ABCDJ – what now

Indian-Mobile-Value-Added-ServicesIn India, the Telecom Value-Added-Services (VAS) was referred to as the business of ABCDJ – Astro, Bollywood, Cricket, Devotion and Jokes. This was the volume and revenue driver for almost all mobile operators beyond the voice and text revenues and it sure was a significant one (if we include the ringtones and call-back tunes within Bollywood or Devotion category).

With the TRAI’s new SMS guidelines, the VAS players cannot send SMS based content to users who are on NDNC. There are talks of partial NDNCs but the fact remains that this business has been hit in a big way. The VAS players had been using SMS both as a channel for marketing and for delivering content too. The ones who have been hit the worst are the ones where the content is the text.

So what now? I think one of these may happen

  1. Telcos/VAS players will build a case & convince TRAI. Given the fact that Telco’s almost enjoyed a significant portion of the VAS revenues, this is surely already happening. The VAS players would need to show that the content is being delivered only to subscribed customers and the customers have an easy way to opt out it. (Airtel had started a on/off service for all products, now all might have to adopt it). There would surely be a lot of genuine customers who need a regular dose of ABCDJ delivered on their handset.What the VAS players might not get, is the use of SMS as an advertising channel to sell their services. If this happens, the cost of customer acquisition will go up, and hence the profitability metrics would be negatively impacted.
  2. Non-SMS channels for delivery. SMS was the ideal channel for content delivery as it allowed the VAS player to just focus on acquisition and content. Delivery was a no-brainer. There was no classification needed basis handset type etc to see if the content was delivered or not. With SMS gone, the players would want to explore GPRS based rich media delivery of content. Here the customer’s handset type will decide whether the specific user should be targeted with this content or not. Maybe now Telco’s will start focusing on selling smart phones either bundled or as part of a special deal. Any smart phone sold by Vodafone, gives them a customer to whom rich-media VAS can be sold. Maybe now the likes of CellTick will have a second lease of life in the Indian market.
  3. More active role by Telco in selling VAS. Till now, the role played by Telco in selling VAS content was restricted to sharing data with the players, and opening up a pipe for them to deliver. Now the Telco will remain the most important touch-point, and if they want the VAS revenues to grow, they would need to “sell” it now. Telcos might invest in a VAS emarketplace of sorts so that pulling the content is much easier.

Time will tell, what finally happens, but my guess is, that it surely is a critical discussion point at most Telco board rooms.

The data-wars have begun

While the whole country was watching the 3G license bidding rounds, Aircel was probably working towards its first data-centric product- Peek. Launched with a lot of noise, Peek is an entry level handset (available for Rs 3999/-) that promises BlackBerry kind of experience- with Push Mail, multiple email id configuration, alert for new messages, scroller for navigation – it is definitely a BlackBerry insipred device.

Its not very often in India, that the operator takes the handset/gadget route to capture the market. Apart from bundling Nokia phones with connections, the only other device related initiative was data-cards. Peek is probably the first step of its kind & it would be interesting to find out, if the device is being given as a white label to the operator or has Aircel actually invested in this product’s design & development.

BlackBerry has gradually gained a lot of mind share even in the non-corporate segment, thanks to its fast working Facebook & Orkut apps. Peek campaigns, in contrast fail to highlight the social connectivity one can experience on this handset & this might be one single reason they would fail to impress the young, unemployed segment.

I expect Aircel to pitch Peek to corporate sector- esp industries with large sales teams – it would be a no-brainer for them to go ahead with.

Rural mobile telephony: Show me the money !

Remember the famous lines from “Jerry Maguire”-” Show me the money”

With the next battles for telecom shifting to the countryside- I guess most of the telco honcho’s are rattling along the same lines…Coz exciting as it may seem, rural cellular telephony doesnt seem “profitable” enough in all its entirety- or maybe I am missing something.

Now, from what I understand of this business- the two major costs are infrastructure (read that as towers etc)  bandwidth- both of which are semi-fixed costs. I say semi-fixed coz- these can be acquired only in batches- you cannot buy tower or bandwidth capacity for one incremental user. Even if the government subsidises the bandwidth in thr rural circles, the tower cost is not expected to come down.

Basic economic principles say that one should aim for demand maximisation in such conditions to ensure maximum utilisation of the installed capacity- assuming the Variable Revenue is more than the Variable Cost. Now given the population density in most of rural India, I can safely assume that there will never be (atleast in the next 5-7 years) enough # of concurrent calls to utilise the tower amp; bandwidth 100%. This is coz most villages do not have enough households (or househlds that can afford a cellphone connection).

Most rural users would not also relate to the “value-added-services” which currently account for a healthy 40% of revenues (in urban circles) and have been the key reason for rising ARPU in a market with reducing call-rates. The uneducated cell user will not really use the SMS/MMS functionality- which is 60% of the VAS revenues. They would infact need voice-activated services where content is also delivered as voice, unless the cell co’s decide to make the rural youth addicted to porn on the handset 🙂

Rural telephony

Add to this the govt’s keen involvement in tarriffs in this sector and one can safely assume that the cell co’s cannot experiment with higher tariffs in the rural circles. So how would these cellular operators make money in the rural circles?

There have been talks about shared infrastructure but even then the shared entity would not break even on its tower cost.I read somewhere that the govt. had experimented with giving a cell connection to the local postman in the villages- to be used by the village residents – something like a truly mobile STD booth. There were clear commissions demarcated for the telco amp; the postman- BUT the service never took off too well. So why are most telco biggies so excited about the rural circle. Well, to be honest- am not sure, but had I been a decision maker at Vodafone, I would have looked at it thus:- Most co’s want to get access to bandwidth at low rates- under the disguise of rural telephony. I would want to hoard on to this bandwidth for future or for roll-out in non-rural areas (see below) – The roll-out would be viable only in the villages of Punjab, Haryana,UP (W) etc ; not really the poorer states of the country.

– The villages that will see the roll-out (in other states) will be the ones close to some decent sized town amp; not the really interior villages. This is coz- in these villages one can expect substantial migratory population with enough disposable income. It could also lead to shared infrastructure between the town amp; the village at a much lower average cost (given that the bandwidth was acquired at the rural circle rate).

– The next lot of villages would be the ones closer to a busy highway or railway line- coz then I could provide roaming connectivity to my existing users and also look at some local customers in the circle.

So there’s some logic in getting to the village first amp; having that critical bandwidth( the only supply-constrained resource in this industry) and wait for the demand to pick up. But what beats me is why is the govt so keen on getting connectivity to the villages?I have been to many a villages during my road-trips and I can confidently say that this will only lead to an additional expense item for the rural households- something which is best avoided. What our villages need are low-cost, efficient and maybe shared resources of more basic kinds- irrigation, sanitation, healthcare,education,microfinance.