NET.COLUMNS: Online Services in India

MUMBAI (November 20): The Web is the world’s largest online service. Very little of it is devoted to India. Most people in India, even if they had a computer and modem, would not find it a trivial exercise to access the Web. Low speeds, few phone lines, access in limited cities and high comparative access costs make it a challenge. So, if we look at the evolution of the market within India, we have a few thousand estimates vary between 10,000 and 50,000) surfers spending most of their time accessing foreign web sites.

Is there an opportunity for an Internet-driven Indian online service? If so, how would it need to unravel? What are the numbers we are talking about? This column explores these issues.

If you wanted to access an online service, you would need to be in one of the cities where Internet access is available. Offcourse, I-Net can technically connect you from anywhere in India to the Web, but you definitely would not want to be data transfer-based charges on the Web. In the US, communications is very inexpensive and the cost of a computer is a fraction of a person’s monthly salary. In India, the opposite is true: a computer costs a multiple of salary, and centralised can keep a specialised developed communications is more expensive. So, in India, if we need to target mass audiences, we have to look at setting up Internet Kiosks, where people can walk in browse, pay based on time and walk away. Very much like the PCOs which have sprung up all over the country. Mass access to computing resources is the first pre-requisite for a online service.

India-oriented content is few and far between on the Internet. The creation of digital databases in multiple languages is the next requirement. There is a lot of information in digital form already available: the NIC databases is one such storehouse, business database and research-oriented companies like CMIE and Capital Market are another, publishing houses are a third. A number of organisations have databases on films, travel, food, etc. Yet, there is no place where a lot of this is available by a dial-up service. These organisations will not offer content on an online service until the numbers are there. So we have a classic catch-21 situation: no numbers, no content providers; no content providers; no numbers.

Local availability of content is another important need. It is not funny when to read a newspaper like The Indian Express on the web, one has to access a server in San Diego. In fact, the information should be available in multiple cities of this country by just making a local phone call. This way, the expensive resource (international bandwidth is conserved). Replicating information is easier and recommended in India server with high-speed communication links. What is needed is a network for duplication, much like the network of a courier company. So, servers in every city, connected whether by dial-up or over the Internet, are needed. As far as the subscriber is concerned, he is just making a local call. As far as the provider is concerned, it can offer the best access speeds possible over the phone line, since there are no other bottlenecks.

If the only requirement becomes a local call, then one can think in terms of flat-rate pricing for access. This is important. America Online recently announced a flat-rate pricing for Internet access (USD 19.95 a month). The fear that a person is going to clog up the network is a valid one. In fact, many phone companies are worried that the rate of growth of Internet-related calls could result in gridlock, since the average Internet call lasts for 20 minutes as compared to 6 minutes for a voice call. But flat-rate pricing encourages usage. Nothing is more valuable than a person’s time. Also, in India, it is not trivial to get an extra phone line just for Internet access. In the initial stages, flat-rate pricing is going to be very important to get the most important element in the online service: the customer. Also, the money to be made by enabling electronic commerce is far more than for the time spent online. The aim of the online service provider should be to get a cut off the business enabled (a transaction fee, akin to what a merchant pays to the credit card company for enabling the transaction).

On to the customers. India has plenty of them. The ones who watch TV, the ones who will buy all the cars being produced, the ones who buy the newspapers and magazines. Our strength is in our potential numbers. Potential is the operative word, since the numbers do not exist. Yet. For them to come on line, we need a large number of services and easy access to a device which can get them the service. It could be a TV, but the interactivity is not there. It could be a computer, but the installed base is not very large. It could be both. Either way, the needs of the customer will have to bet met by a diverse range of services. These applications have to be created, much like the software for a TV channel.

Let us consider some applications. Buying books, for one. How many times have you visited a bookstore only to find that specific book you needed “out of stock”? Think for a moment, why you need to visit the store, if you know what you want. This is not to take away the pleasure of browsing and the soothing ambiance of a bookshop. But, if the sole purpose is to (a) transfer atoms from the shop to your premises, and (b) transfer some money from your wallet to the merchant, then you do not need to have a physical presence in the bookshop. An online catalog can help you select, a credit card or a debit card can transfer the money and a courier company can deliver the atoms. A book distributor could have a warehouse in some remote location and just use the online service for order collection. The reach is wider — national or international, which can also translate into increased volumes and hopefully lower prices. This same concept can be extended to music CDs, airline tickets, classified advertising, newspapers, bills — in fact, anything that a mail order catalogue would probably sell, or what the shopping programmes on TV offer. The difference being that you could also pay online, which is not possible yet in India, of course and which is needed.

Consider the value addition. Say, you wanted to buy two tickets to a concert. You could go online and perhaps actually see the view from the specific seats before deciding to buy. The interactivity which an online setup offers can help make an intelligent choice. So far, items which do not require a touch-and-feel component, online merchandising would be a very effective way to reach out to larger audiences. This will also ensure that only the best will survive, since geography will no longer will be a barrier to making a purchase.

An online service in India can potentially have 1 million subscribers by the year 2000, and 10 million by 2005. The numbers may seem to be far-fetched, but 4 years is a long time. Remember the satellite TV business in 1992? Or 1987? The pace of change is much more rapid now that it was even ten years ago. This is a huge market. The subscribers here would actually mean households, so the numbers multiply rapidly. The big market is present with India, and we have not even begun thinking about it. Many technologies will combine over the next 2-3 years to remove the hurdles — our telecom sector will give us the state-of-the-art telecom networks, satellites will give us access even in remote locations, cable modems will make the TV interactive, and some smart Indian company will allow multiple Indian languages to be displayed and processed.

Indian online services might seem rather futuristic at this point, but the rapidity at which the Internet technologies are developing, it is definitely going to happen. It is not easy to predict which Indian companies will lead this revolution. Who had imagined a Zee five years ago? Cellular phone services are about to unravel over significant portions of the country. The revolutions which communications can bring is far greater than that of the television. Unfortunately for India, in many places, the television has come before the phone. This sense of community, of being connected to one another, is what has spurred the Internet wave worldwide. In India, it has still been a ripple, but the inexorable forces of technology will wire India in its web in the coming years.

The challenge is for Indian organisations to envision what opportunities this opens up. This we will cover in a future column.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.