Meeting Scattered Customer Demands

In Some Places Asking for Broadband is like Asking for Moon

I stay in Gurgaon...a so called millennium city south of Delhi. For the past few months I have been trying to get a broadband connection at home but have not succeeded yet. The reason is simple – non of the 4 or 5 service providers who offer Internet access in the city offer a service in my area –though they do it just 5 kilometres away from where I live. Most operators have not show any interest in getting to the place where I live because they feel the demand there will not meet the cost of their operations. This I feel is quite a reasonable and sensible thinking. So why I am discussing it here? Well, I want to highlight one of the biggest handicaps of telecom services business despite so many advancements – its lack of ability to provide sustainable model for serving customers in small pockets. Telecom operators have always focused on “concentrated demand” and rarely on “scattered demand”. This essentially means that it’s easy and makes a lot of business sense if their customers are concentrated in one area.

How does an operator target potential customers who are scattered all over and are currently not covered by its services. How do operators get money put of people who could be high paying customers but are currently do not reside in their service coverage area? I am looking for answers to these questions in the context of DSL broadband services, for instance, in a city like Gurgaon. Is it possible to work out a way where operators can address the scattered demand and still be profitable? While one answer could be that it will not be possible for all technologies to be a viable business in all situations. For instance, there is no point installing a broadband switch in an exchange that has a potential for just a few broadband customers.

So what’s the best way out? Is there a way operators can compliment their DSL network with some other access technology to include more potential customers? Or should we wait for something like WiMaX to become commercially viable and also affordable for the home user? Or we should just be happy with using the mobile operator’s Internet access?

IPTV: Is it Telco Business?

IP TV is now part of almost all leading telecom operators’ business strategy in India. While I am not sure about what all they intend to do or achieve through IP TV, some of these operators have been running pilots (MTNL is in fact offering the service to limited number of subscribers in Delhi) to test the technical and commercial viability of the service. What I believe is that for any IP TV service to be successful, the service provider must offer something that is not possible with DTH or cable TV service. So how can operators make their IP TV service compelling enough for the millions of TV homes that they consider their potential market?

There are two things that operators can do and the first is very obvious – offer IP TV services at a price that can beat cable and DTH. Bringing down price should also mean bringing down the entry cost for subscribers too. The second thing that operators can do is make sure IPTV offers a very different experience to customers. While pricing the service competitively can surely bring in customers, it can also make huge dent in the financials of the operators and obviously make customer acquisitions very costly. We know most telecom operators can do this because most of them are used to high cost customer acquisitions. However, while operators can gain customers on pricing, they can make profits only if they offer a new experience and value to the customers. As such, the success of IP TV services will depend a lot on what new experience it offers and how different that experience is from the existing TV access media.

There is another challenge that I believe operators must focus on – telecom operators by offering IP TV services are likely to find themselves in a business that is not their core competency. The success of IP TV will largely depend on the content that it delivers. I am not sure if telecom operators understand the business of content . How will they compete with established TV content broadcasters? There are chances that by building IP TV access they might end up just creating another pipe into homes. There are enough chances that some of the IP TV operators might just end up being cable operators.

Telecom Regulations: Focus on Facilitation, Not Restrictions or Control

DON'T MAKE THEM TOO COMPLICATED

A recent study by LIRNEasia that evaluated regulatory environment and performance in India, Pakistan and Sri Lanka, and three South East Asian countries of Indonesia, Philippines and Thailand, found Pakistan and Sri Lanka fairing better than India. I don’t find that very surprising. Regulations in India have a long way to go before they become friendly and encouraging for the telecommunications in the country. However, I don’t think Pakistan or Sri Lanka can be our role models even though we should surely applaud their success in achieving much better tele-density than India. There are two reasons why I think there should not be any comparisons with Pakistan or Sri Lanka. The first is that unlike us neither of them is a democracy like us (Sri Lanka looks like one but it has a long way to go on that road). Secondly, both are too small countries compared to us and less complex issues that what we face as a nation.

Let’s not look at role models and just see how regulations are treated in this country. I strongly believe that (and I am sure many would appreciate that viewpoint) regulations or rules whether for individuals or institutions / organizations are meant to make life convenient for everyone. However, in most cases in India, regulations are set or rules are made with a negative mindset that believes too much in control and restrictions. Many times they are made to hide the incompetency or inefficiencies of their makers or others in the power. The regulations that supposedly deal with national security aspects in telecom will fall in this category. There are many regulations governing telecom or for that matter other sectors that really does not have logic. I will put the restriction of 74% on FDI in telecom in that category.

My point is that rules and regulations should not be made just because they need to be there. Their objective should be to make, as I said earlier, things easy for every stake holder. For instance in telecom, all regulations must be guided by the spirit that as a country India must achieve tele-density or much higher broadband penetration. Unfortunately most regulations in India are made not to facilitate growth but regulate it. Somehow we still have not been able to come out of the controlling mindset that overwhelmed us during the long years of license permit raj.

Liberate Fixed Wireless and Let it Grow on its Own

For some time the government has been talking about making broadband accessible to rural communities and other semi-urban areas. However despite many experiments including some of them involving WiMax nothing concrete has emerged and we are still far off from an idea model that can really deliver broadband to areas where DSL or cable or any other fixed acess technology cannot reach. In this context, I feel that the government can do well by doing two key things -- one, encourage access technologies that do not require huge capital investments and big infrastructure, two, instead of looking at big ISPs or telcos, the government should encourage small players who can make money from serving a few hundred customers.

As far as access technologies that don’t require much capital investments are concerned, I feel fixed wireless is the best alternative. For instance, in the absence of any other sustainable alternative, many rural communities in the US are using fixed wireless to access broadband. These fixed wireless broadband services are usually supplied by small local Internet service providers that rely on unlicensed versions of Wi-Fi that have increased power levels and are tuned to avoid interfering with licensed devices. The subscriber is given a radio and mounts a fixed antenna with a line of sight to the provider's transmission antenna, usually with a range of 8 to 10 kilometres. There are hundreds of such small fixed-wireless providers in the U.S., most of them family run small businesses, who charge between $50 and $75 monthly for as much as several megabits per second of wireless connectivity. While $50 or $75 per month will be an expensive proposition in the Indian context, the monthly rental can surely be brought down by working around the business model, targeted government subsidies (like tax concessions) and deals with equipment vendors.

While in the US, most mom and pop sort of wireless providers have come up on their own and their growth has been purely driven by demand, the government can play a crucial role in India in encouraging “Broadband entrepreneurs” who can serve the rural and semi-urban areas. In fact, ISPs and telecom operators can look at the franchise route to create a network of small operators who can serve these areas. As is obvious, the franchise model that I am talking about is not really a new concept. Telecom operators have been using this route heavily to serve their customers (e.g. PCOs, retailing of connections etc). However, a fixed wireless broadband franchise will be different in the sense that he will have to build his own fixed wireless broadband network that can serve a few hundred or even a couple of thousand customers. In fact even in the broadband space, some ISPs have been using this model to do business. However, it has never been tried on a big scale and in rural areas.

Whenever we talk of wireless in India, spectrum and related regulations becomes a key issue. While at times there is no clarity on what the actual regulation is or what is legal or illegal, at other times regulations only favour licensed and big players. I strongly feel that the government of India should free up spectrum for unlicensed and unpaid usage by fixed wireless operators at least in the initial days of their operations. May be we can have some thing like “Spectrum license holiday” very much like tax holidays. I am sure such a move will encourage a large number of small companies or entrepreneurs to try out offering broadband services in rural or semi urban areas. We must remember that it was only after government freed up Wi-Fi from regulations that it became a common place in India so much so that we now have a growing number of homes with Wi-Fi.

Basically, the government should liberate fixed wireless from all kinds of regulatory hassles and let it grow on its own for the sake of growth of broadband in India.

Broadband can add many colours to our lives!

Imagine what will happen if people across India start looking at broadband in the same way as they look at their TV or radio or their newspaper! Life will change for them and the country if broadband becomes a mass medium and achieves the same kind of reach the three mass medium have. Even though television, radio and newspapers have been playing a significant role in improving the quality of our lives, they still lack something called interactivity. And interactivity is a key element of broadband. It is interactivity that will help broadband provide many more choice to people not just in entertainment and education but also in improving the economic aspects of their lifes. More later.

2007 as the Year of Broadband

I just happened to notice in the year end press release of the department of telecom that the government has declared the year 2007 as the year of broadband. While not much is known as to what the government intends to do in 2007, it surely has set some ambitious targets for itself. It is expecting that more than 1 million broadband connections per month would be added before the end of 2007. Nothing wrong with that. I am not sure on what basis the government is expecting such numbers. It’s always good to have high ambitions and big dreams. However, the problem with the government is that it doesn’t seem to have any concrete and logical plan to achieve such an ambitious target. Remember the broadband policy of 2004? It had set a target of 3 million by 2005, 9 million broadband subscribers by 2007 and 20 million by 2010. However, these targets too appear to be a distant dream. According to the data released by TRAI, the number of Broadband subscribers (with a download speed of 256 Kbps or more) was only 1.56 million by June, 2006!

The other intriguing point in the press release is the statement ““to trigger this growth of broadband in the country Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) have come out with an aggressive plan to provide broadband connections with minimum download speed of up to 2 Mbps from January 2007” . I am not able to understand how only this could trigger a broadband revolution in the country. In a country where access still a big issue even for people who can afford broadband (I live in Gurgaon and can afford to spend up to Rs. 2000 a month on Internet but none of the service providers can reach my house!), talking of higher speed as trigger of growth is some sort of joke. Moreover, the government still seems to believe that it’s only BSNL and MTNL that can get the broadband express rolling in the country. It is true that the state operators, especially BSNL, with their reach and focus on even less commercially viable rural areas, appear to be better placed to expand the reach of broadband in the country. However, the problem with the government is that it still thinks of BSNL and MTNL as some sort of public work departments and telecom services as public works projects. This attitude needs to change. The government must understand that a large section of our population may learn to appreciate the value of good roads on their own, but they must be taught a lot to help them understand what positive change broadband can bring in their lives.

On a positive note, I wish that the declaration of 2007 as the year of broadband should put broadband in focus and galvanise all stake holders to work towards the goal of achieving the kind of growth that India needs in this sector. The government must also actively involve the private service providers in achieving its goal of making broadband available to everyone. Moreover, it must also act fast to offer incentives and liberalise regulations to create a more conducive atmosphere for the takeoff of broadband across the country.

Governments Should Get Out of WiMax Business

Of late there has been a rush among various Indian state governments, municipal bodies and other government agencies to set up WiMax networks. They seem to have been inspired by similar initiatives in the US and some European countries where some of the local governments and authorities have been on wireless network building spree. Why are government organizations trying to become telecom operators and getting into a business that they don’t really understand? From the kind of initiative and interest that some of the government agencies and officials have been showing in WiMax, it appears that they understand it better than those in the telecom services business. That’s something hard to believe. While on paper it may appear (and this is what government officials will like us to believe) that these initiatives are being planned keeping in mind the larger goal of making broadband or connectivity available to the masses. But don’t we know the record of the government on matters related to telecom? I don’t need to remind here what our record as country was before the government had opened up telecom for private companies.

My understanding is that most of the government driven initiatives (some of them may be well-intentioned) are largely being driven by a few equipment vendors who in their eagerness to position themselves as WiMax pioneers and also make a few bucks, have been goading governments into an unchartered territory. It seems that for equipment vendors governments are a softer targets and an easier customer to whom they can sell anything after taking them through some nice presentations. Governments who neither understand telecom nor business are easier to influence than a telecom service provider who will not bet his money on any service or technology unless it is sure of business gains from them.

I am not in anyway discounting WiMax as a technology and its potential to widen the reach of broadband in India. The point that I am trying to make here is that the government of India which rules the spectrum and is the ultimate licensing authority and policy regulator must take initiatives to encourage private telecom operators to get into WiMax. The regulator TRAI can also play a role here. There is an urgent need to make policy matters and regulations clear on WiMax so that operators can try it out on a commercial basis. Only then can we realize the true potential of WiMax for a country like India.