Monday, December 29, 2008

New Year Wish for the Indian Telecom Sector

One thing that the telecom industry seeks in 2009 is the establishment of a predictable regulatory and policy environment. The Indian telecom sector has grown at breakneck speed in the last ten years since New Telecom Policy 99; we have achieved much more in the first decade of deregulation in the telecom sector than any other country has. The overall policy framework has supported entry of several new operators, a dramatic reduction of tariffs and consequently, an exponential growth in subscribers.

However, this rapid growth has also been accompanied by frequent changes in policies and regulations related to the conditions of entry of new players and operations of existing service providers. And in a number of cases, these changes have been preceded by or led to controversies and often, legal battles. Not only have they created confusion amongst operators and investors, but also failed to address the problems.

One of the oldest surviving issues is that of customer choice for long distance calling. In spite of a 2002 Telecom Regulation Authority of India (TRAI) directive to all operators to implement carrier access code within 3 to 18 months, customers are still awaiting this choice. And strangely enough, the TRAI dropped this Directive recently citing non-implementation as the reason! Those operators who invested in long distance licenses on the assumption of direct access to customers have had to since the reset of their business plans.

Similarly, about two years ago, the TRAI recommended the introduction of resellers in the International Private Leased Circuits segment; this licensing change was brought about purportedly to bring international bandwidth prices down significantly. Yet, not a single reseller has been licensed to date! Perhaps, there was no real or urgent need for the introduction of resellers, or customers have been deprived of more choice and lower prices.

Global benchmarks and experience suggest three major changes that can help create a more robust and predictable regulatory environment. Firstly, in order to truly implement the underlying purpose of bringing TRAI into existence, DoT must be mandated to accept and implement TRAI recommendations in totality and immediately. Worldwide, the policy and regulatory functions rest with one agency, thus leading to certainty of policy direction. There is no reason why only a handful of TRAI’s nearly 30 “recommendations” in 2008 should get accepted. 

Secondly, TRAI must be given powers to penalise errant operators. There have been several instances of non-implementation of Trai orders but the regulator has been unable to do much about this. Finally, TRAI should be staffed with professionals with technical, economic and regulatory skills, including those with international experience and private sector participation. Today, TRAI attracts only government officials on deputations or after retirement. Not only are they often conflicted, but also lack the appropriate capabilities to develop forward looking policies, proactively anticipating technology and market trends.

Investors, both international and Indian, have pumped in tens of billions of dollars into the vibrant telecom sector in the last few years. Gains due to exponential market growth have managed to compensate for the disadvantages of an uncertain regulatory environment. Over the next couple of years, in an uncertain economic condition and with relatively slower growth, predictability of the regulatory environment will be necessary to attract further investments.

(This article appeared in the Financial Express on 28 Dec, 2009.)

Friday, November 21, 2008

The Personal Web

A popular PC brand's tagline is, The Computer is Personal, Again... well, they could not have got it more wrong. Over the last few years, consumer behavior (demand) has shifted away from 'computing' to 'communication', 'collaboration' and 'entertainment'. The computer is, in fact, a relatively inferior device for most of the needs of today's generation. Its lack of portability / mobility and high power consumption make it a rather 'impersonal' device. 

Today, there is a surge in the device world - smartphones, mp3 players, LCD & plasma TVs, cameras are emerging as complements and in some cases, alternatives to PCs. While computer sales at about 200 million per annum are still amongst the highest in (hi-end) digital devices, more than 400mn other digital devices capable of entertainment, communication, content, etc. are being sold out there. Most of the consumers own more than one device,  often used inter-changably for some services. Take for instance, photography or video recording. Most mobile phones can perform the imaging functions reasonably well (for the lay person); yet people still do own digital cameras and camcorders. Similarly, e-mail and gaming are available on many devices including computers, mobile phones, smartphones and gaming consoles. Additionally, many of these devices are getting networked (or at least network ready). WiFi is now available on all laptops, most PCs, smartphones and gaming consoles, some cameras, music systems, mp3 players and special devices.   

In such a world, where the customer could choose from hundreds of devices and have Internet access from many of them, the Web emerges as the platform of choice for most services. To be successful in this world, a service should have at least the following characteristics:

Identity: The service recognizes who you are and customizes the content / offering based on your choices or previous patterns. Your identity enables you to access multiple services and carry your content / preferences across all of them.

Context Sensitive: The service recognizes what device and / or access mechanism you are using, and adapts itself accordingly; yet, it preserves the core features based on your Identity.

Storage: For the Identity to be preserved across contexts, your content, preferences and history need to be stored or hosted centrally.

Of course, Google is the leader and champion in this world, having transformed our online experience. With a Google identity, you can access all your e-mails, contacts, photos, videos, chats, documents, news headlines, stocks, blogs, maps... well, pretty much your life, perhaps, from any device, any location.  With the latest additions of the Chrome browser and Android mobile paltform, Google is reinforcing our ability to have this seamless experience, irrespective of access mechanism. While Google is the most successful in leveraging the "Personal Web", others like Facebook, Skype and LinkedIn have also made significant progress in recent times.

The Personal Web experience is not limited only to consumer services; businesses can also now create truly office-less work environments. Enterprises can roll-out hosted applications, including ERP, CRM, Salesforce, collaboration and even, voice, on private IP networks and/or the public Internet, in a highly secure and cost-effective manner. In fact, the success of Google in the small and medium business space reflects the opportunities for greater efficiency and cost savings that large enterprises are probably missing out on. 

I had said in an earlier post that Service Providers (as against Device Providers or Network Operators) would be the winners in the mobile world. The same holds true for the entire Communications industry. Networks are almost a commodity and hold no opportunity for differentiation and consequently, pure network operators have limited opportunity for a value upside. Devices are usually a one time purchase (till the next upgrade or replacement, at least) and therefore, device manufacturers have little scope for an ongoing customer engagement. Services, on the other hand, can leverage the capabilities of networks and devices to create a compelling and ongoing experience; thus, service providers have the best shot at long term value creation.

Customers, individuals and businesses, are of course, the ultimate winners. They can choose the best of all worlds from amongst networks, devices and services - mix and match them to suit their requirements. 

The Web is Personal, Finally... 

Monday, November 17, 2008

Global Influence

Recently, Global Telecom Business, a leading telecom journal, published a list of the Top 100 influential people in the telecoms industry. It was widely reported in India that seven Indians had made it to the list, although if one were to be pedantic, only four were directly connected to the telecom business in India. It is a matter of pride to me that two of the executives in the list belong to Tata Communications, Srinath at No. 8 and Vinod at No. 68. 

I read comments on some Indian blogs that it was surprising that the names of a few other large Indian telecom operators were missing from the list. Well, it was not so surprising to me, partly because the article begins with the caution that the list was biased towards US and European executives because of the nature of the survey. 

More importantly, the list was about people who were significantly influencing the global telecoms industry. While size of operations is indeed a factor that drives influence, it is not the most important one. Influence has to reflect in changes brought about to the market, in terms of customer behavior, business model, economics or competitive positioning. Those that influence have a clear idea of what the future of the industry will look like (not just that of their company) because they will drive that future.

Rightly so, this list is led by the Google trio, and followed closely by Steve Jobs. All of them, in their own way, have shaken up the telecom industry. It is interesting to note that that the Top 2 influencers of the telecoms industry do not belong to it, well, not by traditional definitions at least. This reflects the 'influence' that Service Providers (or platforms) will have on future customer behavior and industry dynamics (see earlier post on the topic here).

The influence of China (its scale and its policies) on the world is reflected by Li Yizhong, the Chinese telecom Minister, at No. 3.

Finally, Srinath at No.8 shows how rapidly one can change the world order... less than 7 years ago, his company was a public sector monopoly in India; today it is recognized as a global challenger with the strides it has made in the international voice and connectivity business, both wholesale and enterprise. With its focus on new technologies (Ethernet, MPLS, Wimax), managed services (Telepresence, security, hosting) and emerging markets footprint (India, China, South Africa, Asia, Middle East), it is poised to play a leading role in the global wholesale and enterprise markets.  

I look forward to greater innovation and game-changing moves by these influencers.

(I would normally avoid writing about my employer or my colleagues, but I felt that I had to make a mention of this topic since it is really about industry dynamics and influence.)

Friday, November 14, 2008

Succeeding in the New World

It is well accepted today that many of the global economies are facing a slowdown. The combined effect of the mortgage crisis, energy prices and consequent meltdown of Wall Street has taken its toll on even the resilient economies of China and India. The financial services industry is worst hit; other sectors including IT, auto and retail are also on the downturn.

To beat a recession, companies must manage through it with minimal injury, usually through cost cutting. However, it is also a time to emerge stronger for the morning after, by growing into new markets, strengthening supply chains and developing innovative business models. Whatever be the strategic objective, communications technologies and services can play a critical role in helping corporations navigate through the uncertain times as well as prepare them for tomorrow.

Conserve: Traditionally, businesses have focused on cost reduction during a recession, usually, by going after G&A and marketing costs. Global expansion and collaboration do add new administrative and marketing costs and create a situation where businesses have to find new avenues of improving profitability. There is also a need to be increasingly conscious of the impact of business activities on the environment; conserving energy and carbon emissions, along with costs, is the primary mantra in current times. The emergence of hosted or managed services for communications services and applications enables businesses to expand their capabilities without many of the associated costs and overheads.

Enterprise applications including ERP, messaging, and security offered by service providers ensure that all stakeholders can have a seamless experience, irrespective of location and access mechanism. Managed services like messaging and security, not only reduce operating costs but also free up valuable capital resources. The managed services model creates greater focus on core, market-facing business strategies and processes by letting specialist service providers manage the non-core activities. Similarly, data center consolidation and outsourcing can provide major savings through scale of real-estate, power and management. Further, virtualization provides ‘multiplier’ savings in terms of capex utilization, flexibility, power efficiency, disaster recovery efficiency, etc.

There are also several customized “cloud” services to address the demands of specific industry verticals. For instance, hosted contact centers enable mid-sized BPOs to scale their operations with limited up-front capex and pay as they expand their business. Services like public Telepresence rooms, in addition to their power of collaboration, provide considerable savings in cost, eliminating travel and other associated expenses as well as providing other intangible savings in carbon emissions and employee productivity.

Collaborate: Developing countries, growing at over 8.6% p.a. over the next five years, provide significant new market opportunities for large corporations that face demand saturation in the developed countries. This rapid growth in addition to the fact that 80% of global population will be in the emerging economies, makes these markets a must-enter for most multi-nationals. Global expansion will result in globally distributed teams based on the availability of best resources to run global businesses. Supply chains, downstream and upstream, tend to be spread across countries but need to work seamlessly as an integrated, virtual unit. Managing people across locations and building a shared organization culture is the biggest challenge for companies in this new world. Moreover, it is critical that companies create real-time collaboration mechanisms across the extended organization for the creation of new products / services and taking them to market ahead of competition. 

Global Virtual Private Networks (VPN) using MPLS and Global Ethernet solutions enable the creation of secure, multi-location wide area networks with high levels of scalability and flexibility. Bringing new offices online or increasing bandwidth between them or implementing a new application globally has become almost as simple as installation of a plug and play device.

Additionally, businesses can choose from a variety of platforms, including high definition video conferencing (Telepresence), next-generation content delivery networks and converged services, to engage more effectively and in real-time with their stakeholders. It could be a BPO that wants its engagement managers to brief their clients in North America and Europe using Telepresence, face to face every week instead of waiting for the monthly on-site reviews; it could be a fashion products company that uses a content delivery network to provide web-based, video training to its sales teams and agents across Asia the day prior to launch of its next best-seller. It could also be any company whose leadership and management teams use unified communications systems to engage and work as a single team, across multiple priorities, geographies and time-zones.

Innovate: It took the “telephone” nearly hundred years to become a globally adopted and mainstream product. Today, new services and products are launched in days and reach the peak of their life-cycle in just months. The rapid shortening of the consumer adoption cycles creates new opportunities and challenges. The willingness of customers to try and accept new products (and providers) enables companies to enter new markets and challenge incumbents. On the flip side, companies now have very short time-windows to launch services and recoup their investments, before an alternate product comes along or consumer preferences change. Simultaneously, the saturation of traditional markets is forcing businesses to identify new segments that were hitherto untapped or were not suitably targeted. This also requires the identification and adoption of new and/or more appropriate channels that can create the time, cost and focus advantage of reaching a market. The Internet has been at the heart of most innovations in recent years; it continues to be so, particularly with the re-invention of the www as Web2.0.

High bandwidth backbone and access networks and huge cost effective storage are providing the impetus for digitization and online distribution of most forms of content and information. Education – knowledge management and training, in the corporate context – can now be disseminated in a highly interactive and customized manner, across multiple locations using IP-based training and conferencing solutions. Content providers can reach their customers much faster; for instance, an online gaming company with an appropriate CDN solution can deliver new games 4X to 10X times faster than without.

Voice and basic data communication enabled the first wave of outsourcing – contact centers and transaction processing; with advanced video communications facilities, BPOs can create now seek to outsource activities that require intense, face to face interaction and collaborative knowledge sharing. Wireless and mobile technologies have also helped expand the reach of services to markets that were earlier out of bounds. Banks, particularly in emerging markets, can now use mobile ATMs with wireless connectivity to open up whole new, untapped rural markets for financial services.

Businesses have a variety of choices, both in terms of services and service providers. A communications service provider can be more than just a vendor. In the context of the shift to managed and hosted services, the communications provider should be one that has domain expertise and can provide customized business solutions rather than just network connectivity or infrastructure. In these times of uncertainty, it is also important for IT managers to partner with service providers that are financially robust. There are only a handful of communications service providers that have a truly global presence in voice, data, IP and managed services. Given that telecom is still a reasonably regulated industry in most countries and that scale, infrastructure ownership and domestic presence have a crucial impact on service delivery capabilities, IT managers will need to make the trade-off between global coverage and in-depth, local presence in key markets / destinations. 

The world has seen more changes in this decade than it has ever seen in the past. The next few years will probably accelerate this change, in political, economic and social spheres. Collaboration and innovation are the heartbeats that will drive this new networked world. It is a world where the strategic adoption of communications and services will play a decisive role in differentiating winners from the also-rans.

This has appeared as an article or an interview in various publications: 
Asian Channels (doc version)

Tuesday, October 21, 2008

Bad Times, Good Times...

I remember reading somewhere (though I am not able to find the reference now, not even with the help of Google!) that usage of telecom networks goes up significantly during periods of economic crisis. While it might appear counter-intuitive -- why would consumers or businesses spend more during bad times -- there is a very simple social behavior aspect that can explain this phenomenon. Communication helps create a security blanket.

Periods of uncertainty, particularly economic slow-downs that can be spread over months and years, cause us to seek comfort in family and friends. Partly to keep track of what is happening with our loved ones and partly to gain confidence from the social network. Such times are also periods of less and erratic work, thus, providing more opportunities to share and bond. Given that our friends and family might be spread across locations and travel costs are reasonably prohibitive, telecom is the most appropriate way to stay in touch. With improved technologies that enable photo and video sharing and various other ways of 'networking', it will not be surprising if we find that the current economic crisis encourages more spending (of time, at least) on mobile phones and social networking sites.

Does this really mean that it would be good times for all telecom companies? Obviously, no. Consumers are unlikely to be willing to spend much more on telecom services than they did normally. In fact, one can expect greater discount-seeking behavior. It would take the form of shifting to unlimited packages or signing up for 'friends & family' schemes. Economy plans, even of lower quality, would become acceptable. Mobile operators should
consider creating packages that encourage group calling or conferencing and data sharing, like photos and video clips (MMS). ISPs or alternate operators could drive the usage of VoIP or Internet Telephony services, particularly for long distance calling. There would also be opportunities to innovate with personal video calling and conferencing services. Such services can also be used to drive increased adoption of Internet services amongst unaddressed segments like senior citizens. 

The recession in several developed markets and slow-down across the world offers  communications companies an opportunity to influence and support our psychological need to stay connected during bad times. Service providers can strengthen their relationship / engagement with consumers by becoming an integral part of their social lives. As a result they can also try to recession-proof their business models. 

ps.    If you have come across any research or evidence to support or dispute the above hypothesis, I would be interested in hearing from you.

pps.    Apparently there is some other research that proves that the need for family bonding (and perhaps, the spare time) during economic crises also results in a spurt in baby births. Interesting as the thought is, I guess some other forum can do more justice to that aspect of bad times, good times...

Tuesday, October 14, 2008

Game-changing Devices

The battle for the consumer's mind has never been more intense. The balance of power between the three major segments of the communications world is rapidly shifting and it is difficult to predict winners. 

Telecom service providers, handset & device manufacturers and the content / software companies are all vying for customer ownership. Only one thing is for sure - telecom companies that had a traditional edge in this battle because of their ongoing / recurring commercial relationship with the customer are now losing out.

I will use the example of the iPhone and my recent experiences to illustrate the point in this post. 

The mobile operator typically had the strongest relationship with a mobile subscriber. From choice of device to service provisioning to customer service to billing, the telco was always the primary face of the mobile service. In the few cases that the customer used any mobile content or data service, the operator would channel the services through its portal. 

In some markets, however, the choice of device was mostly with the customer. So handset manufacturers would try and attract users to their latest models with accessories that usually had no connection with the mobile service. FM radio, Bluetooth and external memory were actually making the phones more than just phones, and in a way, taking away revenues from the mobile operator. But the handset vendor had limited ongoing relationship with the customer -- perhaps once in 12 to 18 months when the device came up for replacement. 

By controlling the content / services portal and with its ongoing billing relationship, the mobile operator dominated the customer relationship. The user had limited choice in what more she could do with the phone, except by changing the device or the service or both -- but we all know how expensive and difficult that is.  

For the first time (almost), the iPhone has tilted the balance of power significantly away from the telco. The phone hardware has some exciting features but not exclusive. Similarly, the user interface is extremely intuitive but lacks some basic features. But the killer app is its App Store. With thousands of third-party applications in the store, many being added daily, Apple now dominates the customer relationship. 

The mobile operator is just the (wireless) pipe provider. 

I have been a subscriber of Vodafone (earlier Orange and Hutch) in India for nearly eight years. I have admired their capability to innovate and create interesting applications / services. However, for the last six weeks since they launched the iPhone, they have lost my attention. I have downloaded nearly fifty applications which are the center of my attention (when I have the time to spare). True, many of them use the Internet and therefore, I do continue to provide Vodafone with a revenue opportunity for the EDGE/GPRS access, but that's dumb pipe. 

Vodafone could have used its 'relationship' with Apple to create unique services that would have combined the strengths of the services platform and network access - to do something that an ordinary third-party developed cannot. But it has not done so. Like most other operators that have launched the iPhone. Today, they are hoping that their (near) exclusive commercial relationships with Apple will tide them through. They are mistaken.

Mobile operators would do well to learn from the Broadband experience. In most cases, the Broadband operators have become dumb pipe providers; Google, Facebook and others  dominate the customer engagement online. The traditional telco response to such situations is to flex their (monopoly) muscles and choke access speeds, thwarted either by regulation or user pressure. Yet, there are also a few Broadband providers that have managed to fight back and create services like IPTV that rely to a large extent on network capabilities. 

Let me go out on a limb here and make a prediction. The likely winners in this battle will be the guys with the services platforms that pour life into the dumb pipes and nearly dumb devices.

Sunday, October 12, 2008

Coping with Data Demand created by Web 2.0

So, how is the telecom industry reacting to the exponential growth in bandwidth demand, what are some of their strategies to remain relevant and succeed in this New World?

Firstly, telcos are doing what they like best - building infrastructure.

There is a significant activity globally, in new submarine cables and lighting up more capacity on existing cables... as one would expect, a large part of this activity is 'centred' around the emerging markets regions of Asia, Middle East and Africa. At last count, over $5 Billion was being sunk in the water, to build these cables.

While this does bring back the scare of the excesses of ten years ago, there are three big differences this time around: one, bandwidth demand growth is now for real and not based on some projected dot com boom; two, most of the investments are directed towards emerging markets which have traditionally been under-supplied with international infrastructure, and three, a large number of the projects are being driven by experienced telcos that have strong organic traffic to support these investments. 

But it is not sufficient to just strengthen backbone networks; the biggest challenge is at the Access level.

There is huge mismatch between existing access networks and the networks that are required in this new world. Broadband networks in developed markets were built for the first wave of Web, assuming low contention ratios. In a text environment, you would download a page and read it for a few minutes before the next hit. Those calculations go completely wrong when large numbers are watching a live broadcast - say, of a cricket match on the net.

It is estimated that $500 Billion to $1 Trillion would be required to build out the fiber and IP networks reqiured to support the emerging demand. Many countries like Hong Kong, Singapore and the US are working towards 100Mb networks to the home.

Of course, in the Indian context, that would be a pipe-dream. Over the next 5 years, most of us should be thrilled if we got a reliable 1Mbps to our homes. Wireless technologies like Wimax will play an important role in most of the emerging markets' broadband enablement.

From a telco perspective, even this is not sufficient. As the content and applications dominate the consumer experience, telcos are slowly losing their relevance from a customer ownership perspective. The Web 2.0 companies would love to relegate the telcos to being dumb pipe providers.

Many of the telcos are therefore moving to a bundling model, with IP services riding on top of the access. It is not clear whether this model will work - the telcos' earlier walled garden models have mostly failed. The telco challenge is that most of them are not prepared -- genetically --
to shift to a services mindset. Some of them have even tried the blocking tactic, trying to discriminate some sites against the others - choking speeds when users access specific sites and freeing it up, for their own content, for example. This is the heart of the Net Neutrality debate in the US. The content companies have won the initial rounds in this battle.

Infrastructure versus Innovation... it is tough to predict who will win.

A similar, but less bloody battle is also emerging between the telcos and IT companies. Most Telcos are moving to an "ICT" strategy, where they are combining services with network, particularly managed services like hosting, security and collaboration. The IT companies have also been moving towards these services from their traditional IT maintenance and outsorucing models.

It is likely that telcos will have an upper hand in services that are network or cloud based - Telepresence, CDN and security, for instance. They are also, in many cases, seeking to collaborate with the IT companies in addressing end to end demands of business customers.

Finally, a word about the economic implications of these developments. We are seeing a virtuous cycle where availability of new applications drives demand for more bandwidth and attracts new subscribers. The resulting growth in revenues is ploughed back into network and capacity enhancement, which in turn encourages new, higher-end applications.

We have seen this happen in the mobile space in India and other emerging markets, and are begining to see the initial signs for the broadband market. It is interesting to note that the developed markets have a slightly different challenge. Web 2.0 is creating the demand for bandwidth, but not many new users, since the markets are getting saturated. Since, most of the existing users are on fixed unlimted packages, they are consuming more bandwidth without any growth in revenues. The fall-out is lower investments and possible future shortage in capacity - already several broadband companies in the US are putting download caps for their users to overcome this challenge.

In conclusion, 300 million broadband homes and most businesses are increasigly using Web 2.0, as part of their daily lives, creating a huge demand for bandwidth. Telcos will need to invest more than $500 Billion in network and capacity enhancements, and more importantly, they will have to radically change their business models to succeed in this New World.

Friday, October 10, 2008

Entertainment and Web 2.0 - The New World

About 15 years ago, the Time Magazine carried a cover story about "The Strange New World of the Internet"- well, we can now say that we are in this New World.

A world where three distinct forces are impacting us: globalization, the ascendance of China and India, and Web 2.0. 

It is a new world, where boundaries both economic and cultural ­ are coming crashing down; where emerging markets have materialized as strategy drivers for most corporations; and, where communication has become as it ought to be ­ one-on-one and interactive.

While there is a lot to be said about the first two forces, this post will focus on the impact that Web 2.0 is having, on consumers and businesses. A follow-up post will discuss the implications for the telecom sector.

When the telephone was introduced, it took this great invention nearly 100 years to become popularly adopted. The cell-phone fared much better, in only 20 years it was available in more than 80% of the world. And then, shift to 2005, a new service was launched which in less than 2 years had become the leading service in its class, available worldwide.

Yes, we are talking about YouTube that has put the power to express and share in our hands. Today, everyone has the chance to become a star, take Judson whose 6 minute dance video is one of the most widely watched performances ever with over 100 million views in 30 months! YouTube serves up hundreds of millions of videos daily making it one of the largest media companies in the world. The other similar phenomenon is iTunes which has become the   world's largest diistributor of music -- ahead of traditional retailers like Walmart -- having sold 5 billion songs in the last few years. It is now trying to repeat the performance with Movies - nearly 50,000 movies are rented or sold on iTunes everyday.

Undoubtedly, the media industry is in the midst of a major re-alignment.

If iTunes, YouTube and other such sites have changed the way we create, share and consume content, sites like Facebook and Orkut are changing our social behaviour. There is empirical evidence that large numbers of young people have more friends online than otherwise, and surely, they are more comfortable "hanging out" - chatting, sharing photos and videos and playing games with their online contacts than say, playing galli cricket!

These interactive platforms and capabilities are also creating other new applications like E-learning and Digital-cinema. I personally believe that Education can be transformed by the capabilities of Web 2.0: why can't we move to a world where all people have access to good quality education, in an interactive manner, independent of geography and time-zone? What an Idea! 

The spread of the Web 2.0 phenomenon is assisted by the availability of new access devices that have challenged the computer's dominance as the Internet access device. Whether it is the iPhone or the G-phone, gaming devices like Wii or Xbox, book readers from Sony or Amazon and VoIP phones, new exciting applications are being enabled through more appropriate end-equipment.  This is particularly relevant that we now have new segments of users, young and old, and from emerging markets that are now beginning to access and discover the power of the Web.

Already, Broadband is reasonably well distributed across the world: AsiaPac contributes nearly 40% of the 300Mn broadband homes and is expected to drive large part of future growth. 
We are also seeing the development of strong revenue models to support Web2.0 - consumers are showing a willingness to pay for the content they consume and as they continue to substitute their media & content spend from the physical world, one can expect online paid content market to grow rapidly.

While the visible face of Web2.0 is in consumer applications of music, video and social networking, businesses are also adopting the power of these technologies to improve how the communicate and collaborate -- amongst themselves and with external stakeholders, like customers, partners and employees. This could be in the form of marketing,  training,  recruitment, market research, etc. Particularly in an environment where there is considerable pressure on corporates to contain operating costs, the Web can provide very effective business tools at unbelievably low costs.

And if consumers and businesses adopt Web 2.0, can politicians be left behind?

It is believed that campaigning using the Web and SMS will play a decisive role in this year's US Presidential elections, taking the messages to voters in a highly customized, interactive and personal manner. Even in India, politicians have begun using these technologies to reach out to the 'so-called middle class' that traditionally stays away from political activities and would never attend a political rally.

So, what does all this do to the data traffic on the Internet? Already, it is believed that video-based traffic constitutes over 50% of all bandwidth consumption. Over the next few years, nearly 80% of all traffic - on public Internet as well as private networks - would be video. This trend is clearly reflected in the growth of Internet bandwidth - 50-60% per annum globally. What is more interesting is that developing markets are catching up in most of these markets, including India, we are observing 100% per annum growth in bandwidth demand.

It is estimated that over the next decade, we will consume 100 times more bandwidth than we do today!

So, how is the telecom industry reacting to this exponential growth in demand, what are some of their strategies to remain relevant and succeed in this New World?

(This is derived from a presentation made by me at the National Telecom Seminar of the Symbiosis Institute of Telecom Management recently. Part Two of this post will follow soon. Time magazine image courtesy damclean)

Wednesday, October 8, 2008

Emerging Markets Calling...

The Indian telecom market has not only grown at a scorching pace in the last 5-6 years but also created some world-class companies that have now emerged as potential global challengers. There is now great level of excitement amongst investors, customers and bankers worldwide about the next moves of the Indian telcos. Whether it is mobile mergers or submarine cable builds or Wimax investments, India appears to be in the thick of things.


Over the next few years, growth in telephony will be driven by emerging markets in Asia, LatAm and Africa. These markets, with low teledensities, have been using wireless / mobile technologies to leapfrog several generations of telecom.  Emerging markets are also leading the growth in data and bandwidth consumption partly driven by increasing Broadband penetration but more importantly on the back of growing enterprise connectivity. These markets, typically growing 6-10% p.a., are now attracting attention from MNCs as growth or revenue opportunities, and not just as cheaper alternatives for back-office functions.  We are also seeing the rise of the new multinationals, from India, China and other rapidly developing economies, creating the reverse, outbound flow of investment. An obvious consequence of this economic activity is the need for improved cross-border communications and networking services. 

Some of the Indian telcos like Tata Communications made significant investments in global submarine cable networks at a time when most western telcos, smarting from the excesses of the previous decade, stayed away from the game. The previously under-supplied regions of Asia, including India and Middle East and Africa are now the hot-beds of cable laying activity, with Tata Communications alone involved in at least half a dozen projects simultaneously. We are also now moving up the value chain through investments in new networks (MPLS and Ethernet) and the creation of managed services like managed security, hosting and collaboration, with investments of several billions of dollars. Not only do we have the advantage of growing local businesses, we also bring with us a distinct knowledge of operating in the complex business, regulatory and policy environments of the emerging markets. As Indian companies and multi-nationals seek to build and expand their presence in this new world, they have greater comfort in partnering with those that have global capabilities but are locally superior. 

Indian telcos may have the disadvantage of a relatively small home market - the Indian enterprise market is about $5Bn in size compared to most western markets that are 4 to 20 times larger. Being small and late to market however is possibly our biggest strength. Determined to make a mark and without the burden of legacy networks and systems, we can seek to successfully take on the larger, more established and usually bureaucratic competitors. In particular, as relative new entrants, we can focus on innovation around new services capabilities and commercial models. At the same time, ownership of the core transmission and IP infrastructure provides us the ability to create distinctive network or cloud based managed services. Our managed security offerings, for instance, combine superior technology platforms with the strength of a global, Tier-1 IP network. Similarly, the ownership of a global MPLS network and a unique private plus public room business model have translated into a world-leading managed Telepresence service.

Indian telecom companies are not yet amongst the largest in the world, perhaps we will never be as large as some of the big players from the US and UK. However, in several segments and markets that have the highest growth potential in future, one can safely expect us to play a leading role. As developed markets age and slow down further, India and other emerging markets will become the center of gravity for the new world of communications. We can proudly say “hello” to that. 

(This article also appeared in the Annual issue of Communications Today in October 2008.)

Tuesday, September 30, 2008

What is this New World of Communications?

A few people asked me, what is this all about? I could have written out a 500 word piece to explain it, but then... in this new world, why not use a video to share my thoughts on what is changing in the world of communications. In about seven minutes, you can go through a presentation that I have made on this topic at various fora, including at IIM Ahmedabad last week.

Agree? Dissent? Speak up or write in...

(Images credits here)

Friday, September 26, 2008

Better than being there!

Telecom is mostly associated with consumer services that one can either touch or experience: attractive mobile phones, content services and applications, calling cards, etc. On the other hand, most enterprise services do not lend themselves to any personal experiences. When was the last time you saw your IPLC or touched a managed hosting service? The power of communications services and their impact on businesses have to be often described through boring powerpoint slides or worse, complex network diagrams.

But now, things will change because we have the Aha! service that businesses are adopting rapidly across the world. Telepresence is dramatically changing how executives are communicating and collaboration, in a highly interactive manner, across geographies and time-zones. It is the killer app for business communication services.

What is Telepresence?

Telepresence is a next-generation conferencing technology that uses high definition video transported on fat pipes. This is still jargon. Let us simplify further.

Imagine a conference room with a dozen participants. They can talk to each other, engage in detailed discussions and arguments, or go through a Powerpoint presentation. All face to face, eye to eye. That’s pretty normal in any conference room, right? Now, what if half of the participants were ten thousand miles away. And yet, it was as if they were in the same room. That’s Telepresence. Better than being there!

(see video below)

Telepresence comes with voice activated microphones, surround sound audio systems, 54” LCD panels and high definition cameras that can capture eye-ball movement. Each of the TP rooms is designed as a half-table so that a full conference room environment can be created. A typical room can seat 6, although other smaller and bigger variants are available. In such a configuration, four rooms can be conferenced at a time, therefore enabling upto 24 participants in a meeting. Data / presentation sharing across all the rooms is available, thereby supporting document sharing and collaboration. Underlying all these are high-bandwidth (10-30Mbps) leased lines or preferably, an MPLS VPN.

The promise of Telepresence is to substitute travel that is normally considered essential for serious meetings or engagements that cannot be done over phone or even traditional video conferencing.

Does this really work? We have heard similar claims from Video Conferencing earlier!

I can confirm, from personal experience that Telepresence is hugely effective. There is sufficient evidence, anecdotal as well as research, that one can surely avoid travel – international and domestic – once TP is available. Cisco, one of the major providers of Telepresence technology as well as a major user for internal purposes, has statistics to prove that travel cost savings alone can justify the investment in TP.

But Telepresence is beyond just travel cost savings. Other benefits include:

Greater Collaboration: As businesses become more distributed and reliant on partners across multiple locations, success depends on the ability to create greater real-time collaboration mechanisms across the extended organization. Today, as a manager, I have to supervise teams that will not be all Mumbai based. I also have to work closely with colleagues, partners and customers around the world. Isn’t it far more convenient and effective to walk over to the Telepresence room for a face to face meeting than depend on an audio conference or worse still, get onto a plane and travel 18 hours!

Cisco has estimated that its benefits from improved collaboration (more & faster sales, and employee productivity) were almost FIVE times (5X) the savings from travel avoidance!

Employee Friendly: We live in highly stressful environments; economic crises, security concerns and reduced time for personal and family activities are putting enormous strain on the minds of executives. Telepresence, by avoiding travel and improving productivity, can play a major role in reducing these stress levels. This is invaluable.

Environmentally Friendly: Avoiding travel not only reduces corporate costs but also reduces related carbon emissions. There are ways to measure this value, but at this time suffice to say, this is our small bit towards preserving the Earth for our children.

This is all fine, but it’s probably prohibitively expensive – only for the Big companies…

It is true that Teleprsence requires relatively large upfront investments – $300,000 or over Rs 1.2 crore per room; at the same time, Wainhouse research shows that the cost of Telepresence is similar to that of video-conferencing on a per hour used basis. This is primarily because Telepresence gets used much more, almost 5-8 hours a day, compared to video-conferencing that is used 1-2 hours at most.

But more interestingly, it is now possible for all businesses to use the power of Telepresence. In a model that is unique to Telepresence (but not to other telecom services), Tata Communications has launched public Telepresence rooms where businesses or individuals can use the facilities on an hourly basis. For a reasonable rate, usually lower than the corresponding cost of travel, small and large businesses alike can experience the extended benefits of this technology and service. The public rooms are available in five Indian metros and in London and Boston. The company plans to extend this public room network to at least 100 locations by the end of next year.

(Cisco-Tata Communications video launching Public Telepresence rooms)

Years ago, while watching Star Trek, I was always impressed by the transporter that would let Captain Kirk be wherever he wanted, in a matter of seconds. Today, Telepresence can provide us a similar experience. Beam me up, Telepresence!

(Updated on Oct 15 -- with the launch of public rooms in UK and USA)

(Source: Telepresence vs. Videoconferencing, Wainhouse Research, Jan 2008)

Monday, September 22, 2008

India@75: What can India Inc. achieve in 15 years?

Vision has been defined by some as the setting of bold and audacious goals. Prof. Prahlad has indeed set India some challenging goals for 2022, one amongst them being ‘30 of Fortune 100 from India’. Given that today not a single Indian company makes it to the list and only 6 feature in the top 500, it is indeed an audacious goal. At the same, it is not unachievable. Five of the top 20 global companies in 2008, by market capitalization, are already from emerging markets. Fifteen years to 2022 is a long and adequate time in today’s world for Indian companies to break into the Fortune 100. 

One of the major reasons cited for Indian companies not being large enough compared to global peers is the relatively small size of the Indian market (the US pet food market size is as big asIndia’s entire FMCG industry, etc.). The trick, however, will lie in identifying opportunities that can leverage our inherent strengths and the rapid economic growth that we are experiencing. By 2022, India would be the third largest economy and will contribute nearly a billion strong workforce to the world. The market should provide adequate (volume) scale to create globally leading business models. Even today, the Indian mobile market is next only to the Chinese, in terms of size, and is growing faster than any other market worldwide. An additional challenge inIndia is to consolidate what are typically highly fragmented and unorganized markets. Leadership, in the true sense, in the home market is essential to achieve the scale that the Indian market can provide. Simultaneously, we also have to be prepared to access and compete in international markets if we truly want to achieve global leadership. 

The key task for Indian firms is to leverage the power of the billion in creating globally competitive businesses. In order to eventually become globally leading, we need to first focus on benchmarking ourselves to the best in the world, on service level, cost and productivity measures. This is important for Indian companies so as to even remain competitive in the domestic Indian market which is seeing the entry of several international players. Tata Steel became the world’s lowest cost steel manufacturer several years before it commenced its global ambitions. 

Being globally competitive will not be sufficient to achieve leadership. Successful firms lead through innovation, backed by open organization structures & culture and significant investments in research. We lag on both counts, more so on the latter. We have relied far too long on licensing technologies, reverse engineering and services models; now is the turn for us to create products, technologies and business models that will be replicated elsewhere. If over 80% of global incremental mobile adds are expected in emerging markets, who better to lead the implementation of profitable, low cost mobile business models than Indian operators? Why cannot India, a broadband starved country, drive the adoption and lead the growth of WiMax and other wireless broadband technologies? Thus, Indian companies are better advised to seek and succeed in opportunities in other growing, emerging markets rather than rush to the large but static markets of the developed world. 

The next few years will be at the same time challenging and full of opportunities. Several markets, including USA and UK, are reeling from economic slowdown and financial crises. Consequently, most MNCs are seeking to grow into India (and other emerging markets) making these markets more competitive. We have to defend our domestic turf, not by creating entry barriers but by taking on global players head-on. At the same time, weak global markets are throwing up interesting acquisition opportunities at attractive valuations, opening up new markets in USA and Europe. This will enable our companies to also enter and take the fight to the global markets. Indian companies will have to master this block (at home) and tackle (abroad) strategy to win in the emerging world order. 

So, can we get to 30 of Fortune 100 by 2022? My bets are in favour of us succeeding. BCG’s New Global Challengers report has already identified 20 Indian companies that have the potential to challenge and change the world. We have to just find ten more.

(A version of this article appeared in the Outlook Business June1-14, 2008 issue.)

Fix the Fixed Lines

(This was written about two years ago, but the suggestions are still valid and need to be implemented.)

I have not had a fixed line at home for several years now; my wife and I have four mobile phones between us and never felt the need for a fixed line at home. I thought, like many predict, that fixed lines would soon die. But just today, I applied for a fixed line at home. Not a fixed wireless, mind you, but the copper line that is uncharitably referred to as the plain old telephone service (POTS). 

Why did I need to take such a "retrograde" step? There were several reasons:

1. The quality of the wireless network is erratic. I am unable to depend on my mobile phone for long phone conversations, particularly official conference calls. With flexi-work and international calls at late hours, the need for a reliable phone line at home has become a must. 

2. Mobile call rates are still higher than that of fixed lines. Whether that reflects relative costs or not, it is surely true that calling from a wireline, particularly at high usage levels, is cheaper. My employer might be footing the bill, but still, why should I pay more when I call from a fixed / pre-determined location (home or office).

3. My mobile phone provides service to me as an individual, it can be shared only when I am at home. So if there is someone at home who needs to make a call when I am not home, say my parents or my child or a domestic help, the fixed line is a shared communication service. This is true even at the work-place where everyone does not necessarily have a mobile phone.

4. Finally, I must admit that I just like the convenience of using the fixed phone - the big black box which nowadays can pack in a lot of intelligence. While I need my mobile to be slim and light to fit into my shirt pocket, the form factor is not convenient for long conversations, particularly when you are in a fixed location. In spite of hands-free devices and bluetooth, voice clarity is still suspect on most mobile phones, even the high-end ones.

Just so you do not misunderstand, I am not saying that mobiles are in general inferior to fixed lines; just that in certain contexts, the POTS delivers greater value than a wireless service.

If there is, as demonstrated above, a reasonable case for the continuation of the fixed line at home, why is it that only about 15% of Indian homes have a fixed phone? It cannot be because of affordability: twice as many homes have cable TV at home, paying almost the same charge, every month. Further, data shows that the average # of mobile phones per home (in homes that have a mobile phone) is less than 1.5; given that household size in India is 4 to 5, there is clearly a gap in telecom coverage.  Lack of competition in the fixed services space and the fixation of policy makers on wireless growth has completely choked the growth of wireline.

Let me correct that to lack of effective competition. There are a few access providers rolling out wireline networks - cherry-picking the enterprise locations and high-end homes. But more interestingly, some ISPs have also rolled out various forms of wireline (cable, fiber, copper) networks. However, none of them get any encouragement to continue their roll-out. There are no clear policies for RoW permissions - every municipality, authority and building society charges its pound of flesh for allowing network creation. Having created the network, with a very high capex per sub (usually Rs 15,000 to 25,000 per subscriber), the ISP can only offer Internet and limited Internet Telephony services. They do not have the opportunity to offer basic services like voice, which even today contribute a large portion of telcos' revenues globally. Obviously an ISP cannot hope to compete with the incumbent , while addressing just a fraction of the customer revenue but with the full (or more) capex.

What needs to be done
* Allow ISPs to migrate to new category of access license: Unified Access License - without spectrum, for a nominal entry fee. On terms similar to UASL, allow ISPs to offer access services, including full Internet Telephony.

* Encourage competition in fixed line services by mandating local loop unbundling - perhaps starting with all non-metros.

* Legislate free RoW for all access licensees (recovering just the actual re-instatement charges) and mandate sharing of existing ducts - on cost recovery basis - by all licensed operators.


Creating a National Broadband Access Network

(This was written nearly two years ago; the suggestions remain valid and still need to be implemented.)
Singapore is considered a highly developed country and is used as a relevant benchmark for India, at least in the telecom sector. The Singapore Government has initiated an interesting and rather ambitious program to make the city nation the leading knowledge hub in the world. The masterplan called iN2015 (Intelligent Nation 2015), is a ten year blue-print to harness the power of infocomm for the nation ( One of the major initiatives within iN2015 is to build a Next Generation National Broadband Network (NBN). Just look at some of NBN's parameters: reach to 95% of all postal addresses, 100 Mbps capacity at each home / office on day 1 to be scaled upto 1Gbps in a few years' time! 

The most interesting thing about NBN is that it is being driven by the regulator / licensor, Infocomm Development Authority (IDA) as a public-private partnership. The model is simple. The IDA intends to license an operator to create a high speed access network as an equal access, wholesale infrastructure. All service providers would be able to lease this access network and offer innovative content and applications to their target segments. Considering the targeted bandwidth, only a fiber based solution (FTTX) would be feasible. A global search for the appropriate partner(s) in this initiative is underway, expected to be completed by the middle of 2007. 

In stark contrast, we have no such plan for the future, in fact, not even a discussion to arrive at such a plan. By defining Broadband at 256Kbps, we have already set our sights low. By treating Broadband Wireless as the panacea, we have converted a short-term bridging technology into our long term goal. By letting everyone do their own thing, we have ensured that the investments that are required to create a robust, national infrastructure are sub-optimally duplicated by several players.

India is a much "tougher" country than Singapore from a broadband perspective; the sheer geographical size of India that is required to be "broadbanded" is many, many times that of Singapore. More the reason why we need to plan today, if we want to be anywhere comparable in ten years' time. 

What needs to be done

* Accept that true broadband will require a fiber-based infrastructure, even in the last mile.

* Develop a plan to create a National Broadband Access Network; select an operator / consortium to roll-out the network in phases, over the next 5 years. The NBAN operator should be a pure wholesaler (similar to IP-2 license) and cannot directly be a service provider. The NBAN operator must get automatic and free right of way across the country, and could be selected on the basis of lowest subsidy required for a target tariff.

* Release spectrum in 2.5GHz and 3.5GHz bands immediately for WiMax roll-out during 2007 - this will enable basic broadband services to be introduced in a ubiquitous manner.

What Ails Broadband in India?

(This was originally written two years ago; nothing much has actually changed since then!)

1000,000,000 people
700,000,000  young people
600,000,000 literate people
180,000,000 telecom subscribers
100,000,000 with higher education
60,000,000 cable pay TV homes
40,000,000 Internet users

... and just about 2,000,000 broadband subscribers. Broadband, which by the way is defined in India at <=256Kbps: just about enough speed to let you experience the new, emerging Internet. The Indian Govt. has declared 2007 as the year of broadband, and a target of 9mn subs has been set for the year.

Just so you know, China has about 75 million broadband subscribers -- 60% of its Internet subscribers have broadband.

Why is a nation such as ours, IT superpower and aspiring global superpower, so poor when it comes to broadband penetration?

1. Very Poor Fixed Line Infrastructure
Most countries that have a high broadband penetration have (a) high wireline penetration, and / or  (b) robust cable infrastructure. Simply speaking, if you do not have the basic infrastructure, you cannot provide a superior service such as broadband. Unfortunately for us, neither of these two conditions exist in India.

There are about 40-odd million fixed lines, of which only about 30% - about 10mn - are capable of providing broadband. In recent years, there has been almost no investment in increasing and/or improving the quality of fixed line infrastructure. The country has added 140mn wireless subscribers in the last 5 years, as against just 5mn wireline subs. While  lack of focus on wireleine by the incumbents, BSNL and MTNL is an important factor, the blame must really be borned by the regulatory and policy regime which has not created an environment to encourage competition (and thereby, investment) in fixed line infrastructure / services in the country. The TRAI had recommended  unbundling of the local loop as a step towards limited competition, but as has now almost become a norm, the TRAI recommendations were not accepted by the DoT.
Less said the better about cable infrastructure. It is a highly fragile and completely unregulated cobweb of many thousands of independent networks. It will take an investment of at least Rs 200 billion to upgrade the cable last mile to make it 2-way and broadband capable. Nobody, it appears, is willing to take that challenge up. 

2. No Encouragement to Competition
It is well-recognized that the mobile revolution in India has been driven primarily by competition: 6-7 operators across the country. Private operators were licensed years before the incumbents were allowed to enter the mobile market; several steps have been taken towards creating a level playing field for all the licensed mobile operators. On the other hand, in broadband, there is absolutely no policy measure to encourage private operators to enter and compete; this in spite of the fact that none of them have any last mile infrastructure to speak of, and therefore, require considerable support in the initial years.

The incumbents that are riding on public-funded fixed line infrastructure have - in almost a predatory manner - dropped tariffs so much that India has, at the same time, the lowest broadband ARPU and the poorest broadband penetration in the world! Wireless broadband (read WiMax) is generally expected to become the competitive alternative - but there has simply been no urgency in creating the policy environment to encourage wireless. TRAI has finally issued its recommendations - suggesting that WiMax be implemented in the 3.3 - 3.6 GHz bands while the rest of the world is moving towards 2.5GHz. There is no clarity when these recommendations will be accepted and subsequently, implemented. One can guess that it will be late 2007 before any real competitive action will begin in broadband. Meanwhile, BSNL's juggernaut will continue - they have now announced 2Mbps speeds (up 4 times from 512 Kbps) for the same tariff.

Can something be done to salvage the situation?
Unfortunately, in the short term, I see no option for the customers and private operators. During 2007, the incumbents will strengthen their dominance in the broadband market (for whatever it is worth); private operators will half-heartedly roll out parallel copper / cable networks and will be plagued with quality issues. Everyone, including BSNL, will experiment with WiMax, and perhaps by the end of the year, commence full-fledged network roll-out.

The Broadband market will have to wait till 2008 for true competition, high quality and innovative services - available in all major towns and cities. But the rest of the world will not stay still. Will the gap between India and other markets such as US and Singapore widen? I am afraid, yes.

What a depressing thought to end 2006 with. Let us change that. My next post, hopefully before this year ends, will have some suggestions on medium and long terms measures on what can be done during 2007 to ensure that we catch up with the rest of the world before the end of this decade.