Mobile, Not Sedentary
Over the last few years, leading telecom service providers have appeared to be completely commoditised. Their networks have spelt customer disdain, their communication has been undifferentiated, and their organisational capabilities appear somnolent.
Shanghai has less than 500 customers per tower. Delhi, on the other hand, supports 5,500-6,000 customers per tower. China Mobile has100% towers connected with fibre. For India’s leading operators, it would be less than 20%. In Delhi, the number of customers are 20 times higher per MHz per tower than in China. This problem is exacerbated by India’s lowest spectrumper-sq km: resulting in our internet speed being among the lowest globally.
The government’s spectrum pricing, sharing and trading policies have had little impact on industry consolidation and customer experience. The fact that 80% of voice was consumed outdoor and 80% of data gets consumed indoors warrants a transformational investment and design effort to develop a world-class experience for data.
The annual capital expenditure in China was $63 billion, the US $69 billion, South Korea $26.7 billion and India about $10 billion. Most data service providers in the developing world are supply, not demand, focused. But Indian service providers have been merely capital expenditure-led while catering to data.
With RIL Jio’s much-awaited launch, it has been unnerving to see incrementalism from large incumbents. RIL’s bet on 4G LTE when its ecosystem was not fully ripe has gained credibility. The likes of China Mobile have added 265 million 4G customers with an ‘early-mover advantage’, surpassing its 3G base of about 195 million.
Suddenly, the 3G bets appear weaker both technologically and experientially. Globally, video is the biggest guzzler of data and its form factor change to HD and 4K is a multiplier on data consumption. Currently, Indian networks struggle to provide a significant video experience for data users. The device ecosystem for 4G LTE, with price points touching .₹ 4,000 and availability of hundreds of models across bands, is bound to grow faster than envisaged.
Airtel seems to be the first one to unshackle the status quo and distance itself from Vodafone and Idea on the data supply capacity. First, Videocon’s spectrum (1,800 MHz in six circles) and then Aircel’s (2,300 MHz in eight circles) are a clear signal to fortify and consolidate its position in 4G play and, to some extent, hedge its 3G bets.
In an industry focused on supply, as demand could be a thousand times and spectrum is finite, market-share protection gets driven by the supply capacity a service provider fortifies.
Now that the market structure transformation from perfect competition to oligopoly seems inevitable, the minimalistic approach of Vodafone and Idea towards data creates a paradox. This consolidation is pushed by RIL’s overhang rather than policy triggers. However, even in a three-four players’ markets, the top two make money and the rest struggle.
RIL is expected to commercially enter the India data market towards the later part of this year with a new 4G data network that includes the power of 800 MHz coverage spectrum. With an integrated data ecosystem play involving devices, content, services, storage and analytics, RIL seems to be building a differentiated play.
RIL’s advantage is that it has a very low existing benchmark on customer experience to breach. But its challenge is that we have yet to witness a successful delivery of such a complex integrated data play, even internationally.
Also, no matter how strong an infrastructure one deploys, the on-ground optimisation of networks leading to a differentiated customer experience has a trial-and-error component involving consumer feedback and time.
Also, customer experience on data is not a linear delivery of network but a collective output of its peripherals including billing, IT systems, etc. Most importantly, the biggest users and evangelists of data are the young data natives. To get any brand to resonate to this target group may not be an overnight exercise.
RIL’s entry into the Indian data and internet market has formidable expectations from all stakeholders, leading the largest incumbent to break away from its rivals and making them appear tentative. The Indian market is finally destined to be a four-player game where the new entrant will gain at the cost of incumbents, at least in the short run.
However, data is all about a non-linear world where the theory of winnertakes-it-all does not apply. It is customer experience, as opposed to price, that will determine the winner.
Data is about indoor experience. While it may feel good to have 4G on mountains and in the wilderness, let’s get going — on public demand — to make it work in cities and in buildings first.
The writer is former CEO, Bharti Airtel
4G? No, thanks. Finding god is easier