they do today, meaning that agriculture, another big candidate for IoT-enabled value, will benefit through solutions which enable farmers to track how effectively animals are grazing, control irrigation levels and monitor crop sunshine exposure. (Connected cows, on show in Hall 3 this year, may actually become a reality soon.)

All in all, a workmanlike MWC this year with less of the shiny suit stats and more of the sleeves-rolled up conversations that will no doubt continue beyond the event.  These are the conversations that will transform our business models, digitise our user experience and revolutionise how we manage our enterprises. Until one day we wake up and realise we’ve changed our world so completely that it is unrecognisable from what we had before.

@mtchowdhury

The 2000's saw people moving from address book to the mobile phone to locate. Now social media is the way

The 2000′s saw people moving from address book to the mobile phone to locate. Now social media is the way

Image: Shutterstock

In the 1980s, the way to permanently locate someone was through their home address for post and fixed line for communications. Remember how mum and dad would keep a telephone book on the sideboard by the landline connection? This would usually be a dog-eared fake-leather bound volume with the letters of the alphabet running down the side as section dividers. ABC, DEF, and so on, down to WXYZ all clubbed together. Familiar entries would have addresses and numbers crossed and re-crossed out, and when all the white space on the line was finished, they would be re-entered sideways in the margin of the page. The address book was the most important reference book in the household, and took centre stage for occasions when we’d send cards such as Christmas and its cultural equivalents. Our fixed communications provider and the postal service (often the same organisation) were the gatekeepers, and as far as telephony was concerned, we paid a fairly hefty price for the privilege of being connected.

By the 2000s, our permanent locator no longer contained a physical address because most of us were no longer posting each other cards or letters, so we didn’t need to write down everyone’s address. In fact, the address book had almost disappeared completely. And for most, we didn’t record a fixed line number either, as this would change whenever people moved homes. There was a much better alternative now: The mobile phone number. Mobiles took over as the new constant because as we moved from street to street or city to city, the mobile number would remain the same (thanks also to number portability). Our mobile communications provider became the new and more reasonable gatekeeper, and we paid a keen (and not hefty) price for the privilege as there was a lot more competition in the market.

By the mid-2010s, our permanent locator no longer contains a physical address or a fixed line number; not even a mobile number. Now the permanent locator of last resort has become the social network profile. No matter where we live or work, anywhere on earth, or whether we are temporarily away from home on holiday or business, our LinkedIn profile, Facebook page or WhatsApp accounts are the surest way to reach us. We can use these methods to even reach people we know but who we haven’t spoken to in 20 years (such as old school friends), or to find people we don’t know! There isn’t a single gatekeeper any more, and the price to be reachable is virtually free, because all of this is done over the internet and the only cost involved is anything being paid for internet access.

I lost my phone last month and with it a clutch of phone numbers, the ones which were saved to my device rather than virtually. How am I retrieving lost numbers? By sending people LinkedIn or Facebook messages. Losing the numbers has therefore been irritating rather than devastating, thanks to social media.

The three phases of permanent locator we have been through in the past 30 years illustrate how the centre of gravity has shifted in the communications world from fixed to mobile to social media. But while fixed line players have conceded relevance in this matter, mobile operators don’t need to, provided they can show customers that they bring essential value to the delivery, security and enrichment of the communications experience.

Follow me @mtchowdhury

smartphoneImage: Shutterstock

According to GSMA analysis conducted by PricewaterhouseCoopers (PwC), the Internet of Things (IoT) is forecast to create an economic impact to the 100
tune of $4.5 trillion by 2020 . That’s a mindboggling number, but thinking about how pervasive the IoT will be, it shouldn’t be surprising.  We already order taxis using apps which use our and the driver’s location, wear devices which track our healthiness and drive cars that have SIM cards embedded to help us avoid road accidents.

The IoT is reshaping how the world produces goods and services, trades and consumes them. New sub-industries are being invented (cash-on-delivery ecommerce didn’t exist five years ago, and neither did pay as you drive insurance) while others are being torn as IoT-enabled innovation enables disruption as we have never seen before.
sales
Telecom operators regularly remind us that they built and manage the vast communications infrastructure upon which the internet operates. A task that began a century ago, without the world’s dispersed communications infrastructure miraculously connecting billions of people and machines from anywhere to anywhere with wonderful reliability (a few black spots in Mumbai, Yangon and other places excluded), billed and charged, the internet simply wouldn’t work. But one of the results of what was first called “packet” communications is that customers can access services “over the top” of a network and pay for them separately.

Hence a lot of the revenue of Google, Twitter, YouTube or Facebook is out of reach for the telcos who carry traffic to and from their sites.

Ever since data services started taking off in Europe in the early 2000s, and now in countries such as India, Indonesia and China as affordable smartphones come flooding into the market, telcos have been challenged. But despite this, telcos’ revenues continued to grow as hundreds of millions of new paying users took to mobile annually.

With IoT, the context and extent of challenge, and the scale of opportunity couldn’t be more different. Firstly, mobile operators no longer have subscriber-driven growth to rely on.  And while data services challenged telcos to manage OTT services from a few companies, the internet of things challenges them from any number of industries who can now access their customer base. Scale is manifold bigger than before: Gartner predicts there will be over 20 billion connected devices by 2020. Mobile data was about transforming communications; IoT is about transforming the economy.

Ill-equipped to deal with data, telcos cleverly maneuvered into making more money from data through network offload strategies, new marketing paradigms and tiered pricing. For IoT, telcos are again short of skills and face new types of challenges:
•    Too little fresh talent coming in from outside the telecom industry – In India, the best telco talent has been moving into the internet sector, for example high profile executive moves into Snapdeal and Flipkart
•    Leaders too telco-focussed – Finding it hard to understand the lenses of the different industries where IoT takes them, as diverse as retail to automotive. Telco executives used to managing billion dollar revenue streams can also lack the patience to let new revenues grow. Telcos in Singapore and Indonesia are beginning to think harder about patiently growing new revenues
•    Difficulty in finding common ground with partners – Telcos are used to working with network and handset players, but unused to figuring out how to work with shops, banks and taxi firms – in India, the major telcos have been absent in roles to work with fast-scaling new internet players. The intent is there, but business development meetings don’t result in solid outcomes often enough because the folks across the table don’t understand each other’s businesses.
•    Lack of IT and solution development skills – Which are critical to developing real, IoT solutions as this requires setting up solutions into an enterprise’s operating environment, implementing with delivery excellence the feed of information, background analytics and all within a secure environment.
•    Piecemeal business case approach rather than a “no regrets” view – CFOs are used to evaluating telco market propositions on the basis of a business case. The challenge is that in the nascent IoT world, some ideas will thrive but most will fail – so a portfolio view is more appropriate than a case-by-case ROI evaluation.
•    Marketing and sales too much an extrapolation of voice and data – Telcos’ sales and marketing teams are institutionalised around selling minutes and megabytes but the same brands, teams and sales channels struggle when it comes to selling services across other industries (such as health, air travel or logistics).

There are three areas that telcos need to be proactive in to build up in-house skills or find partners who can deploy the capabilities needed:
1.    Partner management – This telcos must learn to do better themselves
2.    Sales and marketing – The new skills required could be developed in-house as well as accessed through channel partners
3.    Solution development, integration and maintenance – Only a handful of telcos, such as BT, Orange or NTT have the skills to build and deliver solutions, whereas most have to work harder at creating go-to-market alliances with SI companies and hardware players.

telecom

Right now some of the world’s telcos are dabbling in IoT “adjacencies” in pursuit of new revenue growth – some are building and others are buying into new internet of things businesses, such as eHealth solutions or payments platforms.  Most of the activity is being undertaken by the largest, most advanced market players who face revenue stagnation in their established markets. But no operator is embracing the opportunity in a way that addresses the skills challenges above, for the long term. There is much to do, and given that most of the scale opportunity sits in emerging markets, it is time more of the telcos of India, China and other South East Asian countries got started.

Data monetisation to move away from telcos: this continues a theme from 2015, and predicts that new revenues in the industry generated from data service will flow more and more to data service and applications providers, and not to telecom operators

Data monetisation to move away from telcos: this continues a theme from 2015, and predicts that new revenues in the industry generated from data service will flow more and more to data service and applications providers, and not to telecom operators

Image: Shutterstock

Now in its fifth year, PricewaterhouseCoopers (PwC) has published its “Five trends for Indian telecom in 2016”–a preview of what the market may expect from one of India’s most dynamic industries of late:

  1. Consolidation towards a 5+1 market: The market will settle on five private sector players, and one state-owned one. Combinations may come in the form of outright mergers, or of spectrum sharing such as recently announced by Idea and Videocon.
  2. Network experience prevails over customer experience: In other words, operators will continue to focus on providing a high quality, consistent network experience offering the speeds and coverage expected by customers.  Differentiating that experience (reference net neutrality debates) is not for India, just yet.
  3. Data monetisation to move away from telcos: This continues a theme from 2015, and predicts that new revenues in the industry generated from data service will flow more and more to data service and applications providers, and not to telecom operators.
  4. OEMs to climb the value chain: Network technology providers are expected to do more to leverage their potential in usage analytics, packet-probing and pushing content-based offerings, all in a bid to protect their challenged revenue base.
  5. More regulatory scrutiny on quality: The regulatory authorities are likely to go harder on ensuring operators keep to their commitments for providing a quality service, and doing so transparently and responsibly.

For 2016, PwC introduces a “big wish” too, dedicated this year to seeing India’s National Optical Fiber Network (NOFN) finally start to show some real, on-the-ground progress.

Have a look at the five trends for Indian telecom leaflet: http://www.pwc.in/assets/pdfs/publications/2015/five-trends-to-watch-in-indian-telecom-2016.pdf.  Have a look also at PwC’s brand new “5 trends in South East Asian telecoms”, which provides interesting contrast to the India predictions: http://www.pwc.com/id/en/tice/pwc-view-indonesia-final-mid-2.pdf by considering the trends for countries such as Malaysia, Indonesia and Singapore.

Wishing you a Happy New Year!

India has too many mobile operators in too many circles, yet the M&A and spectrum reallocation rules are so complicated that the market is not able to consolidate in the way that customers need it to

India has too many mobile operators in too many circles, yet the M&A and spectrum reallocation rules are so complicated that the market is not able to consolidate in the way that customers need it to

Image: Seree Tansrisawat / Shutterstock.com

We are in danger of returning to an age where political intervention in the market is getting more pervasive. Essential infrastructure such as telecommunications, media and Information and Communication Technology (ICT) are national assets which need to be made available and affordable to everyone, all the time. To achieve that, governments have to regulate and legislate where needed. But the rest needs to be left alone.

Today, almost every government in Asia is failing in this aspect, in one respect or another. Few can claim to have come close to an ‘enlightened’ pattern of intervention in telecom, media and ICT.  The UK is one exception to this: It has a competitive ICT market, even-handed policies that encourage local and foreign investment, a liberal environment for mergers & acquisitions (M&As) and strong financial markets that can facilitate it. Crucially the UK’s telecommunications regulator, OfCom, has an unremitting dedication to understanding and protecting consumer interests with firmness and transparency, backed by the power of law to impose weighty sanctions.

In Asia, Singapore is possibly the most integrated, with the Infocomm Development Authority of Singapore (IDA) overseeing ICT regulation and policy, as well as setting digital vision and strategy. Other countries such as Malaysia, Indonesia, Philippines, Sri Lanka and India continue to struggle between what to focus on and what to leave to the market. For example:

  • The Philippines is about to see the entry of a third mobile operator, yet the regulator is strangely silent on matters such as reducing today’s very high interconnection charges, which will make it harder for the new entrant to win over customers.
  • India has too many mobile operators in too many circles, yet the M&A and spectrum reallocation rules are so complicated that the market is not able to consolidate in the way that customers need it to. Sri Lanka, too, is struggling to set the right competition policy for a small market with six operators.
  • Bangladesh’s politicians have recently blocked Viber, WhatsApp and Twitter feeds in an attempt to muzzle public discourse that threatens the government. Due to the absence of a stable policy framework backed by law, the ruling party is getting away with it.

There are a few key steps the government must ensure for the industry:

  • Build a fair and authoritative regulatory framework: This is where it starts and most countries in Asia fail here. For the past fifteen years India has kept its industry regulator, Trai, neutered from real power and at arm’s length from media and broadcasting. As a result, ICT, telecom and media regulation in India continue to be haphazardly coordinated and Trai lacks the power to ensure it is taken seriously. In too many areas the Department of Telecommunications (DoT) takes the final call, leaving too much to politicians’ whims.
  • Ensure that industry policy is up to date, and understood by major stakeholders: This sounds obvious, but countries such as Bangladesh, Sri Lanka, Philippines and Indonesia do not have an updated telecommunications sector policy, nor a vision that sets out the national goals for digital or ICT. India does, but it is so complicated that most people don’t understand it, leaving investors to often act at risk.
  • Ensure there is a frequent flow of helpful information: OfCom does a great job of informing the British public of what’s going on by publishing a quarterly review and a comprehensive annual industry report.  Most countries do not put enough effort or investment into this. All over Asia, regulators collect significant fees from licensees, but little of the funding has built the capability to provide good industry information.  Data is critical because it informs customers and investors, and keeps operators honest.
  • Work out the network and cyber security roadmap: To give network and cyber security proper focus, politicians need to sit down and work out the roadmap: What, by when and how much?  In today’s world of fast-moving technological change, there is no ‘right’ national security policy, but a race to keep up with changing needs. Most Asian countries do not have such a consensus view, and as a result politicians intervene ad hoc when they need to, rather like the ruling party in Bangladesh.

These are the things we definitely don’t want politicians to be doing in 2016:

  • Meddling in issuing licences or spectrum auctions when in need of funds: India has become a master at this, linking explicitly the proceeds from spectrum auctions to closing gaps in the public deficit. Spectrum auctions should take place in planned timetables, making available the spectrum the industry needs, at fair prices which encourage long-term investment.
  • Not to just stand and watch when the market is failing: Myanmar recently adopted a policy which unlocked months of stalemate in the telecom industry, as new operators who wanted fibre could not agree to fair terms and prices with those who had it to sell. After the government intervened, matters improved and it took political will to do it. The Philippines has to learn from this, as a third entrant enters in 2016, to ensure it has access to infrastructure owned by the two incumbents at fair prices, and to make sure the government is not captured by the incumbents.
  • No white elephants please: Politicians love announcing grand schemes that will solve everyone’s problems.  India’s and Australia’s erstwhile national broadband plans of putting fibre all over remote villages and the outback were examples of the state’s largesse surpassing what the economy can wear.  Both these programmes have been trimmed and are now more practical. Other potential white elephants are always around though, such as Digital India and Digital Malaysia—two programmes which must be backed up by action-oriented plans to be really successful.
With money being made by apps providers, networks have a lot to play for with the promised world of IP telephony over mobile

With money being made by apps providers, networks have a lot to play for with the promised world of IP telephony over mobile

Image: Shutterstock

Although the telecom operator’s voice services are essential to most users, customers take voice quality and network coverage for granted. This is borne out by market research. According to a PwC survey on mobile usage in India conducted in 2013, 85 percent of users note network quality as a must, yet over 50 percent regard applications and services as the driver of their experience. In other words, when networks are not available, the operators are criticised, yet, when great network coverage enables uninterrupted high-speed connectivity, it is the apps providers who take the credit for delivering a wonderful user experience! Operators have tried various methods to make more money out of delivering a better network experience, but the topic is fraught with controversy. Net neutrality debates sprang up in the US when operators first tried to condition access based on type of usage, and recently this year, came up as a politicised topic in India as well.

In advanced telecommunications markets, while data connectivity uptake has started to peak, apps are becoming an increasingly popular point of monetisation. Since electronic payment capability is well penetrated across the user base in advanced countries, and user habits have passed the point of no return for believing in the security and convenience of mobile payments, growth in apps-driven business is good.

In India, Indonesia and other emerging Asian markets, as electronic funds transfer becomes more prevalent, apps providers offering paid services and goods will come harder to the battle for the customer’s wallet. But apps providers in emerging markets aren’t waiting around. Ecommerce provider Flipkart in India encourages customers to use mobiles to browse and place orders, allowing them to pay cash-on-delivery (COD), ingeniously kickstarting ecommerce even before EFT takes off.  In Kenya, Tanzania, Pakistan and Bangladesh, application-based mobile money transfers are a nationally significant economic activity. Innovation in the service model means that monetisable apps already have a bright future in developing countries too.

So, with money being made by apps providers, networks have a lot to play for with the promised world of IP telephony over mobile. Voice over LTE, referred to as VoLTE in the industry, and Video over LTE, less appealingly labelled ViLTE, seek to provide this functionality:

  • Chat with your friends and share images with them during the call
  • Share your geo-location while you talk so someone can find you even if using GPS
  • Video-conference several of your friends at once while on the go
  • Share files while you speak and over the same connection, making it easier to transact when it comes to health consultations, financial transactions and other information-intensive discussions.


For all the tens of billions of dollars sunk in the network already, the telecom industry is acting pretty slowly when it comes to innovating to drive the adoption of rich communications services for mobile users. LTE networks have launched in many emerging markets, including South Africa and Indonesia, with the first deployments in India becoming available, and with Reliance Jio’s upcoming launch to make such services more widely available than before. But the industry seems to be talking about the service potential with a degree of shyness, and in technical terms (such as IP, VoLTE and ViLTE), reflecting engineering pride rather than marketing appeal, which most people don’t understand.

Operators are going to need a common and compelling voice to shout about what the new network technology can help you do – before the functionality is subsumed into new applications that provide services over the top of the network. They are also going to have to innovate and create services people are willing to pay for, as well as encourage others to provide services that the telcos can provision. It isn’t game over for telcos by any means, because the reality is that in the uneven world we live in, many combinations of the ecosystem will continue to work for years, with many business models that support them. But the reality is that telcos need to get better at being intrinsically involved in the creation of these models, alongside the apps, terminals and IoT (in future) service providers.

Telcos will still win if they don’t engage in a war with Apps and Devices, but build platforms and networks which the others can innovate and delight customers.

In terms of the global competitiveness, Companies Act has some revolutionary provisions which are unique to India  which includes mandatory women directors on board, corporate social responsibility, audit reporting requirements and one person-company etc

Ironically, it is the telecom operators that are currently facing the biggest challenge to get ahead in this 3 way war – the combatants being Applications, Devices and Networks

There is a three-way battle for the customer brewing up in the telecom world and if you live in India, Indonesia or any other Asian emerging market, it is coming to your screen soon. The three combatants are Applications, Devices and Networks and here is the reason why each is battling to secure the customer’s heart (and wallet):

Applications (or apps): For smartphone and connected device users, the range and relevance of apps go a long way in defining the essence of their communication experience, in terms of utility, entertainment and quality of the experience. By using location, presence, contact syncing and other services, app providers are forever developing new ways in which they can be more and more central to defining your user experience. Think Uber, Alibaba, Flipkart and Google as a few examples of app providers engaging in winning you over.  When telecom networks in Asian markets are taking communications to every corner, it appears to be apps which are taking multifarious services over these networks to the connected user.  Think money transfer, ticketing and healthcare.

Devices:  As devices become data-enabled and computer-like, they are becoming the user’s preferred choice of physical interface to the connected world. Users choose handsets wisely, upgrade often, personalise and show them off to their friends. Demand for greater handset sophistication in emerging markets is high. According to a survey conducted by PwC in India, 57% of low-income users aspire to purchase a phone that is twice as expensive as their existing one. They don’t have to. Smartphones sell at below $50 now, compared with three times the price as many years ago.

Chinese handset manufacturers such as Xiaomi and Gionee and Indian players Micromax have entered foreign target markets and in some cases have set up local assembly plants, helping them save on duties and facilitating local market customisation. With syncing tools to manage all the screens in your life, cloud storage and back up, personalisation options, camera-like imaging as well as high-density user interfaces, manufacturers are continuously producing gadgets to better control your user experience.

Networks:  Perhaps the least seen and felt, the long-term evolution (LTE) network offers the opportunity to bring unseen richness, versatility and security to a user’s communication experience.  More advanced than 3G networks, LTE (or 4G) enables a level of interactivity to give enriched communications such as image-sharing, video and file transfer, on-demand conferencing and live location-sharing during the voice call itself. This promises to transform how we interact with each other and network operators are banking on IP-enriched services to win back customer loyalty from the allure of delectable devices and addictive apps.  Rich Communication Services (RCS) promise to do more than apps by integrating the apps experience into a more seamless one, with less sign-ons and more network support to give rise to better user features and interactivity.

Ironically, it is the telecom operators that are currently facing the biggest challenge to get ahead in this three-way war, and they also have the greatest amount of value to lose.  I say this is ironic because when compared to app providers and device manufacturers, telcom companies have by far the most infrastructure, the longest and most established business history, sales and distribution tentacles that penetrate the deepest corner of every market, and by far the highest number of signed up customers. For most users voice services remain the most critical and often lifeline service.

But even the basic voice service of mobile operators is under attack now. Messaging offered through apps are taking off quickly, either due to the functionality offered from combining instant messaging and sharing images with calls (Whatsapp), or because such apps enable users to make international calls at little or no cost (Skype and Viber) if they are on a wireless data connection.  Each country has unique reasons why one or the other service takes off: In India, Whatsapp is popular due to the popularity of image sharing, whereas Viber is a bigger hit in Myanmar and Bangladesh, perhaps because it operates better for voice calls at poorer bandwidths. Philippines remains, uniquely, a market where SMS remains a primary form of communication, but this may be expected to change as smartphone penetration builds from the current 30 percent to 50 percent and beyond in the next couple of years.

The emergence of messaging alternatives to SMS, and the expansion of messaging to take the holy grail of ‘minutes of use’ away from traditional network-based voice calls, is just one of the reasons why telcos are feeling under pressure in the battle for the customer’s heart and wallet. I will explore the other reasons in a few days’ time in a sequel to this article.

(I have completed my short sabbatical and look forward to re-energising ‘No Wires Attached’ so your comments are welcome.)

 
 
Mohammad Chowdhury
Mohammad Chowdhury is PwC's Telecom, Media and Technology consulting leader across Australia, SE Asia and New Zealand. Until recently he built the practice in India where he became one of the most quoted industry experts in the country. Mohammad has served as an adviser to telecom sector reform in Saudi Arabia, Zimbabwe, Ethiopia, Slovakia, Poland and Slovenia and during 2015 as national telecommunications adviser to the Government of Myanmar. Previously in his career he has conducted significant strategic roles at Vodafone and IBM. He is quoted regularly by the Financial Times, Wall Street Journal, BBC, CNBC, TV-18 and NDTV.

Mohammad has worked in 83 countries, lived in 7 and speaks 6 languages. He has a BA in Politics, Philosophy and Economics from Oxford University, an MPhil in Economics from Cambridge University, and strategy training from Harvard Business School. He was born in London, has family origins in Bangladesh, and is married with two sons.
 
 
 
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Mohammad Chowdhury's Activity Feed
June 06, 2016 18:06 pm by Alok Kumar
Hi, It is impossible for consumers/end-users to move away from telcos for data usages because of mobility factors. Off-course significant parts of data monetisation is with application provide but operators have their own share for providing uninterrupted data services on go. And with latest availab...
June 05, 2016 19:00 pm by Syed Hussain
Thanks for the in depth writing.
May 04, 2016 19:26 pm by Khalid
This is a very good article. People like me,who work in Telco,hear tio much buzz words about IoT,Digital etc..But,actually very liitle work is done in helping people to solve problem,which is the real need in society.
April 30, 2016 09:11 am by Mohammad
Thank you for reading!
April 30, 2016 09:10 am by Mohammad
Thank you Sir for your comment re the Network Effect. Quite right, there is an effect from the various factors which results in a snowballing of growth, ie the sum being greater than the parts. Excellent point and keenly observed. Thanks for reading!