A case for WiMAX

26 04 2009

Recently I came across a good business case for WiMAX.  The survey was conducted by a market research firm ‘In-Stat’ in US, to find consumer interest in different wireless business models, for Clearwire, a US based WiMAX service provider. The business model was based on laptop data usage, and described service offerings from mobile operator, Wi-Fi service providers & WiMAX service providers. In the survey, consumers responded positively towards the business model of WiMAX as compared to that of Wi-Fi & mobile operator. The basic component of WiMAX service model was: Unlimited service at home, across home city & one third of major cities in US with downlink speed of 2Mbps & Uplink of 1Mbps.

There are two key findings of the research:

1. Consumers are interested more in coverage where they are, than coverage everywhere. This is not necessarily a key finding, but it will certainly help in understanding the key areas while planning a WiMAX services rollouts. These areas are most of the times are home metro areas and WiMAX business model described the service areas limited to home metro areas & one third metros across US.

                      The key point in mentioning the findings here is that, WiMAX certainly can’t compete with cellular technologies like 4G (LTE). It has its own limitations. But certainly WiMAX can be put up into a successful business case, if we stop comparing it with cellular technologies. WiMAX has its own purpose & areas to focus. Strictly speaking, WiMAX could provide services into “Nomadic” areas i.e. providing network in between two metros areas, than providing true mobility i.e. network in one metro or in a city. The later part could be addressed by a cellular technology.  

2. Second findings show that, more than 80% consumers said they have some interest if WiMAX provides service at home & on-the-go. Another 40% said that, they will be willing to switch their current broadband providers if they get services at home & on-the-go.

WiMAX devices will be the key aspect in success of technology. Keeping Intellectual Property costs low for devices will be the key in keeping costs of WiMAX enabled devices low. This will enable service providers to add WiMAX capabilities to the devices. When costs involved are low, it will encourage consumers to try out these devices at risk factor involved will be low. Currently a WiMAX modem without service contract costs approx 60$ in US as compared to 4G modem of 240$, without service contract. This roadmap looks similar to that a Wi-Fi roadmap. WiMAX enabled devices will come first then followed by consumer electronics. WiMAX may find place where there exists Wi-Fi today.

So when Nokia called WiMAX as “Wireless Betamax”, there is no need to be panic. One may still tend to compare WiMAX to 4G (LTE); in India where we are still awaiting for 3G, WiMAX is often considered better than 3G. We often term WiMAX as 4G technology, but when it comes to clear roadmap 3G wins the case. With 4G (LTE) in line, WiMAX really needs to address few of the concerns raised  e.g. handovers issues. But as mentioned earlier, WiMAX can still coexists with 3G, first because it is better technology for data usage as compared with  3G. Second when compared to nomadic usage i.e. usage between two metro areas, WiMAX clearly provides better option than existing 3G, which touts about true mobility i.e. mobility across metro or in the metro. 

WiMAX surely has a business case, if we are going to focus on nomadic usage. Rest is assured! 

 

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MVNO-A Challenge or Opportunity?

26 04 2009

Recently, both Nokia & Ericssion were in news on advising DoT over MVNO guidelines in India. Later both denied such thing, one thing one would hardly deny these days-Gaining importance of MVNOs. Let’s discover some aspects of MVNO business models which could be beneficial for Indian MNOs.

There are some websites discussing the fundamentals of MVNOs. If you aren’t aware of it, please go through the links http://www.telecomspace.com/latesttrends-mvno.html or if you looking for deep discussions about the topic please refer to http://www.telcordia.co.in/collateral/issues_briefs/mvno_issues-brief.pdf. Then for basic understanding you could also check WiKi at http://en.wikipedia.org/wiki/MVNO.  Here we will proceed further with the very idea of MVNO in context with Indian Telecom Market.

With around 40 Cr subscribers in belly & monthly additions of 10 million subscribers Indian telecom market is one of the fastest growing telecom market in the world. Still there are some other facts which need to be addressed before we understand the need of an MVNO in Indian Telecom Market. At the time of writing, the mobile penetration rate in India is just above 30% & there are only 6.2 million Broad-Band subscribers in India. So India comes under the category of one of the least mobile penetrated countries with good opportunity, in terms of increasing the subscriber base, expanding the coverage & along with increasing Broad Band footprint across country.

In India, with launch of franchise of its own, Virgin Mobile (The First MVNO in world launched in 1999, in UK) came close to the term of MVNO in India, but because of no clear guidelines on MVNO business model from DoT, Indian MNOs are losing revenues garnered by MVNOs with their successful business models in other advanced countries like US,UK & Australia. Currently there are 60 MVNOs operational in US, highest anywhere in the world followed by Netherlands & Germany.

What typical business model will be the most viable model from Indian Telecom Operator’s perspective is the real question, we are trying to answer. In spite of the fact that, there is tremendous potential available in market, MNOs here are reluctant in adapting & pushing the MVNO guidelines. The reason, there is no single business case worth adapting in Indian Context. What makes a real difference? According to some, Indian telecom sector is not mature enough to accommodate MVNOs in present scenario. We might have to wait 2-3 years for successful implementation of MVNO model in India. But according to others, with Indian Tier A cities reaching out to 100% mobile penetration e.g New Delhi, there is lots of room for coverage expansion & mobile penetration in rural segment which is still untapped by majority of Indian MNOs. MVNOs can do a lot in filling up this gap, if proper guidelines are given in setting up an MNVO in India.

Like Virgin Mobile, who buys bulk minutes from Tata and resell them to customers directly, we need few more successful business cases to demonstrate the case of MVNOs in India. Though, as mentioned earlier Virgin isn’t a full fledge MVNO, it has setup the case for setting up a MVNO in India successfully. From MNOs point of view, the real concern comes from revenue sharing model with MVNOs. Along with revenue sharing concerns, MNOs also have to look into expanding coverage & subscriber base continually, which need to be addressed on priority. So the real question from MNOs is straightforward,” How setting up an MVNO would really help me in expanding coverage & subscriber base continually, with maximum RoIs & proper revenue sharing model?”

Selling up Bulk Minutes could be starting point and Virgin has successfully demonstrated the same in past 2 years. Actually, if you look deep down Virgin has targeted a niche market “Youth Population” across metros, while keeping prices highly competitive. This is what a need of time! We need to target niche segments which wouldn’t be possible for an MNO to do due to heavy network infrastructure cost needed for the same. So if there is some room for MVNOs in India, we should agree upon targeting niche market from MNOs point of view which wouldn’t be possible to target otherwise.

Targeting rural subscribers is just one more aspect. Can we really setup an Rural MVNO in India, expanding coverage & adding more subscribers? It is interesting to see. Rural market is a niche segment which is yet to be tapped fully. With growing cost of infrastructure rollouts, one viable option for MNOs is to go for Infrastructure sharing. But if you look beyond, expanding the coverage & targeting rural subscribers could be possible if we allow room for setting up MVNOs. This will in-turn maximize the RoIs for MNOs. How? With virtually no need of buying radio spectrum & no telecom infra setup MVNOs can value add to rural segment on existing infrastructure. So from providing VAS to farmers about crop costs, weather, health etc you could virtually take out MNOs from picture. Yes, it is right that you can add VAS very easily these days, but still targeting a niche segment like farmers, is possible economically with MVNOs only.  This will also value add to existing portfolios of VAS of MNOs with less of burden of innovation.

Another aspect of MVNOs which one might need to take in account is introduction of Data services to urban & rural segment. Setting up infrastructure for expanding the broadband subscriber base is a challenging aspect. Many MNOs are pushing deep into BB segment with aggressive tariff plans, but still there is huge potential for competitive pricing & subscribers in BB space in India. An MVNO could really target the niche subscriber base of potential BB users, which would in turn help MNOs in expanding the BB base with less of burden in maintaining the good relations with subscribers. This responsibility would be own by an MNVO who setups its operation with enough funds to maintain a CRM center along with billing & IN support.

At the end, we are looking forward for release of guidelines of MVNOs setup in India. With sheer pace of growth of Indian Telecom sector, we can’t afford to lose the opportunity of targeting some of old pending issues like rural mobile penetration & low broadbnd usage to restrict the growth. An MVNO would really be an opportunity, if we think they can really Value Add to existing Indian Telecom Market. 

 





3G & Rural India!

20 04 2009

(This Blog was written in Aug-08 & was published in SiliconIndia Sep-08 Print Magazine.)

The other day I was wondering about few things, and one of them was communication wonder. How much world has changed? Could we really communicate in a better manner than our earlier generation? Communication Technologies revolutionized our way to communicate. Have we thought of having a mobile phone, accessing emails sitting inside a metro at a speed of 60km/hr? At least a person borne in India would hardly think of it. But again I was wondering how dose it help us? What has really changed in India?

Some years back talking to my grandpa, I noticed one thing which I felt it was very normal from my point of view. This was in 1998, some 10 years back. We recently got a cordless phone connected to land-line in our house and whenever he thought of talking to his daughters, he used to ask me to bring receiver and dial a number. After the phone was over, he used to exclaim in deep satisfaction “I never talked to my daughter sitting on bed from home, I never thought of becoming it reality someday “. It was just a magic of a wired connection of DoT, India. Though, I never understood why he used to say like that, but now I am getting a bit of his words.

Coming back to point, what future of communication promises to us? News is coming from DoT that it will start on-line auction from October this year, which will really speed up the process of 3G coming to India. In fact Indoor trial of 3G were performed by most of the operators in India. So outdoor testing of 3G will be soon underway or may be it is going on already. Everything seems to be fine and going well.

But my real concern is that, how 3G will help masses in India? What a person in rural India has to do with 3G? Mobile broadband seems to be a long and complex word for all of us. Do I really want to watch videos on mobile? What will happen if I stick to wire-line broadband whose cost is becoming cheaper day by day? At what cost 3G services will be offered? Will there be any congestion problem? And so on….

I primarily use my mobile phone for Voice and SMS. I haven’t used mobile for sending MMS, yet. I don’t use GPRS on mobile which is very slow at the time of writing. I frequently face congestion and dropped calls on mobile. I have to go out of house to receive a call and talk to my friends in Delhi. I hear lots of crosstalk on mobile many times. Oh…so many complaints about 2.5G…..what should I do? What do I expect from Indian telecom operators? High data rate of broadband to chat on mobile or seamless connectivity of mobiles across India. I feel no one can sort out this.

Every person uses mobile for different purposes in India. But in India primarily mobile carries voice traffic with lots of SMS. Revenue generated by VAS, though isn’t very high, GPRS revenues are yet to increase higher. Many of my friends use Internet at Office, cafes and at home. Wireless Internet appears to be slow for even checking mails. So have I given a choice to move to 3G?

Recently Airtel launched VAS service in AP helping farmers to know about weather, market status for crops etc. This is what I expect to see in India when 3G comes. 3G should be application oriented. It should help masses to solve their daily problems. If it promises to value add to 2.5G, it must value add to our life in the manner which was long awaited.

What a fruit vendor or roadside Dhaba owner or rickshaw owner or a farmer has to do with 3G? How many people use Wireless internet? How many people are having broadband connections at home? What is penetration rate of Internet in India, even after 14 years of usage? 3G promises so many things in theory but my views say that the implementation of 3G in India may not change many things in one shot. It will take long long time to realize the dreams of a farmer to actually sit on mobile broadband connection to see weather forecast in their region. Coming generation may use it for sake of using, but real masses of India should not be ignored in a revenue generation process after implementation of 3G.

From where the operators will get revenue? What will happen to current 2G network? Will users be allowed to use cheap and cost effective services of 2G? Erecting a Cell site in village where the next cell site for connectivity is more than 30km, how 3G is going to be implemented is a real question. Rural India is different than urban India, everyone knows it. Should we use WiMAX for rural connectivity? Cheap last mile solutions at urban sites are still not in sight, forget about rural connectivity.

I often felt that communication has more to do than revenue generation in India. It should be people oriented, it should be need oriented and it should be helpful for masses to great extent. Increasing ARPU is always going to be aim of a operator, but just think beyond, think of those people in rural India who still have to travel kms to make a phone call and believe me so many are there. Enriching urban market with new 3G phones should not be the only target of operator, think beyond, think masses, think applications, all in Indian perspective coz this is going to be different and this is going to be tougher than any 3G implementation in world.

 





Nokia: Reinventing Business Model

19 04 2009

Telecom is a democratic field. Unlike Software where you would have only few choices like Microsoft, Google or Oracle, telecom has always played itself as a level playing field. And that could be the one reason, Nokia the Global Conglomerate is trying to reposition itself in telecom service domain.

If you classify Telecom in layered architecture, the level zero i.e. the bottommost layer is of Telecom Equipment manufacturers where most of research & development of telecom sector takes place. Based on the products developed by these layer zero companies layer one provide services to layer two and above layers. So now it is easy to understand the Telecom Sector as a whole. Nokia, lies till date to layer zero, in developing telecom equipments which are used by telecom service providers or Telecom Operators like Airtel, Voda, Idea (in India) etc to provide different Voice & Non voice services. So in short layer zero always relieved the operators of R&D expenditure & products innovation which would otherwise make job of an Operator very tough. This made it easy for an operator to enter into service sector with complete reliance on vendors like Nokia or Ericsson.

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Now coming back to Nokia, come 2008 where world’s number one handset manufacturer is finding it tough to rely completely on sells of handsets. Reason? Nokia Annual report-08.  In 2008 alone 1.2 billion handsets were sold, but the rise in sales is lowest to 6%.  And for Nokia, the market share shrank to 37.7% in last quarter. Revenues from devices dropped almost 7% to 35 billion euros, still accounting for 70% of Nokia’s revenues, operating profit margin fell to 16.58% from 20.12 % in 2007. Nokia & its Symbian OS are hurting most in high end mobile segment where companies like RIM (Blackberry) & Apple are eating up market share very fast. Nokia could leverage the loss partially in India, but rise of Samsung as No.2 handset sellers in India is real concern for company. So it short company decided to turn around its business model & enter into service provider segment.

 

 

Telecom services can be classified into two broad categories namely Voice & Non-Voice. In India Voice service are still accounting for 90% revenues for telecom operator, non voice services are catching fast like SMS, Ring Back Tones, Data(Internet) etc.  Broadly speaking if we are talking about next big thing in Telecom Revenue market then these services, also called as Value Added Services (VAS) will be playing major role. Broadly we can classify them into six major services namely Music, Location Based Services, Mobile Internet, Mobile TV, Information service (railways, bollywood) & Mobile Agriculture Service (Mobile Farmer). 

Nokia has recently conducted a pilot service program in District of Pune, Maharashtra under brand name of “Mera Nokia” (Maza Nokia in Marathi). The aim was clear, tap into Mobile Farmer services. Mera Nokia is actually a NLT i.e. Nokia Life Tool application coded into 2300 and 2323 handsets being used in pilot. Farmers & Villagers pay Rs 2 per day every 10 days, for the latest on crop pricing, weather, farming tips etc. This relived the farmer from hassles of making phone calls for all these information saving lots of time & money. Rs 2 is a decent deal, as far as farmers are happy with quality & validity of information provided. Nokia is also planning to take Pune Pilot program to other countries in Africa & Asia where there is larger scope of these kinds of services. NLT will certainly going to be global services in coming days with number of pilots in India, Asia & Africa.

So what about Urban Customer services? Broadly when we are speaking about services, besides Type of services other entity Type of market plays major role while taking into account telecom service domain. There are two diverse market exists in India, rural & urban and need of consumers vary widely in these two segments. In Rural, where we could only have services related to daily work of people, in Urban we could have leisure of providing other services where consumers are willing to pay for it.

For Urban Subscribers, Nokia offers N-Gage gaming platform which has seen start & stop ever since its launch. Though Gaming & Navigation services will differentiate Nokia from other service providers in high end segment, in India there is need to be created for these services. And in the current scenario both VASs are yet to kick of revenue generation in India, as a payment gateway issue is yet to be worked out.

So at bottom of Nokia’s services lies NLT i.e. Nokia Life Tool targeting Rural segment, while Gaming & Navigation is targeting high end customers. However, the big chunk of revenues for Nokia will come from middle of the market with its “Xpressmusic” range of devices, which will come with service title “Come With Music (CWM)”. Here consumers will be able to download unlimited amount of legal music directly from their devices. Cost of music is already bundled with cost of handset, so consumers needn’t worry about music charges. These Music services will be launched by 2010 in India; there is lots of scope available for such services in Tier 1 & 2 cities where youth population is relatively large who could be easily targeted.

So in coming months of year 2009, we might get the taste of Nokia’s Global Service Brand ‘Ovi’ (Finnish ‘Door’). At Nokia, the current business model of Product development will soon be getting transformed into Product Plus Service model, and yes in India where services are playing major role in transforming lives of common man, Nokia will be front runner in making it happen. Telecom in India is metamorphosing itself from basic telephony provider to Value Added Provider helping masses to solve their local issues. And the reinvention of existing business model by Nokia to enter into service domain is surely a positive step in the direction.