Month: November 2009

I wrote an 11-part series on the issue of A2P SMS interconnect in September.  In the past week, the issues of SMS pricing and SMS interconnect charges have been at the centre of two big stories in Times of India (business lead) and Business Standard (front page):

• Times of India (Nov 5):  “…the cost to your mobile service provider of delivering your message to another mobile network is less than 1 paisa…This revelation not only belies claims that India has among the lowest telecom tariffs in the world, it could also set the stage for SMS rates to fall sharply. Voice calls are already being offered at 1 paisa per second. As new entrants flood into the market, SMS tariffs could become the next major frontier of the pricing war now raging in the Indian mobile services industry…Trai has so far refused to regulate SMS tariffs along with some other tariffs under what is known as forbearance. Forbearance is usually adopted by regulators when they believe that competitive markets are working and tariffs reflect true costs. As it turns out, the true cost of sending an SMS would never have come to light if new entrants had not been forced to sign interconnection agreements with existing operators at a price that is far higher than the actual cost.”
• Business Standard (Nov 6): “The regulator is also re-examining SMS tariffs, which have not fallen as steeply as voice calls. SMS tariffs are around 50 paisa, virtually the same as a one-minute voice call, suggesting there is scope for reduction.Trai is expected to come out with a consultation paper on SMS tariffs as well as on fixing termination charges on them ahead of final recommendations.The move to impose termination charges has arisen because many telecom companies took advantage of their absence to sign bulk SMS deals with companies that were sent to customers of other telecom operators, a practice that resulted in choking the system.”
• Times of India (Nov 9): “Telecom regulator Trai has been besieged with representations from several quarters, including consumer activists and members of Parliament, asking it to abandon its policy of forbearance with regard to SMS tariffs.
• Business Standard (Nov 9): “Since the IUC, for voice calls or SMSs, is based on the amount of the network that is being used, the size of the file being transmitted is critical. Well, a 160-character SMS has a size of around 1kb, while a voice call is around 16kb per second. Today, with voice calls priced at 1 paisa a second, this means that instead of the current 50 paise to a rupee, SMS tariffs should be a fraction of 1 paisa, and the IUC on them even less.”

A story on Medianama detailed the A2P SMS implications. “India’s push SMS industry is facing a challenge with operators Airtel and Tata Indicom increasing the interconnect charges applicable on application to person (A2P)  SMSs on each other’s network. A2P SMSs include marketing information text messages relayed by enterprises such as banks, airlines, theatres, or by content aggregators.”

So, what needs to happen? I will discuss this tomorrow.

This is the presentation I made at Liba’s Insight 09 event.

I was recently reading about China’s plan to add 13,000 kms of high-speed train tracks, and was reminded of my first visit to China more than 7 years ago. Here is what I wrote then about my visit to Shanghai:

Shanghai is a mix of the historic, the recent past and the futuristic. It has been a beacon for international trade for many centuries (”Paris of the Orient”) and has maintained its international flavour, ever since the foreigners gatecrashed into Shanghai in 1842. The local government has poured money into infrastructure and it shows. At one time, it was the largest construction site in the world (a quarter to half the world’s cranes were reportedly deployed in Shanghai in the past decade). Skyscrapers, multi-tiered roads and expressways, an efficient metro system, tourist attractions like the Bund, Shanghai Museum, Nanjing Pedestrian Walk – they are all there.

What is amazing though is what has happened on the east of the Huangpu river. Here, a city has been created from scratch. It is breath-taking. The mix of glass and steel rises above the expansive pavements and roads. The Pudong New Area still has a fresh feel to it. The Jinmao Tower, which also houses the Grand Hyatt, offers spectacular views of the surroundings.

Shanghai is the engine powering China ahead. It has been undoubtedly dressed up for the external world to see and experience the New China. Shanghai’s look-and-feel makes me dream of what Mumbai could have been.

This week’s links:

• Why the Great Indian Media Companies will Fail on the Internet:  by Abinash Tripathy (via Karthik). “Even the true Internet players from the early days of the Internet era in India like Rediff and Sify continue to underwhelm the market with poor product offerings and declining ad sales.”
• Kindle: My Next Notebook? by Ryan McIntyre. “If I could simply take notes on my Kindle with a stylus, I’d be a happy man. I’d effectively have a composition book with an infinite number of pages, and, ideally, it would be backed up online and accessible on the web as well.” I echo the sentiments!
• 5 new technologies that will change everything: from PC World (via Anish). USB 3.0, Video streaming over Wi-Fi, 3-D TV, ‘Augmented reality’ in mobile devices, HTML 5.
• Figuring out what your company is all about: by Joel Spolsky. “Kathy taught me that if you can’t explain your mission in the form, “We help $TYPE_OF_PERSON be awesome at $THING,” you are not going to have passionate users. What’s your tagline? Can you fit it into that template?”
• The Power of Less: from Forbes. “How doing less can produce better business results.”

In Mobile VAS, ABC is Astro, Bollywood and Cricket — the three verticals that tend to be the most popular in terms of monetisation.

I was going through my mobile operator’s ‘Live’ WAP portal and couldn’t help thinking that the ABC has since evolved to BBB – Babes, Bikinis and Bollywood.  Presumably, operators make a lot of money through the various offerings, but that narrow view of their customer base has probably limited the expansion and consumption of VAS by higher ARPU consumers.

Some of the books I have bought recently / am reading:

• Wired for Thought: How the Brain is Shaping the Internet by Jeffrey Stibel
• Getting To Plan B: Breaking Through To A Better Business Model by John Mullins and Randy Komisar
• The Predictioneer’s Game: Using the Logic of Brazen Self-Interest to See and Shape the Future by Bruce Bueno De Mesquita

The Sea Link is one of those things that should have come a decade earlier. Nevertheless, at least it is here now. Which is a miracle considering how slow infrastructure development is in India.

The Sea Link is  an absolute time-saver and a delight to travel on. It is a no-brainer to use it from a time-saving perspective.

The issue is that it is only one of its kind. Mumbai as a city needs plenty of sea links to bypass the parking lots that many roads become during the day. Hopefully, whenever the next government is formed, thinking about Mumbai will be high on their agenda.

With walled gardens and high retained shares, operators in India have kept the Value Added Services (VAS) revenues largely to themselves. VAS in India (excluding P2P SMS) has grown to over a billion dollars in revenue. Only about 20% of that flows through to the VAS companies.

Operators have faced little or no competition here from off-deck services because of the ability of VAS companies to do their own billing. What if that where to change? What if companies could create an independent payment collection capability combined with an open publishing platform?

Such an entity (what I call a Digital Services Operator) would be able to inject competition into the VAS space. More importantly, it could also drive innovation and the creation of new services — and truly make the mobile a magic lamp in the hands of consumers.

Last Word

So, the Indian mobile space will continue to be exciting — the coming disruptions will open up the field to innovation across the board. Operators will need to think smart on how to retain their existing subscribers and acquire new ones, while VAS companies will reap benefits from higher network speeds and more open access to the mobile subscribers. 2010 promises to be an exciting year!

The past few months have seen voice tariffs fall across the board – along with the market caps of India’s mobile operators. Given that we have no shortage of well-funded new operators desperate to reach targets of million of subscribers, the only option is to cut voice tariffs in whatever form. Incumbents have little choice but to respond.

Interestingly, competing on voice tariffs only benefits consumers. If one operator launches a pricing plan and it works, other operators have to match it. But cheaper voice only increases churn among the middle and bottom of the pyramid — which of course is still very large in India. Voice competition does not provide a lasting competitive advantage.

Mobile operators have to look ahead to a world where voice will be a fixed-price commodity – we will pay maybe a maximum of Rs 200 per month for unlimited talk time. They have to think of what they will then offer on their network to generate more revenue from their subscribers. And if they think it is going to walled-garden VAS, they will need to think again!

Tomorrow: VAS Competition

I wrote this series four years ago: “India Empowered to me means India Educated, Infrastructure Everywhere, Innovation Ecosystem, Imaginative Entrepreneurs, Intelligent Enterprises, Internet Energised and Increasing Expectations.”

I expanded on each of the themes. This is what I wrote on what the twin themes of Innovation Ecosystem and Imaginative Entrepreneurs.

Innovation Ecosystem: We will need to think out-of-the-box to come up with smart solutions. For that, we need to build an innovation ecosystem – combining the best minds across academia, industry and government. We need to work on ideas across the board, starting with education, energy, healthcare. We need solutions that are scalable rapidly. We need to foster a culture of innovation so that India can lead the world in key areas – use of solar energy as an alternate to fossil fuels is one example. To make this happen, we need to make our universities hubs for cutting-edge research. We need venture capital funds so that the better of these ideas can be commercialised rapidly. We will have failures, but the impact of the successes will far outweigh the downside of the projects that do not work.

Imaginative Entrepreneurs: We not only need more entrepreneurs, we need them to come up with big vision. We need entrepreneurs who are willing to run the risk of failure – so that they can change the game dramatically with their disruptive innovations. We need entrepreneurs who are not satisfied with building a small, profitable company but are willing to make big bets on building big enterprises. To take an example: what does it take for us in India to build the Google for Emerging Markets – build around tomorrow’s world of network computers, mobile phones and broadband networks and centralized services. We need to think of the future not as what others create but as an instantiation of someone’s vision. Can we make it our vision?