Follow
Mohammad Chowdhury
Mohammad Chowdhury
I offer unfettered insights into the world of Asia Pac and India telecom
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.)

A little over a year after Mr Narendra Modi took office, we finally hear that a fresh Digital India plan is in the offing. It’s about time, too. The previous administration stumbled through years of failed government efforts to arrogantly build an all-fibre network throughout India’s 638,000 villages, minimal disbursements from India’s Rs 30,000 crore ($5 billion) stockpile of funds held to finance telecom infrastructure development in remote areas, and lack of any visionary policy on how to build the innovation culture so desperately needed to propel India from being an IT hub to becoming a digital centre. Compounded with the disappointment of years of telecom policy lethargy, by the time Mr Modi came to power, the expectations of what Digital India could deliver for the economy were high.

As we await the Digital India plans, it is worth considering how Mr Modi’s way forward can stay simple and smart.

Keep it simple when it comes to network infrastructure
India’s National Optical Fibre Network (NOFN) plan has been anything but simple.

An overambitious and typically complex DoT programme, NOFN began life with a mission to connect India’s 638,000 villages with a fibre connection. Looked at from an economic perspective, this was a ridiculous notion which was doomed for failure. So much of the country is difficult to access by fixed infrastructure and so much easier to do with wireless one, and much of the population is not prepared to spend money on ultra-high speed connectivity where a basic and workable internet connection will suffice. The project smacked of centrally planned largesse, and yet, DoT bureaucrats shirked from the possibility of being held accountable later for universal service fund disbursements.  Compounded by painfully slow construction progress, NOFN had little to show for itself after several years of going live.

In terms of mad-cap policy initiatives bogged down in the complexity of implementation, NOFN is on a par with Australia’s National Broadband Network (NBN). NBN stated boldly that all of Australia would be connected with high-speed fixed broadband, but somebody forgot to tell the Australian policymakers that they weren’t in Switzerland. Australia is several times the size of Western Europe, yet has a population of barely 20 million, many of whom live in isolated communities thousands of kilometres from anywhere. When the current Australian PM, Tony Abbott, came to power two years ago, his advisors could see that NBN was a gold-plated plan that was technology-rigid, rather than an expedient programme which is technology-neutral, using wireless to connect the most remote areas rather than running fibre for hundreds of mile to reach a few households. A revamped NBN plan has shaved AUD 5 billion from the original AUD 36 billion budget by bringing in mobile broadband in many places.

Similarly, someone forgot to tell the Government of India that it isn’t fibre that is needed everywhere, but broadband. Broadband can come in the form of mobile or even satellite, and can be built by the state or provided by the private sector. When Mr Modi sets out a Digital India plan, the first thing he should do is announce a meaningful overhaul to the NOFN which consists of two major design changes: 1) That the plan will be truly technology-neutral, using wireless where possible and focusing on fibre investment where it is really justified; and 2) A willingness to embrace the private sector and reduce the reliance on state investment.

While NOFN has recorded modest achievements, India’s private operators (principally Bharti Airtel, Vodafone, Tata Communications, Reliance Communications, Reliance Jio and Idea) have laid almost 1 million kilometer of fibre in the past few years. But the private players haven’t been able to effectively tap the huge universal service fund, with the help of which they could probably achieve a lot more. Mr Modi’s advisors could do worse than learn from the experience of New Zealand government’s Ultra-Fast Broadband programme, which leaves most of the build of a commonly accessible broadband network to be commissioned by private companies.

Make it smart when it comes to digital
We hear a lot about smart cities in India, and indeed some of the hype may come true one day. We should certainly look forward to when the response time for an ambulance to reach an accident scene drops to below 30 minutes, enabled by location-based GPS technology. Smart digital solutions could mean that the crash victim’s health records are on the paramedic’s hand by the time the ambulance reaches the accident spot on the roadside, and together with time-saving, would save thousands of lives.singapore
However, much of what we’ve heard about building smart solutions for India have been hyped and continue to rely on central planning. When the PM announces a Digital India strategy, it would be good to see the government apply some of the principles behind digital which are emerging elsewhere, for example Singapore. Singapore’s digital programme builds on years of creating an “intelligent” infrastructure, to now focusing on being a smart nation. Singapore’s telecom ministry has created an empowered agency, the Infocomm Development Authority of Singapore (IDA), to drive the digital agenda. IDA has a simple organisation structure and clear, focussed initiatives, a government chief information officer who busies himself with conceiving of programmes to drive digital, and cluster strategies to transform selected industries by harnessing digital technology. After years of having a DoT associated with digital and broadband, and yet remain strictly telecom-focussed and complex in its approach, it would be refreshing to see the emergence of an institution in India that drives a truly digital agenda and does so with a simple institutional approach and a genuine orientation to rely on the private sector.

connectivityThe spectrum auctions held recently and the ones held over the past five years have placed huge financial pressure on the telecom industry and on individual operators. Collectively, over $40 billion has been spent on spectrum by Indian telecom players since 2010, more than 1.5 times this year’s predicted industry revenue.

Most of those who have stayed the course have done so because of the long-term promise of being in a stable, mature market where they are able to offer a distinct service which their customers value. And, of course, that this market happens to be the world’s second-largest in terms of subscribers, and one of the ten largest by revenues.

As Indian telecoms have moved well past the 50 percent-plus real people penetration, this market maturity is now approaching rapidly and it is beginning to become evident what the end-game may look like for each player. I still believe that we will have around 5-6 players competing in each circle in India once there is consolidation in the market, as expected. With this stabilisation, we can also expect the emergence of a rather varied set of players, each offering a slightly different set of features to its users. After years, where services were similar, finally, we are seeing the arrival of choice for the Indian customer.

Here is my hypothesis on what the market may look like in the years to come:

  • Five-six players nationally: Three “national” players with operations in 20+ circles and 2-3 additional players in each circle, but with operations in around 10 circles each.
  • Three full-service players who offer the total gamete of voice, data, consumer and enterprise services, pre- and post-paid, as well as options to bundle with fixed services at home or office and possibly TV and entertainment. These will all be relatively pricier options where per minute mobile rates work out higher, but offer better quality of service with more networks on 900 MHz and HD voice, seamless roaming on the same network across India and overseas deals.
  • The big three will be distinct among each other with differences in terms of cities’ coverage, branding and retail experience, and specific themes around international/youth/small city/smartphone.
  • Two-three focussed players in each circle, offering either a specialised data service or an economical voice service.
  • Firstly, there will be the relatively cheaper options where calling rates are lower, quality of service is adequate, not all Indian circles are covered on the same network, and offer only pre-paid SIMs and which work in India alone–the services will, however, be popular with smartphone users who like messaging apps and Viber to call relatives overseas.
  • Secondly, there will be a data specialist option which targets tablet users who prefer internet access, YouTube and apps more than voice, and whose usage may be more stationary and wireless data, and less on the move and voice. The service may be bundled with entertainment services at home, and may appeal to youth, students, families and professionals who prefer an additional data-specialist connection in addition to another mobile connection.

 

I would expect Airtel, Vodafone and Idea to remain the big three since they have now done enough to create daylight in market share between them and the rest. I expect RCom to gradually move to the smaller category where it will join the likes of Uninor, Aircel and Tata Teleservices. Reliance Jio can be expected to be the data player. Overall, I would expect some consolidation along with circle/market exits.

It will be interesting to see which of the players in the market will embrace the digital opportunity that is available in India today, especially in the enterprise market where many industries are likely to start deploying digital technologies to make their businesses more efficient.  If an operator takes this route to innovate and create new value outside the traditional telecoms business, it may spark a new range of acquisitions by telcos of software, applications and cloud related businesses.

Those of us who studied economics at school would have learnt that industries have to reach a “minimum efficient scale” of production before they can turn a sustainable profit.  Until such an output level is reached, the fixed costs of running the business will not be covered sufficiently well enough to return a positive cash flow.  Scale economics showed us that a factory needs to be large enough to integrate many production features into one supply chain, and that its market needs to be scaled to justify the investment to put such a factory together in the first place.

Specialists had their place in this world too – to make niche contributions for a fractional share of the value.  The lion’s share was destined for global companies selling to world markets.  British Airways, Singapore Airlines and Emirates ran global operations with billions of dollars in revenue (USD 17Bn, USD 14Bn, USD 22Bn respectively in the most recent financial year), whereas travel agents were localised players making USD 10-20 per ticket sold.  How big business works with specialists across the value chain was governed by the laws of the production function: Industrial Economics 101.  But do these pillars of industrial economics still hold true?

No.

Expedia, the world’s online largest travel agency, reported revenues of just over USD 4bn in 2012.  Cleartrip, one of India’s fastest growing online booking agencies, claims to book 500,000 travel events per month with revenue of some INR 300 Cr monthly.

Expedia’s growth from being a division of Microsoft in 1996 to a global business which has included hotels.com and Trip Advisor in its stable (the latter was divested), is astonishing (see table).  The business has grown through the customer reach and access provided by the internet, powered through two types of acquisitions: businesses with customer reach in various markets, and businesses with technology or functional specialism in the travel business.  In 2010, Expedia acquired a mobile app business, providing the platform needed to engage deeper with individual customers on a daily basis to attend to their travel needs.  As a result, in less than twenty years, a player in one segment of the travel industry value chain has now globalised its niche role to become bigger than most of the world’s airlines.  For Expedia’s loyal customers, it is now more relevant to solving their travel challenges than any global airline or hotel chain.

expedia

The real-time and virtual connectedness between people and things that digital enables today is creating new ways for people and assets to create value and reach customers never accessed before.  This is turning the basic tenets of scale economics on its head.  There are two reasons why this is happening.

1. Due to better connectedness, tiny businesses can now reach global markets
Thanks to digital, distribution less and less requires global presence as a necessary condition for viability.  Small companies can now reach millions of customers through a mixture of e-commerce portals, social media, channel and solution partners.  Previously restricted to local markets, especially in the services world, geographically small companies can now go anywhere.

A made-to-measure shoe maker in Pune can now sell his merchandise to customers across India via Flipkart.  The portal can provide a link to the shoemaker’s website, where the customer can scan and upload a tracing of their foot size after selecting from samples of leather, soles and shoe designs and lace colours.  This can be done without the need for the shoemaker to spend more money on advertising, sales or distribution, or even for the customer or shoe maker to speak to each other.  So even though the shoe maker only owns the production segment of the shoe market value chain, he can still play national or even global.

Similarly, a highly-rated restaurant in Bandra features high on Trip Advisor’s city guide for Mumbai, meaning that thousands of hungry Mumbaikars will see the reviews and frequent the eatery on the basis of peer customers’ reviews.  In this case, the restaurant gains visibility through social media which simulates word-of-mouth feedback on the destination and replaces the need for the restaurant to spend more on advertising.  So even though the restaurant is a small establishment without the scale to advertise in the city press, the digital world ensures that it becomes visible to thousands of people specifically looking for a place to eat.

2. Digital technologies mean the production function can be more dispersed and collaborative
An international language school based in London providing Hindi classes worldwide discovers through an e-learning portal that there is an expert in Lucknow whose work is relevant to the latest module the school is looking to develop.  Using online collaboration tools, the school works with the translator to source audio, visual and written learning materials which are then edited and digitally integrated into a global publishing portal and resold all over the world.   A bone specialist working at a Bangalore clinic is now retained by a medical tourism company in Delhi to review X-ray images sourced from its customers.  The specialist reviews an image from a pathology lab in Assam, while having a video call to discuss the results with the patient.  Payment for the specialist services are completed through a mobile payments service once the face-to-face consultation call is over.

Even though specialists (whether linguist or osteopath) are remote from the customer, they can be discovered, supply their services and charge remotely.  The emergence of revenue models to sustain the linguist in Lucknow or the osteopath in Bangalore through remote use of their skills creates new businesses which have never existed on this scale before.

The digital phenomenon is having a democratising impact on business because it levels out a playing field once surrendered to big business, but now giving hope to SMEs to play seriously in global markets.

Make in India is looking to the next group of small businesses to scale up and reach the world market: Digital is turning scale economics on its head and has the potential to make that happen.

Sources: Expedia

tele_spectrumImage: Shutterstock

India’s latest telecom spectrum auctions concluded this week with a record spend of INR 1.09 lakh crore (USD 17.7bn). This amount surpasses even the bonanza seen in the 3G and BWA auctions of 2010, and all auctions since. The sums spent also surpass the Government’s expectation before the auctions began. The biggest three players, Airtel, Vodafone and Idea, have spent significantly more on the auction than their share of market revenue. This points to a market being hastened more towards consolidation. I continue to expect a long term position where there will be 5-6 players nationally of which 3-4 will be heavy data players and 2-3 will be cost leaders in voice. This compares to some 8-10 operators per circle today.

Here are my main takeaways from the auction:

  • Top 3 have retained the best access to data growth – they secured and extended all their 900 MHz spectrum. These players spent 77% of the total auction proceeds against their 70% of revenue share: the premium paid reflects their focus to position for the best growth the market can offer.
  • Fierce bidding has pushed the smaller operators more towards the voice opportunity – none of the smaller players acquired prized spectrum bands and overall they spent 18% of the proceeds versus their 30% of market revenue share.
  • The spend pattern at this auction hastens consolidation by one more step as it makes the longevity of some players in the market more questionable – it seems we are still on course to a 5-6 player national market.
  • India is being primed for a major data uptake – 80mln smart phones are being sold per annum and operators (Vodafone and Airtel in particular) have been investing in better network coverage, quality and speed.
  • Idea is gradually building its high quality spectrum base: despite being the 3rd biggest player, it spent more than anyone else, strategically extending 900 MHz into its key circle Maharashtra
  • Tariff hikes may be needed: the record expenditure of USD 17.7bn may require tariff hikes to enable operators to sustain margins and/or maintain their debt levels.
  • The auction proceeds present a boon for the Government budget, but such bonanzas are unlikely to be repeated often and so from a fiscal perspective the gain should not be over emphasised.

Sources: Fitch; Economic Times; Medianama

digitally_connected_vehicleIn their offices in London this week the GSMA confirmed to me that this year’s Mobile World Congress (MWC) was the biggest ever, attracting around 90,000 visitors to the 4-day global extravaganza for the mobile communications industry held in Barcelona from 2 to 5 March. For the second year running we were treated to a keynote address by Mark Zuckerberg, underlining the importance of the relationship between social media, apps providers and mobile telecoms. Zuckerberg didn’t quite have the cache of 2014 when Facebook had announced the acquisition of WhatsApp just before MWC.

This year, once again, we saw less talk on mobility and more on how the Internet of Things (IoT) will be mobile-enabled and transformational, confirming how the mobile industry has entered a new phase of evolution where it will be closely intertwined with many other industries.

Every stand at MWC had an IoT or Digital theme. The GSMA’s “Connected City” included several connected cars, a virtual reality connected home and a 5G super-fast connectivity zone hosted by Korea Telecom. I loved the Fiat 500 [picture above] fitted with an Alcatel Lucent powered communications system which allows a caller to share their location details directly onto the car’s navigation screen, making it super easy to pinpoint where people are when you are trying to meet or collect them. AT&T Mobility had a broad display of the latest connected gadgets including a virtual reality view of the connected home. Not only does the gadgetry on show allow people to experience the technology now being made available, but they importantly provide an opportunity to the corporate to showcase how strategy and business development is being shaped on the ground.

I was less impressed by the “connected toothbrush”, which at US$ 300 doesn’t seem to offer much by way of connected functionality: the brush has a mobile-enabled sensor that sends a signal to your mobile phone if you are pressing too hard on your teeth while you brush. Otherwise, the phone screen will show a diagram of a mouth showing each quadrant, encouraging you to brush the recommended 30 seconds in each (but since the diagram is generic and static, it is not sensing how long you actually brush). But like many products on show, the toothbrush is an experimental product that will no doubt evolve.  Two elements would make the toothbrush more compelling to me:
1. An in-built camera which shows images of your teeth where you are brushing, enabling you to see what you rarely do – which is where to focus the brushing more to be effective; and
2. A purchasing model whereby the brush is not retailed directly to the customer, but somehow paid for through the dental insurer such that the insurer subsidises the brush in order to use it as a tool to reduce its outgoings on treatment. Such a model could be a win-win for toothbrush manufacturer, dental insurer, and most importantly, result in healthier teeth for users.

If the brush had the camera, I’d be prepared to pay US$ 100 for it, with a co-pay of US$ 200 from my dental insurer, agreeing to them being able to monitor whether I am using it or not.

digital_connectivity

And so the Congress boldly revealed early stabs into monetisation, and many prototype ideas which need more development. The most monetisable ideas remain in the domain of transportation, where there were countless vehicles showing digital connectivity that drives lower insurance premiums, better safety or more convenience, all features which somebody will pay for.

In the near term, emerging markets such as India could benefit in three ways from the IoT-enabled world:

1. At the bottom end, India and other developing countries could benefit from leap-frogging more services to be provided without the need to build more and more physical infrastructure
2. India could become the engine room of the IoT-enabled world, a centre where digitally-enabled services the world over are supported through analytics and storage
3. India’s cities could become more manageable, safer and more efficiently run as they benefit from traffic management, energy consumption reduction (such as smart street lights that dim when there is no traffic), road death reduction and better efficiency in using water.

The Digital India story must be brought to life with a clearer vision around what the IoT-enabled world can do for India, and what India can do to enable IoT across the world.

smartphone
Image: Shutterstock

In India, talk about Digital India and Smart Cities is quite the rage. But as with many transformational propositions, there is much hype but limited discussion about how will digital be seen and felt across the economy.

Understanding how digital will influence our economy is important, since digital is likely to enable much of the leap-frogging that India needs to do in order to catch up quicker with the world’s middle income economies. Here are a few examples below, which together pick up on four themes which underpin what digital means, namely Social media, Mobile, Analytics and Cloud (SMAC):

  • In Sales and Distribution, many parts of India are not served by good physical sales and distribution outlets and channels. Digital technologies which help companies connect their suppliers better by using analytics and cloud provide many options for businesses to reach customers over the web and mobile. This will help them both sell and deliver goods more efficiently.

    Relevant example: Flipkart, one of India’s most innovative eCommerce companies, is using analytics and cloud to organise its delivery chain better, and to connect electronic and physical channels in getting goods to the customer, cash on delivery.  Buying on Flipkart is conditioned by social media feeds about products and services.

  • In Retail, India lags in offering customers a truly engaging shopping experience, both in-store and off-site. Digital technologies such as analytics enable businesses to collect more and deeper information about a customer, including combining context from different sources to create a more enriched and insightful view. Mobile helps with data collection, and then helps the retailer connect more efficiently when the customer is on-site and when they are at home.

    Relevant example: Book My Show has made it easier to pick up tickets at venues and theatres without queuing, and the mobile application also enables the customer to view and choose entertainment options while at home or still at work.

  • In Healthcare and Learning, digital technologies which enable service providers to provide remote services (such as monitoring blood pressure via a monitor while the patient remains at home) will enable India to avoid billions of extra dollars in public infrastructure investment, while continuing to improve public attainment and welfare.

    Relevant example: BBC Janala is providing millions of Bangladeshis with customised English language learning over mobiles. This is substituting the need for expensive class attendance in often faraway towns at higher expense.

  • In Smart Cities, digital solutions will help police contain and reduce crime – through CCTV, video surveillance and other techniques which with predictive analytics will drive quicker action to where it is needed. Some solutions will use analytics and geo-positioning technology to give people up to the second transportation and traffic information. Yet more solutions will allow families to remain connected with each other through the day of moving about the city, and will enable people to control appliances and home and in the car from afar.

    Relevant example: Surat Municipal Corporation is connecting with citizens already on several fronts around public services, using social media to engage, as well as analytics.

    The above examples show exactly why definitions of digital are centred on Social, Mobile, Analytics and Cloud (SMAC):

  • Social: Customers, individuals or employees are using social media to express themselves and connect and exchange views, vote on each other’s choices and compare notes on all manner of things from work to school, from housing options to movies, and religious views to political opinions. Such social media are rapidly creating new platforms for expression and communication, giving businesses new opportunity to promote their products and engage, as well as protect the brand.
  • Mobile: Connected mobile devices can now connect people and things almost anywhere and anytime. This makes the customer a 24/7 phenomenon, reachable at any time and who can transact at any moment, infinitely broadening the opportunity as well as the threat from competition. With access to applications which reside on the cloud, almost every mobile device with internet access today has access to a huge amount of computing power.
  • Analytics: Behind the scenes, there is enough firepower now to analyse almost anything that generate data – not just in terms of patterns of usage and consumption, but also to predict relevance and behaviour based on collecting wider, more contextual data – often referred to as “Big” data.  Big data has not really scaled yet, but it is only a matter of a few years till it does.
  • Cloud: All of the above is now supported by huge and globally available computing power and storage capacity, meaning that individuals, enterprises, governments and connected things can all benefit from immediate access to a vast pool of technology.

The role of the mobile industry will be key, because almost all digital impacts will involve the flow of data and communications, between people and machines. There are some 5 billion mobile connections today, and the GSMA predicts there will be some 26 billion connected people and devices by the mid 2020s. Referred to as the “internet of things” or IoT, the mobile industry has an opportunity today to be at the centre of the connected world which goes well beyond people and into “things” everywhere. As the IoT takes off, communications technology will pervade more and more industries, through technologies such as Machine to Machine (M2M), enabling the sorts of digital transformation illustrated in the few examples above.

It is not just connectedness that matters, that is having a “dumb pipe”. No, it is actually the nature of connectedness that will be fundamental to how much impact can be created through digital. In tomorrow’s world, customers will be asking:

How robust is security when my information is going across all sorts of networks?

What is my latency for viewing video while the page uploads or the app updates?

Is my network coverage consistent enough to connect anywhere as we move around?

Is my network sufficiently integrated with GPS information so that I can isolate locations accurately and quickly?

Does my network provide adequate coverage today to connect non-mobile technologies, at high speed and with high quality?

Whoever coined the phrase “dumb pipe” did a disservice to the mobile industry, one it has been trying to shake off for a decade now. The above questions demand that in the digital world, networks and their operators have to be extremely intelligent (not dumb), capable of providing connectivity fit for the need. There is significant value in being able to do this, and it is up to operators to go out into the market and acquire the skills and capabilities to be able to tap this.

 
 
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.
 
 
 
Most Popular
Customwritingpro - Affordable Papers
Mohammad Chowdhury's Activity Feed
January 22, 2016 17:18 pm by Mohammad
Thank you for your comments. Indeed, India is ripe for smartphone growth in 2016, as the penetration rate today is 25%. Indonesia is in a high growth phase now, with smartphone penetration growing at 1% per month. If India does the same, we will see something like 8-10m additional smartphones com...
January 13, 2016 11:55 am by Punyasloke Bandyopadhyay
Happy New Year.. Governments in Asia (read India) have used ICT (read spectrum) to churn out money to minimize their fiscal deficit. No government is as exception, unfortunately. There should be a minimum level of free hand that operators and TRAI should have so that there is less 'politics' involve...
January 08, 2016 16:47 pm by Pankaj Ghosh
Hi Telecom Market in India must see the light of fresh and fast data transfer mechanism. Since it is a growing market where more and more Smart Phones will be in the hands of very young and en-lighted populations where the social network and media will have the space to play. Where fast and non-inte...
January 04, 2016 17:50 pm by Punyasloke Bandyopadhyay
Happy New Year.. Governments in Asia (read India) have used ICT (read spectrum) to churn out money to minimize their fiscal deficit. No government is as exception, unfortunately. There should be a minimum level of free hand that operators and TRAI should have so that there is less 'politics' invol...
December 01, 2015 20:16 pm by Syed Hussain
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! So true!!