A Fertile Ground for Innovations in Telecom
India had a teledensity of less than 1 phone per 100 people not long ago. However, our country added mobile phones at the rate of about 10 million new subscribers per month as per published economic reports in 2009. Between September 2008 and August 2009, India added nearly 145 million mobile subscriber lines and emerged as the fastest growing sector in that period. It is estimated that in 2012 half the population of India will have a mobile phone. Teledensity will leapfrog to 1 phone for every other person in India. India’s telecom network today is the eighth largest in the world and the second largest amongst emerging economies.
However, a major part of this growth has been around urban India. Nearly 70% of the Indian population lives in rural India. This includes the 5000 smaller towns and the half million villages spread around India. The urban telecom market has 80% penetration today and has become a red ocean as far as the Telecom market is concerned. Most of the future growth in the Telecom sector has to come from rural India.
The challenges of rural India are different. Literacy rates could pose as a challenge. Multi lingual messaging may be a required feature where literacy does not pose as a problem. Geographic spread of villages and therefore critical mass required to optimally setup cellsites will prove to be a challenge for network design and implementation. Technologies like WiMAX will look attractive to network operators. Access to microfinance, primary healthcare, resources to increase literacy rates, best practices in agriculture and last but not the least, access to competitive information to sell a village’s produce at a fair market price will be more attractive segments for Value Added Services in the rural segment.
Some of the changing models required for the rural segment like on-demand low value recharge (less than a $ per recharge), single website data access at 20c have already been tested and matured in the urban markets with the student community. ARPU is already declining in India. The rural market with lesser access to finance will only add to the problem.
While the urban market will move up to use more smartphones and consume more mobile data on upscale 3G infrastructure, the fortune will really be at the bottom of the pyramid. Many earthshaking innovations will emerge from the rural market expansion. Necessity is the mother of invention. There are also enough brave players who have no other option but to make a call to adventure. Both the necessity and the will to make a call to adventure are two basic drivers for innovation. Let us watch the fun that will unfold.
Interesting figures, Uday. Few thoughts from my side.
#1 Application centric:THere is a huge potential in applications which are centric to mobile- commerce involving TSPs, Retail stores and 3rd party clearing houses , which will enable a mobile user to use phone as a “Smart Card” for credit based payments. Mobile Banking, Microfinance , Mobile based Tele -medicine , Mobile Games/Lottery , D2D Weather updates, D2D Agri-guides, are some more examples.
#2 Infra centric: Telecom Infra segment is also interesting , with focus on towers installation and maintenance, remote management etc while reaching out to new areas .
Uday, Nice observations & thoughts!
Uleashing the Bottom of the Pyramid is the true growth story for India. In my view:
While the teledensity in India will have continued momentum, service providers do see the potential in increasing the revenue stream through much more simplified and device agnostic communication applications. For example VoIP + Mobility could help in providing the real time data through a single GUI. The ARPU calculation from voice only would mean nothing in future. Its only about how much customer experience that you can provide, will judge the true ARPU.
This needs a fundamental shift in the thinking of service providers, esp. for the rural market where 70% of India population is. The Indian villagers has a community mindset. They learn more when they are in a group. So, creating e-agriculture applications, putting them at kisoks and make them interactive would be a nice idea. The literacy challenge could be tackled through mulitlingual interfaces and an interactive media to a great extent. Technologies like Wi-Fi/Hot Spots and Femto will go a long way in enabling this and making it real time.
If Mobile Pharma or Mobile Medical Assist can be made rural friendly, it will be a killer app. I have seen people deploy archaic methods for child birth or having to travel several kilometers to the nearest hospital at critical situations. The Kisan help center launched recently by the government is a promising driver for rural telecom.
One of my friends was talking about the telecom platform providing services for rural crafts to take center stage and thrive in a larger market.
Uday, you probably haven’t heard of Nokia’s Life Tools – targeted for the emerging markets and interestingly piloted in India.
Not many realise that Nokia, while taking a lot of heat with higher end smart phones, has been spending a lot of energy at the bottom of the pyramid (and I’d say, a pretty smart move at that). For the record, Life Tools services are offered in 10 Indian languages and you can connect to multiple services in the areas of Agriculture, Education, and Entertainment.
http://www.nokia.co.in/services-and-apps/nokia-life-tools/main
http://www.nokia.co.in/PRODUCT_METADATA_0/Products/Services/Nokia_Life_Tools/pdf/NLT%20User%20Guide.pdf
I don’t think infrastructure is that big issue. BSNL covers all district headquarters. It covers in total 362117 villages as of Feb 2010. What we really lack is some vendor or company which can think of ways to harness money from applications which are addressed for this rural sector. It’s evident that mobile adoption in the rural sector has a long way to go, but one thing should be clear that, the industry has to look at alternate ways of profit, when it comes to applications. Something like ad-based revenue should be the core business strategy behind the apps. Reason being, not many will be willing to pay even a rupee for accessing weather watch (not considering the fact that weather prediction in India is not that accurate, esp for rural areas). Checking the price of produce (as outlined by you) can be an excellent app, as most farmers sell these produce to some processing unit (often call mill). Such applications, which “enable” the core business of villages can be adopted widely.
@Srikanth Vallabhaneni
Nokia is still a market leader in branded phones in this country. HCL helped launch their products. They are very much on the right track. I still remember their first advertisement of a Nokia 1100 phone (with a torch light). In tha advertisement, it travels for hundreds of kilometers on unpaved Indian roads hanging by the fender of a truck and it still works. Ruggedness, low cost and utility were the key messages. This company’s thinking has been in the right direction since then.
@surya
I personally think that in urban areas, cost optimization will come in in the form of sharing infrastructure. One company that specializes in the radio network will consolidate RAN’s and provide managed RAN services. This way the cost of the infrastucture can be shared and the resources can be more optimally utilized. This trend has already begun in India.
In India’s rural areas that are not close to highways with heavy traffic or highly used railroads, it will be government owned and tax money funded initiatives that will take up setup of cellular radio network infrastructure. The cost of setting up/operating the infrastructure is high and the returns will be not worth the investment.
Interestingly, I saw a news item this morning. A major service provider has opened a new block of 100000 numbers and is charging for vanity. Special numbers (interesting digit sequences) are being e-auctioned. Want to get one?
Digressing slightly from the topic under discussion, just wanted to bring out an interesting aspect to the Nokia model.
Ideally, you would have expected the service provider to offer these value added services (what with the direct connect to the customer) and improve their top line. But Nokia (and despite being an OEM) has been a consistent disruptor here. And this is not a recent phenomenon. It goes back to the days when they first introduced wifi support in their high end phones – in 2005 or so. It drew a lot of flak from the service providers at the time, as they felt that Nokia was eating into their voice revenues (data was still not a big deal those days). They were also the first to offer online services on the mobile, which till then were an exclusive preserve of the service provider.
And therein lies an interesting story. If you have a sound idea in your respective domain, it really doesn’t matter where you currently stand or what your current role is in the ecosystem. You can still go ahead and redraw that competitive landscape. That’s resulting in a blurring of competition/competitors as we knew it but more importantly in new competition from where you least expected it – a trend seen increasingly in the networking and data center markets today.
@Srikanth Vallabhaneni
Great observation!
Srikanth, Uday:
Great thread on Nokia & Innovation. However, my take is that Nokia has some interesting times ahead …. with pressure squeezing on both sides of the pyramid. At the high volume businesss, the Chinese ODM brands used to be grey market earlier while it is now available as the plethora of indian brands today. Not having created a good apps community like either apple or andriod and not focusing of marketing & WOW has alienated Nokia from the early adopters. Thus the squeeze at both ends
It will be very interesting to note the change in the R&D philosophy of Nokia given this business environment. The race for the mobile business and thereby impacting B2C and even B2B thru mobility has just begun!