Digital Dividend: A solution to India’s Mobile Broadband needs

Last month Indian Telecom subscribers crossed 500 million. There are enough and more studies on the impact of telecom penetration on the economy. One study correlates 10% increase in tele-density to .6% increase in GDP. The canvas is $520 billion increase in GDP over 8 years time frame.

 The need is for a communications model that reaches out to the remotest citizen and low cost wireless solutions. The existing industry spectrums: 850MHz/ 900 MHz/1800 MHz are grossly inadequate for the traffic. The 3G option is being looked at as a solution providing greater bandwidth for voice and data traffic. Given the high 3G auction fees, the 3G option ensures service qualities at a high CAPEX and OPEX. High speed telecom networks would be the key for a long term momentum in the economy as suggested by McKinsey,2009.

1. 3G investment in India will deliver over  $70 billion economic benefit
2. India  would have gained over  $16 billion (PPP) in the last 2 years but for  delay in introduction of high speed mobile BB.
3. 10% increase in broadband penetration can deliver  up to 1.4% increase in GDP

The spectrum: How it pans out and how the digital dividend is a part of it?

Digital compression technologies and coding systems make it possible to squeeze much more information into a radio signal than in the case of analogue technology. Digital TV is many times more spectrally efficient than analogue TV, which means UHF spectrum will be freed up. Large amount of spectrum that would be freed up in case of switchover from analogue to digital terrestrial TV is known as the Digital Dividend.

Refer to the slideshare presentation for a full description on the Digital Dividend:

The analogue TV switch-off represents a “once in a generation” opportunity for a significant reallocation of spectrum. This spectrum has excellent propagation characteristics and can be used very effectively to roll out mobile broadband services in rural areas and to provide in-building coverage. It is approximately 70% cheaper to provide mobile broadband coverage in the 698-806MHz band than at 2100MHz. This means networks can be rolled out quickly and cost-effectively, bringing cheaper services to consumers.

It is approximately 70% cheaper to provide mobile broadband coverage at frequencies (approx. 800MHz) than over 2100MHz.This means networks can be rolled out quickly, cost effectively, bringing cheaper services to consumers.

As a technology the advantages of Digital Dividend over contemporary spectrum allocation are as follows:

• Better propagation characteristics.
• Ideal for providing wireless service in low population density regions, such as rural India
• Target resource for rural broadband wireless access worldwide.
• Less Infrastructure – Reduced costs
• Reduce capital expenditure, which makes deployment in rural or high-cost regions economically viable.
• An LTE network at 700 MHz would be 70% cheaper to deploy than an LTE network at 2.1 GHz  – GSMA.
• Two to three times as many less sites required for initial coverage at 700 MHz compared to 2.1 or 2.5 GHz

Spectrum: Cost versus Coverage

Spectrum Infrastructure: 700 MHz versus Others!

 

Droid Does!(iPhone doesn’t)

The iPhone was officially released in mid 2007. In two and half years, it has captured the fanfare and frenzy of the device and telecom geeks acquiring the status of an Icon and fuelling Apple’s growth story.

There have been many challengers from Samsung, HTC, Sony Ericsson, Nokia and others, but iPhone has held its ground because it combines a glitzy UI, a remarkable device and a 100 thousand strong applications store to its strength. That doesnot stop the challengers from take shots at the frailties of the iPhone.

One of the strongest challenge to iPhone yet is the upcoming Motorola Droid on the Verizon Network and backed by the new Android OS 2.0 (Eclair). That is a strong proposition and they have their sights set on iPhone if the “Droid Does” campaign is to seen. Watch the video here.

 

The latest in this round is the Droid stealth commercial which is an announcer of the launch date amidst a hyper technology scenario. Catch the video here!

What the “Droid does” to the “iPhone” will be an interesting thing to watch. Watch this space.

Read more about the Droid here! http://ronnie05.wordpress.com/2009/10/21/1141u/

 

Indian Telecom Story (Part XX): Telcos caught sleeping over data based revenues

I have been writing about the how a price war in the Indian Telecom industry would be a future in vain. I have also written about why Telcos should explore future in data and consumer centric services rather than price wars. The pay per second bloodbath was clearly inevitable. However, i cant think, why would Large Telcos in the country miss the trick. A price led strategy would never be sustainable, and yet the whole industry seems to have rushed into 1 paise per second formula. Am i missing something?

The explosion of subscribers in India has put a lot of pressure on the existing telecom infrastructure and the frequencies available. While there have been efforts like sharing of infrastructure between operators which has allowed to keep Capex under control, there are also minefields such as Mobile Number Portability which adds a lot of uncertainty relating to the subscriber adds and churn. 3G is seen as an answer to the lack of bandwidth, but the license fees demanded by the government is exorbitant and will require long periods of gestation. India has also attracted players like MTS, Telenor, Etisalat, DoCoMo adding a lot of uncertainty in the existing market conditions.

The principal source of operator revenue is voice and data. (Data services here also implies SMS and MMS services). Under the present bandwidth shortages, existing operators have only been able capitalize on the voice led growth. SMS is the only the significant other contributor to revenues in Indian telecom eco-system. The current contribution of data services to operator revenues range from 8 to 11%. This includes SMS and also includes the Tata Teleservices and Reliance CDMA connections, which are typically data heavy services. GSM’s data revenues would be much lesser than CDMA. India being a 80% GSM country, the ratio of data services to Telecom services thus lags the international numbers. World over the higher percentage of Data revenue balances the fall in ARPU.(The Data ARPUs are on the rise globally). In India, data services provide no such safety net.

 

A case in point is the US telecom market which is the world’s highest consumer of telecom based data solutions. Over the last 5 years, Data ARPU has increased 7X while the Voice ARPU has reduced by 30% in the same period. A $15 dollar ARPU loss in Voice has been compensated by a $12 increase in Data ARPU. One might argue that this be the case in US which is a 3G country. But the point made in Indian context though different in regulatory and eco-system aspects, draws from this example.

• While voice tariffs in India is the lowest, Data tariffs in India are amongst the highest in the world. Cost being an important determinant of penetration, higher data costs have acted as barriers to data spread.
• Application and Content Revenue sharing models sometimes make it difficult for higher levels of applications to be built because of cost/higher break even periods. Even if applications are made, the revenue sharing with Telcos in India, would make it difficult for the Apps provider to advertise or communicate the offering to consumers.
• There is little in terms of consumer services to High ARPU consumers. Telcos in India could perhaps learn from Indian banks a few lessons in differential treatment of HNIs.
• All this time, Telcos in India have done little to tie up with content providers such as Googles of the world. LBS, Maps, Navigation and Social Networking could have been a great apps. This is a “Blue ocean” where Telcos have not ventured yet at all.
• The CEOs of one of the biggest Telcos in India once dismissed the MVNOs as “loss making”. Perhaps it is time to re-think strategy in terms of branded and exclusive content. (Read Report)
• All this while, Nokia has been preparing its platforms to differentiate itself through services. Telcos were in a far better position to aggregate service bundles and yet they didnot. Did all of them miss the trick? Did they fall into the Operator Dumb Pipe syndrome trap!

 So, when it was sunny, all the Telcos in India did was to make good subscriber numbers in falling ARPUs. That was the low lying fruit. Nobody perhaps looked at the next levels, because they were rolling in money anyways. The bloodbath in terms of per second tariffs is now catching the Telcos. They still prefer to look at market shares rather than the EVAs and Bottom-lines.

Next story in making would be the inevitable shake out and age of acquisitions.

Please feel free to rate the post and put your comments (negative or positive as may be!)

Read the earlier posts here:

Indian Telecom Story (Part XIX): Tariff war and hyper competition

Indian Telecom Story (Part XVIII): Eroding profits for higher acquisitions

Indian Telecom Story (Part XV): Net Operating margins at risk!

Indian Telecom Story (Part XIV): Can pricing differentiate new Telco services?

 

Indian Telecom Story (Part XIX): Tariff war and Hyper competition

Mobile tariffs in India are already amongst the lowest in the world and competitive pressures continue to push them lower still. Unless the telecom players resport to separate set of tactics, this tariff war would prove damaging to the industry in the long term.

The age of Hyper Competition is rapidly dawning in the Indian Telecom sector with the advent of per seond billing plans.Tata Docomo set the Domingo toppling with the per second tariff plan. BSNL, MTS, Sistema and Aircel followed suit and TRAI was only too happy to endorse the per second tariff rates (Read More). However it is Airtel’s giving into the paradigm that will now “mainstream” the per second billing trend. In this lower-rate regime, all new entrants into the telecom space will now find it harder to attract customers and end up with lower revenues per minute.

In an earlier post, I had discussed that the per second billing could shave off as much as 15-20% of the consumer monthly bill. Hence this is an attractive proposition for the consumers. However, the question that begs to be answered is whether price is a sustainable basis for competition. Is there a possibility of differentiation through services. Is there a possibility whereby services and high ARPU consumers could be bundled? These are answers left unanswered as the Telcos in India have only focused on Voice based growth rather than having a portfolio of data or services based revenues.

Voices from the industry:

• “Bharti Airtel with 100,000 cellsites is already one of the lowest producers of mobile airtime in the world at a cost of 42 or 43 paise/minute. By engaging in predatory pricing and targeting the subscribers of other telcos, Tata Docomo is trying to get big operators to bleed by selling below cost. This is bad for the country as a whole because it will create bankruptcy in the telecom sector,”
• “Trai needs to examine if this is a sustainable tariff proposal. Consumer interest in the long term is not always served by lower tariffs. Tariffs must be cost plus. Operators cannot sell below cost,”

The interesting bit in the second statement is the candid  admission that consumer interest in the long terms is not always served by lower tariffs!

The on-going tariff war among telecom companies and the sector regulator Trai’s suggestion to move to a ‘pay-per-second’ tariff structure for all operators took a heavy toll on the stock prices of telecom companies. Analysts expect the new tariff plans are sure to dent the revenues of the telecom majors by 10-15% annually although the companies themselves maintain it would take 45-60 days to come back to the current average revenue per user (ARPU) levels. In the backdrop of the current telecom tariff war, analysts are now taking a bearish view of the stocks. Foreign broking major Morgan Stanley recently noted that RCom’s tariff could ‘‘possibly stagnate industry revenue growth for the next 12 months.” With aggressive pricing becoming the industry norm, and at the same time competition increasing ‘‘investors could start de-rating the Indian telecom sector,” it noted. They feel losses for firms could be higher and duration of competition longer since there are about 10 operators, listed and unlisted, who could start tariff war if pushed by new entrants or existing competitors.

The race to higher subscriber numbers and market share at the cost of eroding margins and diminishing profitability is a trap that the Telcos seem to have engaged themselves into in vain. If the stock indices are to be believed, investors feel that ability of the Telcos to create value even in a market as lucrative as India has diminished. 

In part XIXb, we will cover the self fulfilling doomsday prophecies of Indian Telcos, how “others” in the industry would ride the “operator dumb pipes” and how the Telcos measue up against others in emerging markets world over.

A chronological listing of earlier blogs on the same topic:

Indian Telecom Story (Part XVIII): Eroding profits for higher acquisitions

Indian Telecom Story (Part XV): Net Operating margins at risk!

Indian Telecom Story (Part XIV): Can pricing differentiate new Telco services?

 

Google Android Eclair gets Google maps navigation

I first used a navigation based software more than 2 years back. It was the voice based navigation system NAVTEQ on the Nokia E90 communicator. The maps were still evolving and the ancillary services have come a long way since.

Google today announced upgraded maps and navigation for mobile: Google Maps Navigation (Beta) for Android 2.0 devices. It features 3D views, turn-by-turn voice guidance and automatic rerouting. The enhanced Google maps features the following upgrades:

1. Google Maps Navigation, automatically updates maps and business listings from Google Maps eliminating the need to buy maps or update the software.
2. Search function is enabled on the software (Like Google on the internet)
3. Search by voice is a very potent feature which takes makes the work of typing inputs light and this is one of the biggest advantages of the Google Maps Navigation.
4. Live traffic view is another killer feature in the Google Maps Navigation.  A Traffic indicator light in the corner of the screen glows green, yellow or red, depending on the current traffic conditions along the route. For all those hassled by long traffic stoppage times, this feature is a HUGE utility.
5. Google Maps Navigation searches along the route to give ancillary points of interest e.g restaurants, gas stations etc.
6. Google Maps Navigation uses the same satellite imagery as Google Maps on the desktop….
7. …and yet can zoom into the next turn looks like. Double-tapping the map to zoom into Street View, shows the turn as one would see it, with the route overlaid.

Video Demo

 

Android OS update:Eclair (OS 2.0)

Eclair follows Donut and Cupcake as Android roles on

Google today announced the release of Android 2.0, the next iteration of Android OS. Android 2.0 is codenamed Eclair!

Android 2.0 brings new developer APIs for sync, Bluetooth and adds  multiple accounts support, a search functionality within SMS, an improved virtual keyboard and a much sought after camera menu enhancements. The camera menu now includes options like scene mode, digital zoom, color effects, white balance and macro focus. Eclair also brings with it a refreshed browser UI as well as support for HTML5. Users can now double tap the browser for zooming in.

Motorola’s Droid which is set for a November 6th release will most probably be the first device to use this OS. Catch the video demo 0f the Android 2.0 Eclair on the following link.

 

Google Audio Indexing: Empowering Media Democratization

YouTube is associated with the democratization of media. In real terms it is the Google in Web Media. However, there are times and moments when a user would like to search for a particular reference in a speech and GAUDI is Google’s search solution to enable search for words on media files. The excitement never stops at Google it seems.

Google’s mission is “to organize the world’s information and make it universally accessible and useful”. As more video content is being created everyday, Google Audio Indexing (Gaudi) is a new technology from Google that allows users to better search and watch videos from various YouTube channels. It uses speech technology to find spoken words inside videos and lets the user jump to the right portion of the video where these words are spoken. Google Audio Indexing thus makes it easier for people to find and consume spoken content from videos on the Web.

Google Audio Indexing is a showcase for speech technology. Political videos and election materials are a special case of broadcast news content, a domain that has received a lot of academic and industry attention and is known to perform well. By making the technology available to a wide audience, Google offers a useful service to the consumers of video and media feeds.

 

Google already has Google Elections Video Search gadget which is more US centric information and is very instrumental in culling information that describes the views, actions and platforms of the two presidential candidates. Both, Google Audio and Google Elections Video Search gadget use the exact same underlying technology. While, the scope of the Google Elections Video Search gadget is restricted to the US election. The aim of Google Audio Indexing on Google Labs is broader and the US election is just a first step. Thus Google Elections Video Search is an experiment platform where Google can learn what features make the best user experience for people looking for spoken content on the Web. To put it in context, Elections Video Search is a precursor to GAUDI.

Google Audio Indexing uses speech technology to transform spoken words into text and leverages the Google indexing technology to return the best results to the user. The returned videos are ranked based — among other things — on the spoken content, the metadata, the freshness. The gadget periodically crawls the YouTube political channels for new content. As soon as a new video is uploaded to YouTube, it is processed by the system and made available in the GAUDI index for people to search.

Google Audio Indexing searches only those videos uploaded on the YouTube political channels. If a video is on the YouTube political channels, it will be in the index. Candidates control the video content released to the public using Google Audio Indexing technology by controlling the content they upload to YouTube channels. That is a limited scope currently, but it wont be long before Google democratizes the use over the whole YouTube Gamut!

 

Displays of the Future: FOLED (A Photo Essay)

The future of digital screens is OLED or so it seems.

Displaysearch’s Q2,2009 reports worldwide OLED revenue has set a new record, with $192 million in revenue for Q2’09, a 22% YOY increment and a 32% QOQ increment in OLED shipments. Furthermore, Displaysearch predicts that OLED display market will grow from $.6 billion in 2008 to $6.2 billion in 2015, a 10X multiple in 7 years, at a CAGR of 33%. Mobile phone main displays will be the leading application with revenues of about $3 billion in 2016; OLED TV will be the second largest application, with revenues of about $2 billion in 2016.

The OLED growth is led by High end Mobile Phones/Smartphones, where the OLED/AMOLED screens act as a differentiator and over the course of next 4/5 years, we will also see OLED screens making an impact on Television technology and audiences as well.

However, it is not the OLEDs and AMOLEDs that we are talking about. The technology in focus is the FOLED: Flexible OLED.

Sony debuted its VAIO mini notebook concept in CES 2009 with the Flexi OLEDs. The FOLED is made up of high performance flexible bioplastic and has no restrictions on layout and size.

While there are stories and shots of Apple’s new Tablet all around, the most striking one to me was this next picture. It uses the full lenght FOLED screen that is folded in the middle to convert it into a netbook look alike. Half of the screen could be used as the monitor and the other half would be used a touch key pad.

Other concepts include Samsung’s Bendable 6.5 inch OLED screen.

Samsung had introduced the “Flapping Display” concept in FPD International 2008, which kept flapping like a piece of cloth under a fan. The specs were impressive at 0.05 mm 4″ OLED display, 480*272 pixel screen with a 100,000:1 contrast ratio and luminiscence of 200cd/sq.m.

Sony’s Play Station Portable  2 (PSP 3000) uses a Foldable OLED screen in a neat package in which the screen resides inside the console. This one designed by Tai Chiem is one radically different design on gaming consoles.

The last shots are that of Nokia 888, a concept based upon the idea where form changes in accordance to user’s requirements. Compared to the designs featured earlier, Nokia 888 is a slim rectangular design which has the advantage of being rolled up or shaped into a lot of unconventional features. The concept is exciting. Check out the accompanying video.

 

Apple and the Chinese challenge

Apple has won the world over and is arguably the best smartphone around. However, Apple’s China venture will be unique in terms of opportunities and challenges.

India and China are Apple iPhone’s last frontiers. While Apple has sizzled with its iPhone sales throughout the world, India was a wash out when Apple launched its iPhone 3G in India in 2008. Instead of the regular lines and throngs of consumers outside Apple stores, the price sensitive Indian markets found iPhone to be steeply priced and very elitist. Without the initial sales burst, Apple couldn’t back its launch in India with a marketing campaign.

After an year of the India Fiasco, iPhone readies itself for China in co-operation with the China Unicom. China Unicom has a three year contract to market the iPhone 3G and iPhone 3GS in China. The Chinese iPhone is somewhat crippled due to the absence of Wi-Fi on the phone following the Chinese government regulations (which could be a product drawback). Although BDA China, forecasts that the iPhone will take 10 to 15 percent of the Chinese smartphone markets, there are hurdles aplenty in the 700 million subscriber China market, the largest Telecom market in the world.

1. iPhone faces the biggest hurdle from the thriving Chinese grey market which churns out touch devices by the Millions.  

2. The trick will be to price it right, low enough to drive sales and high enough to maintain exclusivity.

3. Apple is also handicapped by its partnership with China Unicom, which is the 2nd largest operator. China Mobile would have been a better bet for Apple. The share of the market that Apple gets an access to through China Unicom is much smaller than China Mobile.

4. There are host of competing devices such as Lenovo,Dell, HTC, based on the Android , Palm apart from Nokia (which controls 67.3% of Chinese smartphone markets, 2008).

5. Then there is competition to China Unicom from China Mobile and China Telecom.

Inspite of the above given points, what has worked for Apple is the fact that Chinese grey markets have sold 1.5 million iPhones in the country without any marketing support purely on the buzz around the product. Many believe that the greatest challenge for Apple would be maintain the price and brand salience around the iPhone. It could be very tempting to lower the price and get numbers in the Chinese markets and yet that would dilute the brand salience and exclusivity. The ideal would be to price it at the correct stretch so that consumers associate the brand with higher status and Apple doesnot get associated with the price wars that it is highly susceptible to at lower prices.

 

Moto Droid: A lot rides on it!

There have been many contenders to iPhone’s best smartphone crown and yet none have really come close to the Apple’s prodigy (check statistic). On the other hand, Motorola has been lying dead for 3 odd years. (When was the last time, Razr was hot?). But then, all it takes is one strong offering to win back consumer confidence and cheers. (Ask Palm!). Earlier this month, Moto announced the Cliq, a social networking machine (Pic Below).And while it’s unlikely the new Moto Droid will knock the iPhone off its perch as the top consumer smartphone in the world, it could be in a position to pose the most serious challenge yet to the iPhone’s unquestioned supremacy.

  

Powered by Android and backed by Verizon, Droid has the right combination of strong hardware, Google’s brand strength and Verizon’s network that could present the iPhone with a formidable foe over the next few months.

 Here’s how the stack up: The Droid versus the iPhone.

The real test of Moto Droid will be when the rubber hits the road. It stacks up well against the iPhone! On other terms a lot of other successes including that of Android as a platform and Verizon’s flagship devie depends on the success of Droid.

We will watch the game.