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

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.

 
 
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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April 25, 2016 07:38 am by Hammad Arif
Dear Mohammed, I have gone through your article, while you have made some good points regarding the valuation of Whatsapp. I think you missed on a very important concept which I believe strongly influences the valuation of Whatsapp. The Concept of ‘Network effect’, which is a phenomenon wh...
April 12, 2016 21:09 pm by Farhad Khan
Well written piece. Thought provoking insights, especially for MNOs
February 12, 2016 00:04 am by Chaitanya Dhareshwar
Thanks Mohammad! Noticed your response just now - apologies. The concept has grown to a point we're expanding to South Africa and the US. We can connect offline (via linkedin or suchlike) if the topic is of interest. I'm happy to contribute latest and upcoming stuff for your blogs on Forbes
February 11, 2016 17:33 pm by Punyasloke Bandyopadhyay
Patience seems to be a failing force with the telcos...they are too myopic and want to quickly want to enter the "profit" zone too soon... Marketing & Operations/CRM has scope of improvement and telcos digress from tying up with individual organisations such as taxi providers,etailers for exclusive...
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...