Already 8.5 million subscribers and still growing—Indian cellular industry’s pace has far exceeded predictions and forecasts by industry pundits. The industry, however, faces troubled times, as subscriber figures continue to skyrocket while ARPU is actually falling. There is a serious threat from the imminent launch of WLL services, and differentiation of service is becoming increasingly difficult in a crowded market.

Times have never been more suited for the launch of mobile data Internet services in India. Advanced data networks are in place, many operators have evolved to GPRS or are in the process of doing so. Indian subscribers are quite data savvy and the SMS example has shown that if the service is right, they are not the ones to shirk away from taking it. The critical question is whether the Indian operator can differentiate himself from the rest of the pack.

Mobile data services present a clear-cut opportunity for operators to stabilize prices of voice services and compete and differentiate increasingly on data. An oft-quoted argument against this has been the failure of WAP and the reluctance of the Indian user to use wireless Internet services. Responses like ‘too expensive’, ‘not really useful’, and ‘just don’t need it’ are all too common. A closer inspection, however, goes on to reveal that data services may not have failed in India just because the market didn’t want it. They probably failed because operators couldn’t provide what the market wanted.

The Japanese wireless data story is the stuff of legends now. I-Mode has cult status in Japan, the Internet is almost synonymous with i-Mode and every operator in the world is seeking to emulate DoCoMo’s wildly successful service. The lesson from DoCoMo is: subscribers don’t want your technology, they want value. The closer we get to providing the Indian subscriber with true value-for-money services, the faster the Indian mobile data services industry is going to grow.

So what does it take for Indian cellular operators to get down to brasstacks and provide services that will fly with the Indian subscriber?

Let’s look at the challenges faced by the Indian operator on way to providing mobile data services of the future, and ways to address them:

Content That’s Different
Carriers need to re-evaluate their strategies and look at what content their subscribers are looking for. Content needs to be ‘ubiquitous’ in nature, so as to reach the widest range of audience, and at the same time some content needs to be specifically tailored for specific target segments, such as business, enterprise, youth, teens etc. Like the Japanese and European markets, India will probably see initial usage within the ‘fun and entertainment’ segment (ringer-tones, screensavers, games etc.) and in communication content (dating services, community networks, chat applications etc.)

Pricing Strategies
Price continues to remain the single most important factor that will decide on how much a subscriber will use a service. It is imperative that while content is innovative and useful, it very clearly delivers value in terms of price. Operators will need to clearly identify what ‘perceived value’ subscribers derive from services and map them vis-à-vis their expectation levels.

Operators will have to evolve from an airtime-based billing system, to a fixed-price unlimited usage billing system, to a usage-based billing system and finally to a ‘value-price’ model where users can be billed depending on what application they use and the value they derive from such usage (e.g., a user could be charged differently for news, and differently for transacting in shares).

Management of Value Chain
The operator is central to the existence and performance of a mobile data services value chain. To deliver true value to their subscribers, operators need to tightly integrate, and exert substantial influence over their data services value chain. This is critical to providing the subscriber an ‘all-round’ enriching mobile data services experience.

Technology
There are three major technology areas that operators will have to address before they can effectively deliver next-generation data services.

n Micro Billing Systems: These systems allow the operator to bill the user for usage in terms of packet or data size. They also allow for the transparent sharing of revenue between content providers and operators, by monitoring traffic from every subscriber to each content provider. Such billing systems form a core requirement before we can evolve to advanced revenue models and high-end data services.

n Affordable Multimedia and Internet Handsets: While content and pricing will stimulate usage, a key to the mass adoption will rest with high-end handsets being available at reasonable prices. The Japanese market is a superb example of this. Operators heavily subsidize sleek attractive handsets. The Indian market scenario may not allow for heavy subsidization, but operators will have to step in here and use their influence on the handset value chain to bring prices down to affordable levels.

n Secure Usage: While teens and youth markets are typical early adopters of mobile data services, much of the onus of heavy and consistent usage will rely on the corporate. It is important that operators provide an environment of high security on their networks, which allows for the implementation of corporate workgroup applications etc.

Recent COAI estimates suggest that Indian mobile operators need a minimum of $2.5 billion to continue to keep pace with market projections. In India, there is an upper cap of 49 percent on FDI. Operators will soon have to find way to work around this.

Huge increases in subscriber bases have put a lot of pressure on the bandwidth. It is difficult for operators to optimize their networks for the use of data services. Current allocation of 2x4.4/6.2 MHz per operator can now go up to 2x10 MHz per operator. This however is still lower than the Asia-Pac and world averages of 2x17.18 MHz per operator.

If the above challenges are adequately addressed, we should soon see a revolution of sorts in the Indian wireless data segment. The time has never been ‘more right’ for launching innovative mobile data services. It is up to the Indian operator to take the initiative and make it happen.

Vipul Kant Upadhyay,
CEO and managing director, IAP Company Ltd.