Growing Mobile Data and Value-Added Services in India

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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