Strategic Thought Transformation - The IIPM Think Tank
Strategic Thought Transformation - The IIPM Think Tank
Strategic Thought Transformation - The IIPM Think Tank
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S T R A T E G I C I N S I G H T<br />
revenue, but it is expected to grow rapidly,<br />
at 30-40 percent annually. <strong>The</strong> challenge is<br />
to convert the simple SMS service to more<br />
sophisticated VAS services.<br />
In India as in many other nations, voice<br />
still generates almost 90 percent of revenue,<br />
while value-added services (VAS)<br />
do not yet add significantly to the balance<br />
sheet. Market players must find ways to<br />
offer a wider range of value-added services,<br />
starting with cricket-related content,<br />
latest news, Bollywood soundtracks, and<br />
video clips. “<strong>The</strong> mobile media is probably<br />
the biggest media opportunity of this<br />
century,” thinks Arun Gupta, CEO of Mauj<br />
Telecom.<br />
Last April, the Confederation of Indian<br />
Industry (CII) formed a Mobile Value Added<br />
Services (VAS) task force bringing together<br />
not just content providers and media<br />
companies, but network operators, handset<br />
manufacturers, and technology providers.<br />
Chaired by Vishal Gondal, CEO of Indiagames,<br />
the Mobile VAS group comprises a<br />
slate of industry leaders and foreign multinationals.<br />
In the future, he believes, this<br />
emerging mobile value chain community<br />
“will transform consumption patterns of<br />
media and entertainment.”<br />
<strong>The</strong> appetite for mobile entertainment<br />
is driven by the youth demographics (15-30<br />
years). “Worldwide this age group contributes<br />
75 percent of the mobile downloads<br />
and India is set to play a major force in<br />
this segment,” believes<br />
Bobby Bedi, Chairman<br />
of the CII National Entertainment<br />
Committee.<br />
One of the most<br />
critical challenges is the<br />
revenue-sharing model<br />
between the operators<br />
and content providers.<br />
Currently, the operators<br />
get 50 percent, the VAS<br />
vendors 25 percent,<br />
and content providers<br />
around 12-25 percent (maximum 35<br />
percent) of the revenue realization. New<br />
models must provide adequate incentives<br />
to content providers – as exemplified by<br />
successful service innovators, such as NTT<br />
DoCoMo in Japan, and emerging leaders,<br />
such as China Mobile (Figure 7).<br />
India is well-positioned to launch such<br />
an effort - but it is an immense task.<br />
3G & Spectrum Issues in India<br />
Today, the industry is characterized by the<br />
rapid decline of mobile tariffs, price erosion<br />
in handsets, and affordable services. At<br />
the same time, operators and vendors are<br />
transitioning to 3G networks, while struggling<br />
with a growing range of stationary<br />
broadband options (Wi-FI, VoIP), some of<br />
which are expected to pose substitution<br />
threats (WiMAX). <strong>The</strong>se new networks and<br />
options are critical to operators and content<br />
providers because they enable more<br />
for less, i.e., greater and more diversified<br />
services for lower cost.<br />
Since 2001, worldwide mobile markets<br />
have witnessed early transition to multimedia<br />
cellular (3G, UMTS). Today, there are<br />
several international 3G standards. In the<br />
US, Qualcomm has pioneered CDMA. In<br />
Europe, a group of companies led by Nokia<br />
promote WCDMA. More recently, China<br />
has been pushing its TD-SCDMA. At the<br />
end of 2005, more than half of the 50 million<br />
3G users were still in Japan and more<br />
than 40 percent were in Western Europe.<br />
<strong>The</strong> 3G penetration was barely 2.4 percent<br />
worldwide. <strong>The</strong> worldwide 3G subscriber<br />
base is expected to grow from 29.1 million<br />
in 2004 to 540 million in 2010.<br />
In high-income OECD economies, the<br />
benefits of 3G have been touted largely on<br />
the basis of advanced services. In China<br />
and India, the emphasis is heavily on cost<br />
advantages. Expected to be introduced in<br />
2006, 3G has 4-5 times higher voice capacity<br />
than the current 2G services. 3G will<br />
also enhance India’s competitiveness in<br />
business process outsourcing (BPO) – via<br />
the expansion of broadband and IT.<br />
In spring, the Department of Telecommunications<br />
(DoT) in India released a set<br />
of new guidelines that increased the limit<br />
of spectrum each GSM and CDMA operator<br />
can claim, based on their subscriber base.<br />
<strong>The</strong> new approaches have been welcome,<br />
but also criticized for a piecemeal approach<br />
to such a vital issue as spectrum. As noted<br />
by Sridhar T. Pai, head of tonse telecom,<br />
“<strong>The</strong> impending spectral shortage has been<br />
a ticking explosive in the Indian telecom<br />
70<br />
STRATEGIC INNOVATORS<br />
An <strong>IIPM</strong> Intelligence Unit Publication