Indian Telecom Story (Part VII):Reduction in Mobile termination charges

I had discussed the Mobile Termination charges in an earlier blog http://technologyandtelecom.blogspot.com/2009/02/indian-telecom-story-part-iii-entry.html and this was a month back (9th February 2009). TRAI has finally taken the mid road to the question of Mobile termination charges. Mobile termination charges are basically the per minute charge paid by an operator to another, if a call of the first operator is terminated on the second's network. To that effect, any operator with a national coverage has lesser probability of paying this termination charge because chances are that the call will be terminated on its network owing to its ubiquitous presence. Thus the incumbents could use this as a pricing barrier against newer entrants. The chief beneficiaries of the MTC regime are the 100% footprint operator such as Airtel, Reliance, Vodafone etc. Lobbying for the case of MTC as a means to generate returns to serve their rural expansion, it can be debated that the Lobby had tried to impress TRAi and DoT hard on this subject. On the other hand the new players to the party have clamored that a MTC regime would make it difficult for them to establish a reasonable presence because of the price disparities.

As of today TRAI has slashed the MTC charges from 30 paise per minute to 20 paise per minute there by taking the mid road between these two views. The effects of this:
1. Likely reduction in Revenues for the incumbents
2. A more uniform battle ground for new entrants
3. Lowering of the telephone tarriffs for consumers on roaming
4. ARPUs further reducing on account of roaming charges.

Thus to an open market, reduced prices, commoditized products and more competition, here it is: Jaye Ho!

Apple: Software Services as Differentiator

Customer loyalty is a thing of the past, or so it is believed. Not with Apple though! RIM, Nokia, Microsoft and Pre are busy in their preparations to launch their own options of App. Stores, and it might seem that this will take the wind out of Apple's Apps Store sails. Au contraire, quite the reverse seems to be the case as Apple seems to be accelerating both in terms of number of applications on their stores and the downloads. On March 5th, 2009 Apple registered its 25000th application in its iPhone store. Before this, sometime in mid January, Apple had passed the 500 million mark in downloaded applications! For full report click here!

The 25000 apps and 500 million downloads on 23 million devices act as a part of a software strategy, which creates a distinct stickiness for the iPhone and enhances customer loyalty over the long term. It is believed that the Apps personalize the iPhone to levels that competitors cannot match and consumers cannot do without. This creates a huge stickiness between the consumer and the product. A device tailored by him according to his requirements in the one thing that he needs the most and at present Apple does seem to have both the device and software wherewithall to give suffice his need.

While Apps range from free to $999, it is but obvious that the ones in the lower price brackets < $2.99 consitute 80% of the apps and probably will also feature as much in the downloads!

Profiling Facebook: The Google of Social Networking (Part II)

In the earlier part of this post (part I), i had written about the Facebook phenomenon and its about its popularity and its business model. It is doing to social networking what Google did to the evolution of internet and search as a whole. Little wonder that it is the largest social networking site and in top 10 websites of the world. http://technologyandtelecom.blogspot.com/2009/02/profiling-facebook-google-of-social.html

While this schematic is a little old (June 2007) it gives a pretty clear picture of the dominance of social networking websites in the world. The Dark Blue (Facebook) features prominently in Canada, Australia, South Africa, Egypt, UK, Scandinavia, South Korea, Italy and parts of Eurasia. Since then the spread of the Blue would have increased by a factor of 3.5 and would porominently feature the whole North American continent. Facebook's march to 200 million users earnestly began in January 2008, when it made translation tools available to the international user. Today more than 70% Facebook users are outside USA and most of them read it in their native language.

In 2005, Mark Zuckerberg had outlined his vision for Facebook to be an online "social utility" tool which would mean a global digital phone book which users would use to locate people on the web. In strictest terms the vision has not changed very hugely except that instead of Phone book (assisting medium), facebook intends to usurp the position of the phone itself. He dreams of Facbook to be the central portal for communication, work and pleasure. It also becomes the central place where users organize parties, store pictures, find jobs, watch videos and play games. eventually , Facebook will become an online passkey to gain access to websites and online forums that require personal identification. In other words, Facebook will be the place where people will live their digital lives in the internet of the future.

Zuckergerg vision has found teh traction and has a 175 million "friends" following. However the question of monetization of traffic is something that most of the Web 2.0 evangelists are wrangling with. We will analyse the business macros of Facebook in the next part of the series in some time.

The Ascendance of Apple

This has been Apple's decade. From behind and nowhere, this Cupertino, California based hi tech company has disruptive technologies and trends and worked its own path upwards. In the process, it has emerged as America's no.1 most admired company, sales have tripled over the last 5 years and it ranks no.1 amongst Fortune 500 companies for total return to share holders over the past 5 years (94%) and past 10 years (51%). The latest feather in Apple's cap is a successive listing (2008 and 2009) in America's most admired company list and World No 1 in most admired companies list. This 32 year old company had an unprecendented run since 1997 disrupting conventional wisdom on product lines and groundbreaking new products. Led fully from the front by Steve Jobs, Apple has out thought, out innovated and out played markets and competitors alike.

Timelines, Products and Discontinuities
As stated earlier Apple has launched waves of discontinuity in industries turning tables on the existing rules of the game:
1. Pixar, which Steve Jobs bought from George Lucas in 1986, out innovated the Hollywood mainstream into full length computer animated movie making with its Toy Story in 1995. It redid its success in 1998 Bug's Life, 2001 Monsters Inc, 2003 Finding Nemo, 2004 Incredibles. 2006 Cars. Pixar is sold to Disney in 2006 making Steve Jobs Billions.
2. In 1998, Apple upturned the desk top with its colourful IMac, which became the fastest selling Macintosh ever!
3. In 2001, which is arguably Apple's biggest year till date, it released the iPod, iTunes and OS X operating system. 8 years later, 50% of Apple's revenue come from iPods and iTunes store is the second largest music retailer in the US with 6 billion downloads. It spawns a plethora of attempts by Telecom industry players, notably Nokia and Microsoft to build a Music store, on a somewhat different business model.
4. iPod Nano is released in 2005 and is a huge hit. iPod becomes to music players what Kleenex is to tissue or Xerox is to copiers.
5. iPhone is introduced in 2007. Gets the status of Jesus phone and in one sweep upturns the existing game inthe mobile device industry. Spawns a record number of copy cats.
6. 2008: MacBook Air released, a ultra thin 13 inch wide sleek metal laptop. Apple again triumphs
7. 2008: A faster cheaper and more powerful iPhone 3G debuts and outsells the original by a mile.

Apple has demonstrated how to create real, breathtaking growth by dreaming up products so new and ingenious that they have upended one industry after another: consumer electronics, the record industry, the movie industry, video and music production.Apple's approach is to put every resource it has behind just a few products and make them exceedingly well. Apple is brutal about culling past hits: The company dropped its most popular iPod, the Mini, on the day it introduced the Nano (a better product, higher margins --> why dilute your resources?).

The culture of Innovation and the leadership of Steve Jobs has gotten Apple so far. As all and ever, everyone waits for Apple's next innovation, its next endeavour to change history.

Examining the case for Nokia Netbooks

Lap Top makers Lenovo, Dell, and Acer have announced their ventures into the smart phone space. I had covered a few of these in earlier blogs.
http://technologyandtelecom.blogspot.com/2009/02/smartphone-debut-dells-mephone.html
http://technologyandtelecom.blogspot.com/2009/02/lenovo-promising-smart-phone-debut.html
http://technologyandtelecom.blogspot.com/2009/02/toshiba-timeline-iphone-in-its-sights.html

Now, the king in the mobile space, Nokia takes the battle to the enemy camp by announcing its foray into netbooks. Olli-Pekka Kallasuvuo mentioned in a recent interview that Nokia was “actively looking” at the laptop market as the cellphone and mobile PC markets get closer and closer to convergence (read article http://www.reuters.com/article/technologyNews/idUSTRE51O6Z320090226). This had created the immediate buzz that it was expected to create around the technology geeks and followers around the world.However, this is more than i-fight-you-at- your-home-while-you-fight-me-at-my-home motive out here (meaning Nokia fights the lap top makers with its entry in that segment, even while Lap top makers try to prey on smartphone space). For starters, Nokia was already the largest computer maker in 2008, if the smartphone population are allowed to be counted in as computers.

An interesting line of thought that has featured in Nokia Conversations (Nokia's informal PR window to the world) is about how "mobile lifestyle" is fusing with "mobile computing" even as internet apps change the mobile phone from a medium of communication to projectors of our selves in the cloud. (Suggest the article as a compulsary read). Essentially, there are three major take outs from the article
1. Mobile devices will have to evolve to more creative usages in networking people.
2. The Cloud will be a platform where people would needto project themselves as a means of communication with others
3. Hence the need for a netbook device!

The article very beautifully explains the device story behind the need to graduate from Mobile Computing to Cloud enabled netbooks. So Nokia's device strategy follows the convergence story as it unravels and transitions from a N 97/ iPhone to netbook!Interesting times, as industries converge and new paradigms emerge. However the question that pops up is, whether Nokia is doing things one too many? Its 2007 - 2008 strategy has revolved around services and even after a while, Ovi is not exactly "there" in terms of consumers, services, applications and stickiness. The opportunities for Nokia's software services would surely outweigh the cost of building a commodity consumer electronics device.

The first reaction to this one is Nokia shouldn't be looking at the netbook space. They've got enough on their plates at the moment, the new devices need attention and promotion, it will confuse the marketing message, there's very little profit in commodity devices...

On the other hand the Netbook can be seen as a natural device extension of the Ovi platform which links up from the consumers to the crowd.

My take on this is Nokia should be looking at its services eco system foremost. Netbooks will seriously not be an differentiator in the age of content and the internet. Investements in the netbook may not be both time, investment and attention consuming for very little returns.

Cashing in on Orkut

2009 should be the watershed years in terms of monetizing of the social networking sites through ads targeted on user specific information. Mark Zuckerberg knows it and Google is doing it. Orkut which is the No 1 networking site in India is tieing up with IPL to create its own brand positioning platforms to lure advertisers. What it offers advertisers is a better opportunity to create engagement and branded pages, groups etc with its users... to create its own buzz. Ultimately at some level it may serve as a online brand building medium with a decent RoI.

“Last year, we built a stronger base of marketers and invested in internet advertising. In 2009, we should make revenues from our social media platform,” says Google India Managing Director Shailesh Rao. Google is banking on converting its vast network of Adwords advertisers to Orkut, where they can place targeted and contextual advisements on various social communities and user profiles, reaching individual customers directly.

According to comScore data, in 2008, Google sites ranked as the top property in India, with nearly 20 million visitors. Orkut registered nearly 10 million visitors, marking a growth of 39 per cent. Orkut Apps, the blog that has become popular for software developers to market their social applications, has also opened new revenue streams for Google. An estimated 45 million internet subscribers drove the online advertising market to Rs 240 crore in 2008, and according to Federation of Indian Chambers of Commerce and Industry (Ficci) estimates, it could touch Rs 2,500 crore by 2011. But a harsher financial outlook in 2009, combined with an expected fall in online advertising, is forcing the networks to focus more on making money from existing subscribers than on adding new users.

The only catch is the belief that a user on social networks is browsing to keep himself updated with his network of friends and to interact with them. Thus he is immune to ads. It is now Google, with its formidable access to users and advertisers and customized solutions, which is going to test the axiom of "immunity to ads on social networks". Whether it can extend the success of its ad sense and ad words is what we will see happening through this year.

Nokia - Skype: Jinxed as partners?

The MWC (Mobile world Congress) was a spectacle this year as well (as every year!). The Mobile world had a sneak peek into New Technologies, new devices, new services and new partnerships happening around.

One of the most promising partnerships annpounced was that of Nokia and Skype.According to this partnerships, Nokia would integrate the Skype VoIP software with its N Series flagship N 97 on the S 60 platform for its consumers in Q3,2009. This would enable consumers to sync their phone address book with their Skype contacts and make calls over VoIP to them. A computer call would be free and users will pay Skype for voice calls to Cell phones or landlines. Skype as an application is free for download to cell phones. However it would require a 3G service or a Wi Fi zone to allow this service better.

This is a classic case of convergence media being offered to consumers (who now have a choice of making a call through their cellular operator as well as VoIP). Skype is the biggest beneficiary of this partnership as it piggy backs Nokia's reach in geographies where the lap top will take some more time to estanblish itself. Thus Skype, Internet and VoIP will leap frog emergence of lap tops to tap into the VoIP technology.

However there is an unexpected backlash from UK operators, O2 and Orange who obviously view this partnership and the technology ofered being disruptive in nature. The sources cited state that the partnership of Nokia and Skype would wrest away control of their consumers by offering easy access to an application that could hurt their call revenues.

To quote verbatim:

Mobiletoday.co.uk’s source said to them that this was yet “another example of [Nokia] trying to build an ecosystem that is all about Nokia and reduces the operator to a dumb pipe…But if you spend upwards of £40 million per year building your brand, you don’t want to be just a dumb pipe do you?” The source added, “Nokia have tried several ways to own the customer over the years and operators have had to say no.”

The adjectives to describe the operator outrage are "furious" and "venting their anger" amongst others. Operators have also stated that they wouldnot stock up Nokia devices if Nokia doesnot strip the application. Thus we have an interesting situation out here, since Nokia wouldnot want to walk back on its MWC partnership with Skype for fear of a loss of face. However inability to do so, may jinx the N 97, a device where Nokia is betting a lot to fight back on the smartphone platform. It doesnot have a US carrier for N 97. Not having a UK carrier could be worse for them. It needs the operators to subsidize the N 97 for the smartphone users. We may see Nokia walking back on the Skype partnership after all, at the end of it.

PS: One would remember Nokia's earlier attempts at trying to have a eco system of consumers all for itself without sharing it with its eco systems partners. An earlier example was the Comes with Music service which it started short circuiting the operators (who also saw this as a competition to their own music stores).