Win Win strategies for telcos and their ecosystem players

Innovative pricing, product features, bundling with ingenious revenue share arrangements are possible.

Innovative pricing, product features, bundling with ingenious revenue...

In a pink paper op-ed piece 10 years back, I had bemoaned the fact that the Indian telcos were in fear of under leveraging their ecosystem, and would be bought to their knees with their engineering-centric approach ‘we will build, and they will come’ model of telecom growth.

Ten years later VAS as a percentage of their revenues is still a small proportion. It is about 10%. It should have been 50% after more than 20 years of being at it! Even though voice transmission was expected to remain the cornerstone of wireless business, the growth rate of non-voice was expected to outpace it five-fold during the same period (Booz, Allen & Hamilton, 2004)! This has not happened in India at least.

Why is this so?

First, the shift from a market paradigm dominated by rapidly commoditizing products viz. voice-SMS (comfort zone) to a paradigm of multiplicity of data and other services (uncharted zone – where certainty of demand is uneven, though upside potentially significant) is not an easy one. Wireless carriers today need to make seismic not subtle changes in their mindset. Having engineering centric DNA has seen its sunset years. Nor is bringing in FMCG managers. Technocrats – with nimble and keen understanding of technology, and having done so within consumer businesses is the new right stuff.

Currently, revenues accrue from connection, whether it is time or volume-based fees. Companies charge consumers to access their greatest asset: their networks. Because revenues have thus far been derived from charging rent for use of networks, carriers have been embroiled in brutal competition on pricing, and network quality. This time could have been better spent on forging third party (renters) collaboration with third party partners to allow use of networks as a virtual distribution channel. This means closer integration and competition amongst spectrum owners, handset manufacturers, content owners, software vendors and application developers. For e.g. OTT/ twice- over- OTT seem both a threat and opportunity. I look at it more as the latter. While OTT players have clearly benefited in round one. Telcos need not feel short-changed. That is indeed the lay of the land. Telcos and OTT today have become closely intertwined, where the latter can’t do without the telco, and vice versa. Innovative pricing, product features, bundling with ingenious revenue share arrangements are possible. I can think of several ways to extract monies from currently popular OTTs without upsetting the apple cart, and thus leading to enhanced revenues for both. This is based on the premise that telcos are not the only service