How telecom can enrich billion lives in next few years?

How telecom can enrich billion lives in next few years?

v  Bridging the digital connectivity gap

·         Overall telecom penetration gap – VLR (Active mobile customers)- 707.3m; If we exclude multiple connections[1] and ~325m population below age of 15[2], somewhere about 375m Indians do not have an active telecom connection yet.

·         Rural telecom penetration gap – Almost 500m rural population does not own a phone

·         The rural mobile subscriber base is anticipated to grow at a compound annual growth rate of 12% between 2012 and 2016, at nearly twice the expected growth rate of the saturated urban market. It is likely that 62% of the new mobile subscribers added in the next five years will be from the rural market.^[3] The National Telecom Policy (NTP) 2012 also envisages to increase rural teledensity from the current level of around 39 to 70 by the year 2017 and 100 by the year 2020.[4]

·         Internet access gap is likely to be bridged in next few years by mobile broadband. 3G subscribers are expected to reach 142 million by 2015, accounting for 12% of the total wireless subscriber base. Further, 3G subscribers are expected to be more than 300 million by 2020, accounting for 20% of the total wireless subscriber base.[5]

v  Financial Inclusion through Mobile Platform   

·         Primary attribute of inclusive growth is financial inclusion which requires  greater access to capital.

·         Out of approx 1200 million of Indian population, nearly 70 percent lives in rural locations and over 90 million rural households are on farming.

·         Approximately 27 percent are indebted to formal sources and 13 percent are availing loans from the banks in the annual income bracket of INR 50,000 or less.

·         Millions of people in rural India have little or no access to credit, even from non-institutional sources. Approximately 50 million farmer households in India have not taken any bank credit so far

·          Rural banking does not appear to be a financially viable activity for banks either.

·         Banks have ~7.4 lac point of sales, ~ 1 lac ATMs, ~94000 branches of scheduled commercial banks[6] , 18.3m credit cards and 302m debit cards[7]. Whereas Telecom Service Providers have ~150 Lac point of sales and cover 80% of Indian geography.

·         Mobile platform by creating a branchless banking system for the communities can be a  potential tool for financial inclusion. 

·          Low tariffs and low cost of handset provide a clear value proposition for driving financial inclusion through mobile platforms.

v  Efficient delivery of public services

·         By virtue of their ubiquitous nature, mobiles enable anytime, anywhere access to and delivery of services, bridging the last mile gap without huge upfront investments, even from rural and remote areas of the country, where computer and internet penetration is still low.

·         Department of IT  finalised the Mobile Governance Policy Framework in January 2012

·         The Framework  addresses  many essential issues that can help efficient delivery of public service through mobile

o    making government websites mobile-compliant,

o   developing mobile applications  in open standards to become interoperable across various operating systems and devices,

o   use of uniform/single pre-designed numbers in the form long/short codes for mobile services,

o   creation of Mobile Service Delivery Gateway (MSDG) as the core integrating infrastructure for multi-channel delivery

·          Department of Information Technology (DIT), Government of India, has created National e Governance Division (NeGD) as an autonomous business division within Media Lab Asia, under the Ministry of Communications and Information Technology, Government of India, for taking up the tasks being carried out by the Programme Management Unit National e-Governance Plan (PMU-NeGP) at DIT. NeGD through Centre for Development of Advanced Computing (C-DAC), has been developing the modularly-scalable Mobile Service Delivery Platform and Gateway (MSDP/ MSDG)

·         Strengthening this framework and bringing more and more government schemes and services under it in next few years can help to bring in inclusive growth

v  Effective transfer of benefits under govt. schemes

·         The service, based on mobile phones and biometric authentication, can form the core micro-payment platform for the transfer of benefits under various government schemes

v  Creating more jobs

·         Research conducted by ITU and several other entities have shown direct correlation of increased telecom penetration and broadband access to economic development

·         While the telecom industry in the rest of the world obtains 35-50% revenues from non-voice services, India derives only ~15% of sales from non-voice/ data services. Projections by UBS for major telecom players in India indicate that the non-voice revenues are going to be ~30% of total revenues for these players by 2020 With digitization of cable TV services, convergence encompassing TV, broadband and Telecom is possible. All this will shift the focus towards multi lingual content creation and VAS innovation.

·         More jobs expected in telecom related equipment and handset manufacturing, network expansions etc

What should be the policy focus?

·         Further improve percolation of internet/broadband

·         Improve impediments(like Right of Way and tower site clearances) for creating physical infrastructure

·         Further enhancement of network capabilities (esp. Optical fiber network) in rural areas

·         Improve resilience/robustness of  mobile infrastructure esp. for  remote areas

·         Bring down cost of entry level handsets to below Rs 500 & smart phones and tablets to below Rs 2500; Make available multi-lingual handsets

·         Foster innovation in local/rural content and VAS with a focus on regional languages

·         Promote R&D and indigenous manufacturing of telecom and related equipments

·         Complete integration of mobile delivery infrastructure with the core e-Government backbone infrastructure. 

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[1] GSMA report says on average every mobile users in India has 2.2 SIM, compared to worldwide average SIM per person of 1.85;  If we take world average of 1.85 it means of 921m subscriptions in India, the unique subscribers are about 497.8m

[2] http://www.nationmaster.com/country/in/Age_distribution

[3] Source – Evalueserve research estimates  www.evalueserve.com  

[4] http://www.dot.gov.in/ntp/NTP-06.06.2012-final.pdf

[5] Enabling the Next Wave of Growth in India : Ernst &Young  and FICCI

[6] excludes rural post offices -1.15 lac , co-operative banks, agricultural credit societies, self help groups etc

[7] http://www.rbi.org.in/scripts/ATMView.aspx

Interesting co-opetition between Apple and Samsung

Samsung and Apple have been vehemently fighting each other over smartphone patents and the market share in various countries, but very few of us know that the two companies remain close collaborators on manufacturing Apple's iPhone. Samsung has a contract for supplying the application processors used in Apple's iPhone!!!! Interesting example of co-opetition. 

However as per market news, Samsung may lose its supply contract for the application processors used in Apple's iPhone for the coming year. Apple is now expected to award the contract to TSMC to manufacture all the application processors (APs) used in the 2014 model of its iPhone. Let's wait for the news to be confirmed officially

Is this the beginning of the end of Google's monopoly as a search engine?

Well this is something which we all go through each day - unconsciously. Have you come across someone who uses internet but has not used Google. For the netizens Google search engine is same as what a dictionary is to a school-going. Just imagine what would happen if you find that your dictionary does not give you the entire meaning or explanation of the words but rather an explanation that suits the publisher's commercial interest. Well something similar is the contention of European Commission(EC) against Google search. 

As per one of the analysis firm ComScore, Google search has over 80% market share in European Union(EU). The EC has been investigating Google since 2010 on suspicions of uncompetitive behaviour in the search market. In March this year, the EC informed Google of four areas where it thought the search giant may be abusing its dominant position. To address these concerns, Google has offered this month a proposal to EC. Some of the salient points of the same are -

a) Label promoted links to Google's own services so that users can distinguish them from other web search results and clearly separate these promoted links by graphical features (such as a frame);

(b) Display links to three rival specialised search services close to Google's own services, in a place that is clearly visible to users. 

(c) Google will offer all websites the option to opt-out from the use of their content in Google's specialised search services, while ensuring that any opt-out does not affect their rankings in Google's general web search results. 

(d) Google will offer all sites that focus on product search or local search the option to mark certain categories of information in such a way that such information is not indexed or used by Google. 

(e) The newspaper publishers will receive a way to control on a web page, per web page basis the display of their content in Google News. 

(f) Google agreed to no longer make any agreements with publishers conditional on using online search advertisements exclusively from Google, nor impose obligations preventing advertisers from managing campaigns across competing advertising platforms. 

The commitments made by Google to EC would cover the European Economic Area for five years. An independent Monitoring Trustee would advise the Commission in overseeing the proper implementation of the commitments. 

Last week, The European Commission has published the above proposal received from Google asking for comments from the market before it decides whether to agree to a settlement with Google and make the proposed changes binding on the company. 

Earlier in Feb 2013, a group of 11 European and US online businesses, as well as three German online associations, have written an open letter to European Commission competition commissioner to urge the EC to end its settlement negotiations with Google over search rankings and issue a Statement of Objections instead. The companies who signed the letter were Expedia, TripAdvisor, Foundem, Streetmap EU, Twenga, Visual Meta, Hot Maps and Euro-Cities.. They express their increasing concern that "effective and future-proof remedies might not emerge through settlement. They claim that Google systematically promotes its own services and demotes or excludes those of its competitors. 

It would be interesting to see what happens over the period of time. After the EC's decision it is obvious that other countries will follow suit. It seems the Competition Commission of India is also looking into the issue. A precedence set in Europe would help others to ink similar agreements elsewhere. 

Google has taken a time lead which is very difficult for other search engines to bridge. But such crack downs on anti-competitive behavior will help in bridging the gap, severely denting the monopoly that the Google enjoys in search engine space. It's too early to predict a trend reversal, but the Google era might have started its journey towards descend.

Indian mobile market to grow 11 percent in numbers and 8 percent in revenues in 2013

The analyst firm, Gartner, has published its new report on the Indian mobile services market. The highlights of the report are –

·     Indian mobile service market is expected to reach Rs.1.2 trillion (US$22.8 billion) in 2013, up 8 percent from 2012.

·         The mobile connections in India will grow to 770 million in 2013, an 11 percent increase from 712 million connections in 2012.

·         The mobile market in India will continue to face challenges if average revenue per unit (ARPU) does not grow significantly. India will account for 12 percent worldwide mobile connections, but just 2 percent of worldwide mobile services revenue (in constant USD) in 2013.

·    Two major challenges that India Telcos will face in near future - growing their profit margin in the face of intense competition and successfully competing with over the top service providers, such as Facebook and WhatsApp.

·      With the increased use of voice over IP (VoIP) and the probable termination of national roaming charges, mobile broadband is the area of opportunity for operators. Smaller mobile broadband plans using a sachet-style usage pattern appeal to Indian consumers.

·         Further rural expansion of mobile services will come at a cost.

·  In India, innovation in utility apps that help bring efficiencies in a consumer's life will bring in sustained revenue and will be relatively more difficult to replicate by new entrants.

·       While social and video apps are doing extremely well in India, it is time to look beyond these and deliver apps that can have a sustained business model. Operators need to insert themselves into the value chain of these new apps and services.

Design Elements of institutional framework for Spectrum trading

What is Spectrum Trading?

ITU study material on radio frequency management[[1]] explains spectrum trading as-

“In the traditional administrative approach to assignment and authorization system, spectrum is first allocated specified uses and then assigned to particular firms or public organisations that carry out the authorized use according to specific obligations as are laid down in a licence or permit. Secondary trading of spectrum, or simply ‘Spectrum Trading,’ permits the purchaser to change the use to which the spectrum was initially put while maintaining the right to use.”

Spectrum trading allows parties to transfer their spectrum rights and obligations to another party, in return for a financial or market benefit.  It allows the present user to decide when and to whom the spectrum authorization will be transferred and what sum it will receive in return.  The market, not the regulator, determines the value.  Further, a consultancy report commissioned by the European Commission, the consulting firm Analysys was cited whereby the following methods for transferring rights of use were identified -

• Sale – Ownership of the usage right is transferred to another party.

• Buy back – A usage right is sold to another party with an agreement that the seller will buy back the usage right at a fixed point in the future.

• Leasing – The usage right is transferred to another party for a defined period of time but ownership remains with the original rights holder

• Mortgage – The usage right is used as collateral for a loan, analogous to taking out a mortgage on an apartment  or a house.

Spectrum trading covers a range of possibilities, from straightforward change of ownership of an assignment with no change of use to more advanced variants in which assignments may be divided or amalgamated and use changed.[[2]]

Design Elements of institutional framework for Spectrum trading

The success of spectrum trading depends on appropriate institutional framework that precisely determines how rights of use of spectrum are transferred. In case spectrum trading is to be introduced in a country, the basic design elements that will need deliberation will be –

(a)  Definition of property rights and liability rules in terms of [[3]] :

(i)           The band which is available for use;

(ii)          The geographical area in which it can be used;

(iii)        The period for which the licence is entitled;

(iv)         The uses to which it can be put;

(v)          The licensee’s degree of protection from other users;

(vi)         The licensee’s obligation not to interfere with other spectrum user’s rights.

(b)  Flexibility or otherwise with Licensees to determine the services they want to provide with their spectrum, using the technology they deem to be the most efficient.

(c)  Transferability of property rights after trade - sale or lease, in whole or in part.

(d)  Terms and conditions of compulsory purchase backs (with compensation) if required by government under some extreme circumstances.

(e)  Need for defining or otherwise of the emission levels, interference limits

(f)   Arbitration mechanisms in case of disputes.

(g)  Mechanism of putting in place a public register [[4]] to record changes in ownership and to ensure transparency for private users, effectively displaying information on opportunities and easing entry into unoccupied bands. [[5]]

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[1] http://www.ictregulationtoolkit.org/en/PracticeNote.3076.html; The ICT Regulation Toolkit is a joint production of infoDev and the International Telecommunication Union.

[2] Messolonghi, September 2002, REFARMING AND SECONDARY TRADING IN A CHANGING RADIOCOMMUNICATIONS WORLD, Electronic Communications Committee (ECC) within the European Conference of Postal and Telecommunications Administrations (CEPT)

[3] http://www.ictregulationtoolkit.org/en/Section.1704.html

[4] For example the Australian Communications Authority (ACA) maintains searchable register of licences to facilitate trading. - www.aca.gov.au

[5] The ability of regulators and licensees to keep track of current licences is an important component of market-based systems and can be facilitated by a publicly available database. Knowledge of the location of existing Tx’s and Rx’s (where feasible) will allow potential purchasers of rights to accurately model the existing interference environment they are seeking to enter and to enable them to properly assess the rights they seek to acquire. The database :

• should enable regulators if called upon to adjudicate spectrum disputes and to enable them to track and assess the usage of spectrum in differing bands;
• Should include additional tools to analyze, data on spectrum historical occupancy/usage and to interpret alternative propagation models. 

Verizon to buy spectrum leases from Clearwire as US telco's struggle to acquire airwaves rights

As per a latest news report in Wall street journal, Verizon Wireless has offered to pay as much a $1.5 billion to buy spectrum leases from Clearwire Corp. That’s about 8000 Crores in Indian Rupees. However, Verizon Wireless hasn't made an offer for spectrum that Clearwire owns. Clearwire owns some spectrum but it leases other spectrum from third parties so it can offer a nationwide network. Any bid for Clearwire spectrum could face hurdles if Sprint doesn't approve. Sprint has a number of contractual rights that pose steep obstacles for any outsider trying to do a deal.

The entire news is contrary to earlier reports according to which Clearwire had agreed to sell itself to part-owner Sprint Nextel Corp.  and Sprint agreed to sell a controlling stake in itself to Japan's Softbank Corp.

Strangely Sprint has always been looked upon as a company who would be interested in Clearwire’s spectrum. As of 2010, Clearwire was  licensed 133 MHz of spectrum, and Sprint had 51 MHz. Their combined 184 MHz represented more twice the holdings of Verizon (83 MHz) and AT&T (77 MHz), and nearly four times T-Mobile's haul (48 MHz). However, Verizon has been quietly amassing spectrum since then. Last year, the company paid $3.9 billion to acquire spectrum licenses from a group of cable companies including Comcast Corp and Time Warner Cable Inc. An access to Clearwire’s spectrum would have given Spirint an ability to compete with rivals like AT&T  and Verizon.

Clearwire's spectrum is in the 2.5 GHz (2,500 MHz) range, a band where signals don't easily penetrate walls and weaken significantly over long distances, requiring way more cell towers to transmit signal as lower-band airwaves. Verizon's spectrum in the 700 MHz band, acquired at more than $9 billion because it travels over long distances and easily passes through buildings for indoor coverage. On the positive side, the 2.5 GHz range is potentially perfect for small cells, since the higher bands can carry more data over a MHz of spectrum than lower bands, and they have less potential for interference. Some of the bigger markets like China, India and Japan are planning LTE roll outs in 2.5 GHz band. Thus the Verizon offer seems to throw open speculations that Verizon might complement it’s network in 700 MHz with small cells operating in 2.5 GHz. The U.S. telcos appear to be  evolving toward a model in which they will use the lower bands for voice and the higher bands for data transmission including video, streaming tv and cable programming.

Tablet market gearing up; Android gaining market share

The PC manufacturers are for some tough time ahead. In fact, even if your main business is centered around making Laptops, be ready to face some rough weathers going ahead. Why? Here is the reason - according to latest report from market intelligence firm ABI Research named Media Tablets, Ultrabooks and eReaders Research Service, in 2013 approximately 150 million tablets (up 38% year-over-year) are forecasted to ship globally worth an estimated $64 billion (up 28% from 2012) in potential end-user revenues. This is mainly because of  convenience and mobility benefits afforded by tablet 

As far as the market share of operating systems is concern, the tide is slowly turning in favor of Android. About 60% of last year's tabletshipments used Apple's iOS operating system software while 37% were based on Google's Android OS (or development forks of Android, such as found on Amazon's Kindle Fire slates). The remaining 3% OS share consisted of Windows (Windows 7, 8, or RT), BlackBerry Tablet OS, and unidentified OS implementations.

Growing appetite for mobile data and suggested approach for India

Growing appetite for mobile data globally

Juniper has published it’s latest report on Mobile data traffic forecasts. As per them, the total mobile data traffic will exceed 90,000 Petabytes by 2017. What is more interesting is that 60% of this data will be offloaded to Wi-Fi networks and only 40% of the data generated by mobile devices will be carried through the cellular network by 2017. The report also emphasizes the roll that the small cells are going to play going forward.

Mobile data growth – Indian scenario

India today is on the verge of data revolution and in the current decade, data will transform the Indian telecom industry the way voice did in the previous decade. Indications are that data contribution from 2G will continue to rise, and 3G and LTE adaption will augment this growth. while the telecom industry in the rest of the world obtains 35-50% revenues from non-voice services, India derives only ~15% of sales from non-voice/ data services. Projections by UBS for major telecom players in India indicate that the non-voice revenues are going to be ~30% of total revenues for these players by 2020. These projections may well be surpassed if India is able to achieve a good broadband penetration backed by the recent policy pronouncement on National Broadband Plan.  As against the current broadband subscriber base of 14.68 million, the National Broadband Plan envisages provision of 160 million broadband connections (22 million DSL, 78 million cable and 60 million wireless broadband) by the year 2014. It is likely that the share of wireless broadband may be much more than the expectations as, like other countries, in India also; the data revolutions will piggy back on wireless broadband. 3G and Broadband Wireless Access (BWA) are expected to aid the growth of economy by boosting broadband growth.

Nokia Siemens Networks (NSN) M-Bit report indicates that mobile data usage in India has grown at 54% growth in 7 months and is likely to double every 12-14 months. This report can be accessed at http://www.nokiasiemensnetworks.com/sites/default/files/document/india_mobile_data_-_mbit_index.pdf . Evolution of data services in China provides some insight for the potential for the data segment growth for India. Data service revenue constitutes 30.6% of total service revenue in China as compared with 12.6% in India in FY11, giving an indication for strong data services growth trajectory in India in coming years. Credit Suisse estimates that over the next three years, data could more than double in size to a US$14 bn industry in India, contributing over half the incremental industry revenue and add 500 bp CAGR to an otherwise slowing voice industry. They estimate 3G’s contribution to mobile EBITDA to rise to 9-13% (from less than 5%) by FY3/14

Wi-Fi offload – a solution to handle growing data volumes and speeds

No doubt more and more carriers are adapting to Wi-Fi. Recently AT&T had inked a pact with Boingo - one of the leading Wi-Fi service provider having more than 600000 Wi-Fi Spots around the globe. Going forward the carrier-Wi-Fi adoption will be gather speed mainly because of two developments –

a)   NGH (Next Generation Hotspot) and Hotspot 2.0 specifications along with 5GHz enabled devices.

b)   Carrier-grade small cells along with Wi-Fi will enable high levels of capacity and along with the macro network will provide commercial and financial success to the operator.

Now what’s there for India in all this? Ironically, there are not many Wi-Fi hotspots in India currently. Given that almost one-sixth of the world's mobile subscribers are in India and that the country is already spectrum starved, in future offloading the mobile traffic on Wi-Fi is the only feasible and practical solution to cater to the growing hunger for data services.

ITU studies and other major research firms have already pointed out that the data requirements of future can never be met by increased availability of spectrum even if spectrum efficiency improve considerably. India cannot rely on vacation of frequencies by Defense ministry as the chances of this happening are remote. And even if this happens it will be a slow process. Thus demand and supply of spectrum in India will always have wider gaps than in other countries.

India specific approach – A Public Wi-Fi hotspot network

In such a scenario, it becomes important for the India to have a large number of Wi-Fi hotspots in almost all major cities and towns. There are two ways of doing this. The first way of approaching the problem is that the market is left to itself and the telecom operators or third parties like Boingo creates a Wi-Fi hotspot network. However the problem in this solutions can be  -

·         - The commercial criteria and not the country/public good at large will drive the hotspot creation

·         - All operators will target the same places for hotspot creation like Airports, bus and railway stations, big malls etc. They will end up creating duplicate infrastructure and in process may not get the return on investment. India missed the bus while the mobile towers were being erected and this resulted in sheer waste of resources by way of creating redundant infrastructure. All operators invested in mobile towers at same time and at same spots.

·         - Such approach slows down the rural penetration as all operators are busy spending their money in big cities. At least for Wi-Fi, we can eliminate this approach.

This leads us to the second and more practical approach of policy intervention to ensure that a common Wi-Fi network is created across major cities that can be shared on payment basis by all operators. This will help in savings on one hand and better ROIs on other. An added advantage can be faster rollout even in tier II and tier III cities. The Bharat Broadband Nigam Limited (BBNL) had been created by Government of India to roll out a common optical fiber network that can be shared across telecom service providers. On similar lines, BBNL can also be entrusted to create a common Wi-Fi network funded through USO. However, the entity will be able to make money once the Wi-Fi network is used by telecom operators. A Wi-Fi hotspot requires back-end connectivity, preferably on fiber so as to ensure that large numbers of users are supported by the hotspot at higher speeds. Suggested approach will ensure that BBNL will identify Point of Presence (POPs) for optical fiber as per the hotspot requirements. If implemented, such a solution can not only help in solving the spectrum crunch, but will also help Indian citizens to get higher broadband speeds at affordable prices – an objective that the NTP 2012 envisages to meet.