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Growing Mobile Data and Value-Added Services in India

December 8th, 2008 · 8 Comments

I wrote earlier about India’s Red and Blue Mobile markets, and ended by saying that “the action (and value) going ahead in India will be not in Voice but Data and VAS (Value-Added Services) in India’s most valuable Red Market.” The question is: how does that happen? How can VAS become a bigger opportunity for mobile operators and the rest of the ecosystem?

There are five things that need to come together to make this a reality:

Reasonably-priced Flat-rate Data Plans: The US leads the way here. From being a laggard in the use of mobile data, the US is now showing the way with all operators having flat-rate data plans. In India, the right price point, according to me, is Rs 100 per month. A plan like this will encourage the use of the mobile Internet and other services, and create the necessary pull for companies to start building out mobile data services. Operators will benefit from large-scale adoption of data plans.

More Spectrum for Operators: Mobile operators in India have to make do with much less spectrum than almost anywhere in the world. The big cities, especially metros, have a severe shortage of spectrum. And so, mobile operators tend to focus on using the spectrum for voice rather than data. This needs to change. A worry is that even when 3G comes along (and that date still seems a year away – as it has been for the past 3 years), operators will focus more on voice than VAS given the spectrum constraints.

Better Revenue Shares for Off-deck VAS Players: Mobile operators need to encourage off-deck VAS players and provide them support for billing. In this case, the billing fee should be 15% or so, rather than the 50-75% that is currently the norm (and which can continue for on-deck services). This will encourage VAS players to create a wide variety of services, since it provides a revenue stream where subscribers pay rather than a complete reliance only on advertising.

Separate VAS from the Government Fees: VAS should be treated separately so that operators don’t end up paying the 12-15% of topline as revenue share to the government. In fact, for VAS, service tax also needs to be applicable only depending on the actual service. For example, if my cash balance as a subscriber is used to pay for a book purchase, then it does not make sense to pay nearly 25% taxes. In that situation, the mobile operator is acting more as a mall than a telecom operator.

Creation of a VAS Operator Licence: I have elaborated on this point in an earlier post.

Taken together, these steps can help drive mobile value-added services in a big way in India. A combination of factors stunted the growth of the wireline Internet and eCommerce in India. We have an opportunity to ensure a different ending in the mobile space.

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8 responses so far ↓

  • 1 Growing Mobile Data and Value-Added Services in India | Adoption and Orphans Information // Dec 8, 2008 at 8:06 am

    [...] Continued here:  Growing Mobile Data and Value-Added Services in India [...]

  • 2 Nadeem // Dec 8, 2008 at 11:39 am

    You have rightly pointed out that flat rate plans are the way to go. For an average mobile user, simplicity and transparency in tariff for data connectivity is important as nobody likes surprises, especially when it comes to phone bills. Even for pre-paid customers, the option of buying a data connection pack (very much like ‘SMS packs’) could be useful.

  • 3 Growing Mobile Data and Value-Added Services in India | kozmom // Dec 8, 2008 at 5:32 pm

    [...] details: Growing Mobile Data and Value-Added Services in India [...]

  • 4 Sundar // Dec 9, 2008 at 7:54 am

    Data plan could have a couple of slabs from Rs 100 to 300 as heavy users could afford to ay more.

    I do not understand why Government is pushing more operators in 2G without introducing 3G first. Data on 2G / GPRS sucks. Latest news indicates that defense department would take 2-3 years to fully vacate the spectrum earmarked for 3G.

  • 5 Roz McCarthy // Dec 26, 2008 at 2:33 pm

    VAS is they key to breaking open the SMS flood gate her in the US as well as in India..
    I believe consumers are willing to pay for it if sensible and reasonably priced. The info you share in respect to off deck partnerships is key to that success. Great info!

  • 6 Roz McCarthy // Dec 26, 2008 at 2:33 pm

    VAS is they key to breaking open the SMS flood gate here in the US as well as in India..
    I believe consumers are willing to pay for it if sensible and reasonably priced. The info you share in respect to off deck partnerships is key to that success. Great info!

  • 7 Idea 1: A flat-rate data plan for Rs 99 per month // Jul 14, 2009 at 5:00 am

    [...] MVAS Paper Comments (Jan 09) – Mobile Microcontent (Jan 09) – 2009 India Mobility Trends (Dec 08) – Growing Mobile Data and VAS in India (Dec 08) – India’s Red and Blue Mobile Markets (Dec 08) – The Need for a Mobile VAS Operator [...]

  • 8 Nilanjan // Jul 21, 2010 at 12:29 am

    Its all very well to talk about un limited data plans in India. But with the lowest spectrum per operator, how are operators to offer that without severely impacting voice services.

    thoughts?

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