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.

A peep into Apple’s future: A Photo essay

Introducing a photo essay to my blogs with this post, since pictures say it louder than words. Well, Mostly!

Apple’s sinful delights. The iMac, iPhone and iTablet are every tech geeks dream. Everyone seems to have a desire for these products. On the product side, these gadgets are an innovators delight and every consumer’s dream.

The first look of the fames iTablet: Apple’s next wonder machine!

The iTablet in its full glory. Connecting to the internet is fun more than everything else.

This then is the edge. A foldable OLED screen that adorns the Tablet. This may probably be the first sight of iTablet’s second runner. There are others who have worked with FOLED (Foldable OLED screens); Samsung and Sony to name a few, and this technology is another class altogether.

Digital Dividend: The future in Mobile Communications

The govt of India, Telecom  Regulatory Authority of India (TRAI), Cellular operators association of India (COAI), Association of Unified Services Providers of India (AUSPI), Broadband wireless consortium of India (BWCI) and may industry apex bodies are single minded persuing three point agendas in the Indian telecom ecosystem.

1. Mobile Penetration

2. Lowering the costs associated with mobility / Allowing population to go “mobile”

3. Bundling services for the masses through mobiles.

According to studies by Telecom researchers and consultants, Thrust in rural telecom sector can increase GDP by $520 billion in next 8 years. ALso, a 10% increase in broadband penetration can deliver a 1.4% growth in GDP. Currently it is the best available opportunity of bringing 70% of Indian Population who love in far scattered rural areas to the mainstream. Thus the necesssity of a communications model which will reach out to the remotest rurak citizen at lowest capital and operational costs.

As with many other countries, Spectrum limitation and exponentially growing telecom subscribers are putting a lot of pressure on the existing spectrum (900/1800 MHz). The 2.1 and 2.5/2.6 GHz spectrum will have utilities more in 3G and higher end technologies. It is here, that a parallel innovation promises a lot of help. Traditionally TV spectrums have been very wide because of the fact that most of it is analogue. With the coming of Digital age, a large amount of spectrum will be freed up in case of switch over from analogue to digital signals. 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 broadcasting is roughly six times more efficient than analogue, allowing more channels to be carried across fewer airwaves.The surplus spectrum not required for the Digital transmission is called the Digital Dividend.

1. It is approximately 70% cheaper to provide mobile broadband coverage in the 698-806MHz band than at 2100MHz.

      2.     Lower the spectrum, more the coverage per BTS, in effect reducing the number of BTSs required for an area coverage, which reduces the capex costs.

Both the reasons considered, a 700 MHz is twice the coverage of 3500 MHz at roughly 20% the cost. Indian Government willing, the Digital dividend could be the next step in connecting the masses in India and reaching out to them with information, technologies that would empower them and allow them to become “mainstream”.

Gartner:The OS markets in future

Gartner has released a 3 year projection of  0perating system market shares. A few key takes from the study are as follows:

1. 4X growth expected in high end smartphone volumes. Clearly the numbers and growth in the category will be driven by the smartphone segment.

2. Gartner predicts Android (which is currently 2% of the market) will grow to 14 percent of the global smartphone market in 2012 — beating Apple’s iPhone, Windows Mobile and RIM’s BlackBerry platforms.

3. Gartner has been very Android biased for long. The 5 reasons why Android will outrun most of its competitors provided by Gartner are as follows:

• Google backs Android, a major pipeline for its cloud services.
• Android is improving rapidly. The Cupcake 1.5 release was well-received, and Donut 1.6 has already been sent over the air to handset owners.
• Android is open, making it easier to quickly gain developers’ support.
• Android will run on phones from several manufacturers, which will help it quickly spread through the marketplace. HTC, Motorola and Samsung are already supporting handsets.
• Android combines the best of what’s out there. It’s open, but it offers iPhone-like menus and apps, with Windows Mobile-esque icons, with Palm Pre-like multitasking. There’s another arms race afoot — the battle among Android handset makers as to which company can squeeze the most out of the OS.

4. The report indicates enough head room for all players to grow in the market which is quadrapuling in the next 3 years.

5. Interestingly, Gartner seems to indicate that Blackberry which is currently the best seller in US and North America will loose ground to the edgier iPhone and Android.

6. It also looks like Gartner has a lot of faith on Nokia and Symbian, which has been loosing ground lately to the others. 39% looks a tad high and i would epect Symbian to lead the market but by a more slender margin. I would give Symbian a market share close to 25%. This is in light of the fact that Nokia has not been able to keep pace with the iPhone/Android/Palm OS.

7. WinMo’s future hangs by WinMo 7.0 releasing next year 4Q. Microoft has to deliver on that else it would have to kiss smartphone OSs a bye for times to come.

8. Surprisingly, even if Linux and Open Source is the toast of Internet and Mobile developement, Gartner refuses to acknowledge the fact and accords a paltry 5.4% to Linux based systems. What with Moblin, Maemo and the coming of age of Intel in the smartphone space?

Whats your take on the situation? Leave your comments on how you see the smartphone OS wars shaping up!