Strategy, Technology

Impact of Converging communications media

An avid cricket fan, say Swami was watching the India-Pakistan cricket match in Mumbai at his office. Since it was a long weekend, he had to catch a flight to reach his home in Bangalore. So, he left the the small TV sets in office albeit reluctantly. But, Swami was keen to stay in touch with the scores all through. So, while he was waiting for a cab, he sent an SMS to an cricket-SMS channel about latest scores. In the car, he asked the driver to put on the live radio (and cursed his luck for not getting the FM mobile connector with him) Then, at the airport he enjoyed the match on a flat screen plasma TV. In the plane, he enjoyed live satellite TV (note: he had booked a KF flight knowing that there would be a match on) . Next, after alighting at Bangalore, he called up his friends, for expert commentary on phone – who in turn advised him to go to this new cool website on internet for live commentary. So, he checked the mobile internet on GPRS for the match. So, finally he reached home, where he quickly put on his LCD tv and logged onto the internet for a detailed scorecard as well! Clearly, Swami had not missed a moment of the match!!

cellphone-TVNotice something here? The service offered was essentially the same – ‘Providing Cricket Match updates’! But check the communications media used. Sounds incredible right? Well, I haven’t even brought the social networking aspect yet into the above scenario. Clearly, communications is evolving and fast!

The moot question in all of this is – how will this impact the society? Well, the answer is simple – the effects are already seen. Due to so many communications media available, news gets around extremely quickly. People are becoming more aware. Example: the recent floods in northern Karnataka, AP and southern Maharashtra. The news spread like wildfire. I am sure, these communications media can help in more ways than one in such crises (its another matter whether they are used already or not, but thats not the question here) On a global context, the relevant issue was on the Iran elections and how twitter was used to post updates about happenings in Iran then.

Given all this, what is the future of communications as a service? I am of the opinion that it will evolve as a service which can effectively cover all of these media and provide real time updates. It is this critical success factor which is making people in the USA gaga over the internet industry- twitter and facebook in particular. The concept of real time updates is here, and is here to stay.

In the Indian context, however, the media convergence is a few steps away, but not far off. While internet on the ‘computer’ may not get as popular as in the USA, but one device has the potential to reach most of the 100 crore population – ‘the mobile phone’. Many believe the convergence of media would happen on the cell phone. And in that context the 3G auction is going to be critical since the 3G spectrum allocation can truly place power in the hands of the users’ pockets. We are getting closer to communication media convergence for sure.

The point is, whether the end consumer accept this change? And are the telecom operators willing to see this as an opportunity? Even in the USA, Google voice as an application ran into trouble. How will the telecom industry as a whole react to this inevitable change? That would truly decide the pace of media convergence in India….

Comments, thoughts invited…

Right, so this Friday – 6 October, 9 pm to 1030 pm – Strat. In is hosting its first live chat. The subject is going to be CAT 2009. There will be 4-5 from among us at the chatroom –  . This group includes CAT 100 percentilers as well. Please let your friends know about this event on strat.in . Details about the same follow tonight.

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Marketing, Strategy, Technology

Apple iPhone and its India Strategy

iphone-3gsAs we all know iPhone is one of the most sought after possession in the recent times. The phone which combines iPod with a mobile phone and wireless connection which enables us to connect to the web has captured the imagination of the people all around the one and lots of them are dying to lay their hands on it.

iPhone 3G was released on August 22, 2008 in India, thus allowing the Indians to lay their hands on iPhones legally. Indians who till then had mostly heard about the iPhones and a few had got it from US through some relatives could now “legally” own it. But as history tells us it was a flop in India. Now that Apple is preparing to release its next version of iPhone, iPhone 3G, we can try and see what went wrong with Apple’s strategy last time.

1. Pricing: Most people do tell that the high pricing of the iPhones were a deterrent to the people who wanted to buy it. The reason was that the people knew that iPhones were being sold at $199 in US which is equivalent to around Rs 10000/-. So they had expected that it will be around the same level in India too. But what they hadn’t factored in and what apple has till now failed to educate is that it is a highly subsidized rates being provided by the carrier and you need to get into a 2 year contract for that with the carrier.
The carrier, AT&T in this case, had used the opportunity to lock in thousands of users. Take for example the recently announced one of its best ever spring quarter results in which they added 1.2 million cell phone users and activated 2.4 million iPhones in the quarter. And most of them came in the last two weeks of the quarter when the new iPhone 3GS was released. Also many don’t know that you are forced to take up data plan with the carrier leading to its increased revenue. This is one of the main reasons that AT&T subsidizes iPhones in US.
But in India, though the people were bound by the contract to the carriers, they did not subsidize the phones, leading to the higher price. Though many blame apple for the high price, I think it should be the carriers in India who should be blamed for it.

2. Carriers: And now coming to the carriers, why were Airtel and Vodafone so uninterested in subsidizing the phone and in providing unlimited data access which Apple wanted.
For that let us see how AT&T benefits from being the carrier which enables it to give the subsidy. AT&T is a leader in the wireless provider market in US and it has exclusive distribution rights for iPhones in US. It provides GSM services whereas its closest competitors Verizon and Sprint are both CDMA shops. With the exclusive agreement with AT&T, Apple is barred from developing CDMA version of the iPhones for next 5 years. Thus, making this a much sought after item, if AT&T subsidizes the price, it can attract more users from its competitors and lock them in.
Whereas in India, Apple is going in with both Airtel and Vodafone as carriers. And they are the leading competitors in the wireless provider market, at least as of last year. And by simple logic as the prices were pretty much similar with both of them, they knew that attracting users from the other is very hard by giving subsidy as the other would also follow the suit. That way there was no guarantee of them increasing their market shares due to iPhones. Hence, the lackluster attitude of both the companies towards iPhone. It is also rumored that Apple is not happy with both of them as they did not aggressively market iPhones, but were interested in marketing blackberries and their own phones. The reason for this too would be the same.
Regarding unlimited data access, the reason for Airtel and Vodafone to not provide unlimited data access might be the very low ARPU. Since the ARPU in India is very low most of the companies make their revenues in the data access which they provide and Airtel and Vodafone would be very much disinclined towards reducing their profits by providing their main revenue earning service for unlimited use.

Although these are the main reasons, there are many other reasons for the failure too, like the non availability of 3G which was the selling point of the phones in US. But I don’t feel that that would be an important reason, because not many Indian users would be buying it for the 3G factor, but most of them would be buying it as a novelty factor.

So what should Apple do to improve its performance in India?

1. Try and educate masses about the price they see in US and that in India. Although unlocked iPhones in US and other places sell at almost the same or higher prices than in India, not many know it. All they see is the price on the apple store which lists the price at $99 for 8GB 3G phone and $199 and $299 for the 16GB and 32 GB 3GS ones respectively. What they don’t see is that an unlocked iPhone 3GS 16 GB costs $600+ and 32 GB $700+.

2. Stick to one carrier so that it has some incentive to provide subsidized rates in India. But again the problem here is up to what level the contract can be enforced by the carriers in India. Especially in a country where there is jugaad in every work, the users can easily get the phone unlocked and use it after buying it cheap. Can something be done to make sure that breaking the contract has the same penalty as in US? This is something for the carriers to think and make their contracts stricter.

3. Instead of selling iPhones at unsubsidized price and being locked to the carrier for a year, it would be better if they could sell the iPhones in apple stores. The people who were not buying it because of the contract (now I know this would be a very miniscule amount) would then consider buying it. At least I have seen many people buying iPhones from Hong Kong where the prices are almost similar (many be a couple of thousands less), just because you are getting an unlocked iPhone legally and for a lesser amount than in India.

4. Now that the iPhone 3GS is being introduced, instead of phasing out the older 3G version in India as it is being rumored now, provide it at a lower price, which could be affordable for the upper middle section of the society. This would allow more number of people to have the feel of an iPhone and as I have seen many of them would be hooked for a long time. And don’t give me the reason that Apple wants it to be a niche phone. When they can allow it to be sold at a subsidy (with many plans you get an iPhone without any payment and you pay the amount in installments over the period of contract) in US and can have 2.4 million people buy it in 10 days, does it really want to play to niche game in my view.

(This post was written by Arun K S. We thank him for his insights, and look forward to his further posts. For more on Arun, check his previous post here)

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Business

The miracle we call Cell Phone

Mobiles have become very common especially in countries like India, which have been traditionally considered poor. The commonality has reached a degree that just a phone ringing is not enough to get the attention of people around you. You would rather require a wacky ring tone (and also one which has not become common) to be able to make some heads move. We have long moved ahead of the times where people started looking for the source when a ring tone was heard, and the owner proudly talked on the phone as others looked on.

cellphoneAny public event or function you got to, you will hear the announcement – please switch off your mobile phones – without fail. The announcements have to be made because the people have become so excited, about the fact of having a cell phone that they overlooked one feature of the phone, namely to switch it off. A user does not like to be disconnected even for a split second. I think they feel that some “important” call may be missed if they used this feature. They fail to realize that their last 10,000 or so calls did not belong to the above category and so they should take the hint.

A more sophisticated user is one who knows when to switch off his phone (assuming that everyone knows how to) or atleast put it in the ‘silent’ mode. The problem is we do not get to know many such users, for unlike their competitors, they do not use features emitting the highest allowable decibel of sound (I would have given undue respect, if I called it noise).

I have seen it over the last few years as I went to attend my lecture classes. Without fail, I get to hear the first few lines of all the new songs. Once the first words are heard, the user realizes that all he wanted to achieve is through and now he/she can – not so gracefully – jump at his phone to cancel the call. This user is going through a hard phase in his life. He is facing a dearth of attention/visibility. The mobile has come to the rescue. So what if the calls being received are the ones from his mobile service provider – for checking if the previous month’s bill has been paid or to inform of a new value added service.

So, he thinks that the lecture class would be the key to get some attention and get 15 seconds of instant fame (Sometimes even more, depending on the ringtone, the way he handled, the reaction of the lecturer and the other students in the class). Whenever I am in the class, I follow such an event with a mandatory sound indicating my disappointment at being not able to concentrate (and also at having to share a room with … ). I make sure the sound goes to the culprit as well as the lecturer. It may also be due to my disappointment that I never get such instant fame for I keep my cellphone in the ‘silent’ mode.

Though we believe, and I implied previously, that we have come a long way and no longer take cell phones with an awe, but actually we are still so much obsessed that I am beginning to feel that if the initial days were better. I and my batch mates have gone for a few long train journeys. The train passes through areas where there is no ‘signal’ for the cell phones and so they remain disconnected. But whenever we come near a city the cell phones get connected, and everyone starts having a magical feeling of being a part of the world again. The emotions were such that I can easily write a book – Title: How People Got Cell Phone, Got Connected and Got a Life. Ironically enough they neither had to make a call, not even send a message; what was important was that they had the power to do those things, even if they did not actually want to.

The cell phone mania takes unusual forms and even if all the above things subside (to implied normality), newer stuff would spring up and give me content to write on.

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