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Growing Mobile VAS in India: Data MVNO Opportunity

What kind of data services would the Data MVNO offer? Here are some starting examples:

  • SMS subscriptions (push-based microcontent)
  • Voice portals
  • Content downloads (mobile games, apps, etc.)
  • Video downloads / streaming
  • mCommerce

What is common to all of these services is that consumers pay for each one of them. Offering them free in the hope of getting ads is not going to be a business – as has been seen in the Internet space in India, where the top home-grown portals are losing in excess of Rs 150 crore a year even after 14 years of the Internet in India.

There are three things which need to come together to offer such a service in India:

  • Reach: distribution and relationships to reach the top 100 million target audience
  • Cash Balance: enabling people to pay to create prepaid accounts independent of the mobile operator
  • Open Publishing Platform: to allow content publishers and service providers to create content. This is similar in concept to the iPhone AppStore.

Continued tomorrow.

Growing Mobile VAS in India: The Big Opportunity

India has 400 million mobile users with an ARPU of about Rs 200. Of this, the non-voice ARPU is about 10% (Rs 20), comprising P2P SMS (Rs 10), CRBT (Rs 4) and other VAS (Rs 6). The other VAS (which are non-network services) amount to about Rs 3,000 crore [400 million x Rs 6 per month x 12 months].This market for data services will probably grow to 2-3x in the next 3 years. The market itself is growing 25% per annum, and also the spend on data is increasing.

So, in about 3-4 years, this will be a $2 billion market (Rs 10,000 crore). The bulk of this spend will come from the top 10-20% of subscribers (about 100 million), each of whom can on average spend Rs 75-100 a month on various data services. By then, voice will have become a commodity being offered at about Rs 200 for unlimited talk time, so that even as the overall phone bill will stay the same or even fall, the contribution of data services will rise.

There is an opportunity to create companies which operate like a Data MVNO (Mobile Virtual Network Operator) or a Mobile Computing Operator in the country – focusing on high ARPU consumers and enterprises. The goal for this company would be to target the top 100 million consumers with operator-agnostic data services.

Continued tomorrow.

Growing Mobile VAS in India: An MVAS Agenda for India

Here are some measures that need to be taken in the short-term:

  1. SMS interconnect charge issue resolution
  2. Better implementation of national do not call (NDNC) registry
  3. Short code registry to make short codes like domain names so they can be centrally registered and can work across all operators
  4. DoT to accept TRAI MVAS recommendations submitted in February 2009
  5. Local Indian languages to be supported on all handsets

Over the long-term, there are more actions which can help grow the industry:

  • Open access / net neutrality; enablement/recognition of off-deck MVAS players. What this means is that mobile operators should not block any voice / SMS / WAP service offered by a third party.
  • Dispute redressal authority (may also need light licencing for MVAS cos.). Today, if there is a dispute between an MVAS company and a mobile operator, the only option is the court. Ideally, TDSAT should be able to take up these issues, but TDSAT only deals with telecom licene holders, hence there may be a need for a light VAS licence.
  • Billing consumers via operator cash balance at sub-15% fee for off-deck players. This will kickstart mCommerce in this country. A related provision which needs amendment is that operators have to pay 23% tax (service tax and the spectrum/WPC charges combined) on anything they bill to the consumer. This needs to be relaxed in the case of billing for non-telecom services.

For on-deck services, operators can charge what they want and do whatever revuenue shares they want with VAS players. The future of the MVAS industry lies in the facilitation of growth for off-deck services.

So, what is the potential for the MVAS industry in the years to come in India? And what is the bigger opportunity?

Continued tomorrow.

Growing Mobile VAS in India: The Coming Mobile Data Revolution

The IT and telecom industry has seen then creation and growth of two large industry segments in the past 15-20 years. The first has been in IT and business process outsourcing. The second has been in the mobile space, with the creation of an industry that now generates over $20 billion (Rs 100,000 crore) in annual revenue.

There is a third revolution that is waiting in the wings to happen – in mobile data.

In the years to come, the contribution of MVAS (non-voice services) to the ARPU is likely to grow. What else can be done to provide a healthy, competitive environment in which operators and MVAS companies can both compete and co-operate to create solutions which make the mobile a magic lamp in the hands of consumers, make India a world leader in mobile data, and hopefully, help in the creation of the next Microsoft / Cisco / Google in the world?

In this context, some of the posts I have written on my blog over the past year are useful backgrounders. Here is a list in reverse chronological order:

So, what should the MVAS Agenda for India be?

Continued tomorrow.

Blog Past: Computing for Broadband 101

This is excerpted from an article I wrote four years ago:

If broadband has to boom in India, the computing industry will need two innovations to reinvent both its architecture and business model. After all, what will people do with fat pipes without affordable and manageable access devices and a variety of services for users to access.

To reinvent the computing architecture, we need to take a leaf out of the industry’s past in centralised computing and create zero-management access devices. Think of these as “thin clients.” To build these multimedia-enabled network computers, move the guts of today’s personal computer (the high-end processor and the storage) to the server, and replace it with the innards of a mobile phone (with a low-cost processor and limited memory). The “thick server” delivers the virtual desktops to users over broadband connections.

This server-centric computing model has many advantages. First, the access device can now be dramatically simplified and has the potential to reduce the cost to about Rs 3,000. (Keyboard, mouse and monitor would cost an additional Rs 4,000). Second, the computers require no maintenance and can now be easily bundled with the connectivity without the worry of house (or office) calls for support. Third, piracy will be eliminated since all software and content is delivered via the server, and can be controlled and monitored by the service provider.

The second innovation needed is on the business model. Instead of asking users to make upfront investments, computing needs to become a utility – available on a subscription basis for monthly payments. The pay-as-you-go model is what the world of mobile phone users and cable TV watchers is already very familiar with. This reduces the entry barrier dramatically for new users and provides a full solution at an affordable price.

Using thin clients and server-centric computing, it should be possible for service providers to offer a bundle including broadband connectivity and support for no more than Rs 700 per user per month – which is about what is paid most mobile phone users in urban India. This is the point where computing will take-off and spur the creation of a wide variety of services making broadband a catalyst of transformation across homes, offices and educational institutions.

The next platform will consist of network computers as zero-management access devices, ubiquitous broadband networks, server-based computing and storage grids as the underlying infrastructure, centrally accessible services built around hosted software and content and utility-like subscription-based payment model. This is what will take the power of computing to the next billion users globally.

Weekend Reading

This week’s links:

  • A Manifesto for Slow Communication: by John Freeman (in The Wall Street Journal).  “Given that our days are limited, our hours precious, we have to decide what we want to do, what we want to say, what and who we care about, and how we want to allocate our time to these things within the limits that do not and cannot change. In short, we need to slow down.”
  • Have We Lost All Control? by Sage Lewis. “You can participate in the message. You can pay for your message to go out. But you can’t control the message like you used to.”
  • Hyperdistribution: by Jeff Jarvis. “Right now, news organizations should be trying to reach more people and engage with them more deeply. They should seek hyperdistribution.”
  • Future of Mobile Search: by Mohit Agrawal (via Sunil). “The mobile search should be able to utilize all the resources (location, camera, voice, etc.) that the device has to offer to retrieve socially relevant results that can give confidence to the user in almost every situation even if he is alone or in a completely unfamiliar environment.”
  • What is Really Happening to the Venture Capital Industry? by Bill Gurley. “In order to fully understand what is happening, one must look upstream from the venture capitalists to the source of funds, for that is where the wheels of change are in motion.”

Navigating NetCore – The Past Year (Part 5)

Our goal this year is to consolidate the enterprise business streams so we can create a foundation that can grow 75-100% year-on-year. This business generates ideas, revenues, customer relationships and profits. In parallel, we are also building out the consumer business – something we had slowed down over the past year. This is something that I am personally driving.The shift of focus to the enterprise business is for the reason of sustenance of business in the short-term
and not necessarily the ultimate goal (though it will continue as an important contributor even in the long run). Our passion still lies in consumer business which means both advertiser pay and consumer pay. Both of these will take time and that is a reality we have accepted. The name of the game is constant re-think yet continued efforts to make our original plans (consumer monetisation) ultimately successful, even though in a re-jigged format.

During our last Board meeting, we asked one of our Board members about the ups and downs we had faced. His response was that unlike some other companies, we had adapted quite well to the changed environment. We had recognised that a specific strategy (consumer monetization through ads on mobile) wasn’t working well, and instead of just sticking to it because “it was part of the plan”, we changed our approach and built out the enterprise mobility business. Now, we were ready, from a stronger base, to take another look at the consumer business with a modified approach.

For me, every year as an entrepreneur is one to be savoured because of the learnings.  Just because I did something right in the past does not guarantee success in the future. Building a business is hard. There are moments of joy – but there are many more moments of pain. However experienced one is, situations are different and have to be dealt with accordingly. More than anything, one has to be optimistic and keep the big picture in mind for what one wants to do. It is that vision of the future that keeps the enthusiasm and morale high even during difficult times. For me, the journey matters as much as reaching the destination.

Navigating NetCore – The Past Year (Part 4)

Over the past few months, I have also started doing what I should have done a year or two ago – going out and meeting customers. If there is one learning that I have from the past couple years, it is that customer interaction should not be delegated to the sales team only. While building businesses based on breakthrough ideas, top management has to lead from the front by interacting closely with potential and existing customers.

I used to meet customers a lot when I was running IndiaWorld during 1995-1999. Later, since there were others to do that bit, I would only do it occasionally in NetCore. Now that I have resumed meeting with customers I realise that I had made an almost-fatal mistake by not going out earlier. New ideas are sold on a vision of a different way of doing things. One has to understand a customer’s problems, and package the tools that exist in the form of a solution. The actual solution doesn’t necessarily exist in a perfect, replicable way. Besides, customer feedback about what is missing and what needs to be one leads to new ideas.

Personally, going out and meeting customers has been something I have liked because it enables me to use the mix of passion, vision and on-the-spot ideation to open opportunities for us. That is what had helped us in IndiaWorld when we were a fledgling start-up. In NetCore’s early days, I forgot my past lesson.

Continued tomorrow.

Navigating NetCore – The Past Year (Part 3)

To ramp up revenues, we pushed harder on the enterprise messaging services in both mailing and mobility. There was a lot of interest for our high-volume mailing product, and made sure our sales team pushed that harder, given that we had some unique technology advantages.

On the enterprise mobility side, we created a separate team internally to focus on our top customers, thus increasing the attention and service that we gave them. In addition, a new stream in the form of database marketing was added to the mix and helped compensate for the slowness in mobile advertising.

Although we had set our hearts and minds to being a consumer-centric company in the mobility space, we recognised that it would take time to get there. Therefore we increased focus in the short-term to using our enterprise messaging and marketing services to bridge the gap. Now, with the Digital Services Operator business, we are re-focusing on the consumer mobile space, but with a different idea (consumer pays rather than being limited only to advertiser pays).

All of our efforts over the past year have paid off well, and the burn is now a small, manageable fraction of what it was a year ago. We expect to be cashflow positive soon as a company. The next step will be to make the mobility business profitable on a standalone basis.

Continued tomorrow.

Navigating NetCore – The Past Year (Part 2)

It was then that we made a decision to focus on bringing the business to cash profitability in a year or so. This meant that we would have to bring down expenses and work harder to grow the existing revenue streams faster. It would also mean eschewing newer ideas to bring a stronger focus on the things that were working. This was especially hard for me because I always like to experiment and try out new ideas. But the need of the hour then was different.To reduce expenses, we first focused on the two biggest cost heads – staff and SMS costs. We asked a few people to leave (less than 5%). We worked hard to manage our SMS costs better. And on all the other costs, we introduced tighter controls. At a company meeting, we explained our decisions to all the staff.

We also postponed a few projects to put more resources on those projects that would pay off quicker. It was a sudden change of gear, but we managed it quite well. In April this year, continuing in the same vein, we reduced salaries of top management, put the sales team on a higher variable pay, and froze salaries of everyone else for six months. All of these cost management exercises helped us fix our expenses at a figure which was 15% lower than what it was a year ago.

Continued tomorrow.