Blog Post

@ Digital Summit: Don't Call Us M-VAS, We're Customers; Limiting Pipes, Toll Roads; MVNOs

A riveting discussion between Atanu Mandal, President of ACL Wireless, Viren Popli, VP and Head (Mobile Entertainment) of STAR India and Milind Pathak, Co-CEO and Country Manager for Buongiorno, was among the highlights of the IAMAI’s India Digital Summit. Popli, in a belligerent mood, played the devil’s advocate: “I don’t see anyone spending billions of dollars to be a Value Add. Docomo’s imode is not a value add, it’s a service. We need to redefine who we are and what we’re doing. Stop referring to us as MVAS: We are content, information and services over mobile and other delivery platform. Secondly, there is no differentiation between Internet on a PC and Internet over the mobile phone; it’s just a small laptop. Challenge is of the pipe – we have the ability to deliver much more, but we don’t have the adequate distribution. We have 350 channels on TV, but not the pipe to deliver it. On the Internet, we can’t watch YouTube seamlessly. On mobile, on some of my shows, the capacity doesn’t exist to deal with the avalanche of response sometimes. We’re all working on business models that are limited by the pipes available to us. We accept it because we feel like value added services. But we’re all customers – I’ll say this again – we’re customers of the distribution medium. We pay them money to deliver our product, even if it is as revenue share.”

Mandal countered, saying that the mobile world is significantly different from the Internet world; it’s off-deck. On-deck services like the ringback tones don’t work in the Internet world, and it constitutes around 50 percent of total VAS revenue. Popli responded by saying that the whole deck concept is a western concept, where the operator locked up the service to the device — “In India, I choose my own device. It’s a forced-into-place concept, in my view. As content providers, we should be able to survive on the basis of our ability to deliver our content and services. The operator should focus on filling up the pipe – to find new ideas. I build a toll road, and the more traffic that goes through the toll road, the more money I make. But if I sit down and value every truck, and what’s the value of what that truck is carrying so I can get a share of the trucks content, kind-of takes away from the business of building toll roads.”

Pathak decided to play the devils advocate, saying that though revenue shares are not justified, he believes that what operators are doing in emerging markets is right. “Who has said an operator should not be a part of value added services? I wouldn’t want to be judgmental about whether they have a right to be in the VAS business or not. Here the issue is – do we have an equal opportunity? Are they building an ecosystem? How many calls come to the content provider if there is a problem with their service? The consumer holds the operator responsible. The operator puts millions of dollars in advertising and network, and I go and ask for higher revenue share? Vishal Gondal of Indiagames once said that it’s our fault – it is we (content providers) who went to the operator and said if my competitor gives you 50 percent revenue share, I’ll give you 60 percent revenue share?”

“But what if there’s a free service, what happens to the revenue share then?” asked Popli. Mandal responded, probably referring to MyToday: “One company started offering cricket alerts free of cost. They have a cost – they advertised a short code, and offered a free push based service. Now they’ve started getting ad revenues, with SMS inserts. They’ve invested in the market for 1-1.5 years. Now the operator themselves had paid cricket alerts, and took offense to it. The first steps in opening up the WAP/GPRS connectivity in the offline model, have been taken. That gives many of us the confidence that it will open up more.

On whether the regulator should define revenue shares, Pathak believed that the operator will, at the most define how much the consumer should be charged; they’re not going to define revenue share. Mandal pointed out the example of UAE wherein the regulator has defined that in case of on-deck services, 65 percent goes to operator, and off deck, 65 percent goes to service provider. However, in case of off deck, customer service is the responsibility of the service provider.

I asked about the advent of Mobile Virtual Network Operators (MVNOs), and how the entry of Virgin (albeit as a branding JV partner with Tata) will make a difference: Pathak said that historically, MVNOs have provided services on networks that have the capacity to give some to third party service providers to monetize. Here, with the pace of growth, the networks do not have the capacity yet. In a few years, we might allow MVNOs in the market. Virgin had launched a service in UK where one minute talktime was given free for every ad that users interacted with. They found that redemptions for brands increased from half a percent to 5 percent, which is huge. Maybe some such innovations can be brought in. Mandal expects a separate license for MVNOs, and they’ll to put in their own billing systems. Popli believes that the MVNOs time has come. “Virgin’s entry into this market is a great move. Currently we have one shoe that fits all. Today one brand services 40-50 million people; it’s been stretched. I as a consumer with an ARPU (average revenue per user) of Rs. 4000 would expect to be treated differently from a Rs. 250 ARPU. I’d like to be recognized differently, treated differently, and probably would like different services. I don’t think it will be MVNOs – it will probably be sub-branding strategy.”