An office virtually anywhere

This article first appeared in the Business of Life section of the Mint paper on October 13, 2010.

The workplace of the future will be very unlike what we have experienced for several decades. The era of the dedicated office building, desk and PC is slowly coming to an end. Soon, employees working for most businesses, particularly in the technology and service industries, will no longer troop into an “office” and occupy their assigned desks, nor will “personal” computers and cubicle walls mark the territory for each “worker”. Team meetings and gossip sessions will stop originating at the coffee machine or the water cooler.

Office 2020

The new and improved workplace is going to rest on the pillars of flexibility, mobility and collaboration. With enterprises moving towards the “more for less” and “asset lite” models across business operations, the “physical” workplace will not be far behind. In a bid to reduce their total cost of ownership, enterprises (particularly small- and medium-sized businesses) are looking, and will increasingly look, at moving their infrastructure and IT requirements to the Internet or, as it is now called, the cloud. Escalating real estate costs will force the traditional cubicle to change into a personal virtual office, with the same space being customized for several employees with the swipe of a card (or biometric scan of an eye).

According to technology and market research agency Forrester’s report on telecommuting, more than 40% of the US workforce will telecommute by 2016; employees will opt to work from home or remote offices, thus saving time and travel costs for themselves as well as their employers. The war for talent and the need for an inclusive, multicultural workplace will make organizations “location agnostic”, with the emphasis being on hiring the best talent irrespective of geographical location. Some of the world’s leading companies, including BT, AT&T and IBM, already encourage telecommuting. Tata Communications, for instance, has its apex management team of 11 executives in nine cities in four continents.

The most significant trend in information technology has been that of IT services emerging first in the consumer market, for individuals, and then spreading to the enterprise market, for businesses (what IT research and advisory firm Gartner called the consumerization of IT). The focus on employees is shifting from just “workers” to collaborators and co-creators, those who are rapidly adopting social networking and communication tools such as Twitter, Facebook and Skype in their personal lives. Enterprises are now catching on to this trend; unlike traditional, linear applications such as the email and static Intranets, Web2.0 tools such as Chatter, Jive, Yammer and Injoos provide real-time, collaborative platforms for engagement, knowledge creation and sharing, and activity management. “The more effortlessly employees can communicate, collaborate and share new insights with one another, the faster an organization can respond to changing customer expectations and business conditions,” said Ross Mayfield, CEO, SocialText, at the Web 2.0 Expo in May.

The fine line between the virtual and the real is becoming finer with the rise in popularity of virtual work environments such as Teleplace for decentralized teams akin to an office version of Second Life. Mark Levitt, program VP, collaboration and Enterprise 2.0 strategies at IDC, said in a press statement, “Teleplace provides a rich 3D collaboration environment that makes virtual meetings, presentations, training sessions and other interactions as real as possible without getting on a plane.” At least one-third of organizations will support social networking this year, predicts a 2010 Forrester report.

The problem areas

Are organizations prepared for this change? Are HR executives, IT departments and facilities administrators ready to face the challenges that a distributed and decentralized workforce is going to bring? Since these changes are already occurring around us, enterprises have no option but to rework their IT, infrastructure and facility strategies. Network architectures need to shift from centralized data storage and fixed LANs to distributed access—mostly over the Internet. The proliferation of video-based collaborative tools catering to distributed teams will put greater pressure on the IT and network infrastructure, leading to a rise in corporate content distribution network (CDN) technologies used to deliver content more efficiently to distributed locations. Security and privacy issues will multiply, with a plethora of end points that IT teams cannot physically control.

These implications are more serious from a people management perspective. Business leaders and managers will be required to manage by outcomes rather than by observation. Unfortunately, research by the University of California Davis suggests that even today, when bosses and co-workers see an employee at work, they tend to think more highly of that person, and their evaluation is even more favourable if the sighting is after normal business hours. Several academic studies, including Jay Mulki and others’ article in the MIT Sloan Management Review, Fall 2009, have shown that remote workers tend to suffer from a feeling of isolation, which may affect their productivity and, in turn, retention rates. Given that effective communication is almost only based on body language and paralinguistic cues, team building and motivation in a globally distributed team will require the adoption of high-end video conferencing systems such as Telepresence that can create a virtual presence.

If managers aren’t already thinking about these issues, they must. Their employees surely are experiencing these changes and adapting their lifestyles rapidly. They will expand these tools into the work environment, unofficially if necessary. Can enterprises shake off their inertia and embrace the new world before it is forced on them?

(Thanks to my colleague, Priya Bhatia for her help in writing this article.)

Let Neutrality not lead to Mediocrity

Recently, Thomas K Thomas of Hindu Business Line wrote an article regarding the Net Neutrality issue that is being debated in several countries and was introduced into the Broadband debate in India by Google. While TKT was kind enough to quote my views, there's only so much one can express in a quote. Therefore, this post to elaborate on the quote:

But Indian telecom operators are not in favour of any such regulation.  Srinivasa Addepalli, Senior Vice-President, Corporate Strategy, Tata Communication, says that more than it being a question of principles it is a commercial issue. “It is fair that consumers should have unrestricted access to the Internet. It is also a fact that telecom operators are investing billions of dollars in creating infrastructure. The Internet is at the core of private enterprise today; network operators, like the content/service providers, should be allowed to develop their commercial models without additional regulatory constraints,” Addeppali says.

There was a twist in the Net Neutrality debate in the US with Google and Verizon announcing a joint proposal and with AT&T jumping into the fray with its support of said proposal (or at least one key element of the proposal). Proponents of an open Internet accused Google of a sell-out and Google responded with an analysis of myths and facts related to the proposal. (By the way, I liked this reasonably objective teardown of the Google-Verizon proposal).

Whatever the outcome of the current round of debate on Net Neutrality proposals, I guess there are some key issues that one needs to consider here.

Is the Internet a public good or a private enterprise?

What might have started out in defence and academic circles, is now the primary platform for knowledge, collaboration, commerce, entertainment, and more. On one hand you have the largest encyclopedia in the world that is user-managed and runs on donations, and on the other you also have the most valuable brand in the world, both of which owe their existence to the Internet. The late Dewang Mehta of Nasscom once famously included Internet bandwidth as a fundamental right of all (Indian) citizens and rightly so. But it is not just information or governance that the Internet provides us now and nor is the Internet "free". Content providers and commercial enterprises are free however, to charge their customers (or not) for access to their services as they deem fit. There is no regulation that determines how much a song download should cost or what the pricing of a hosting plan should be. You can sign up for a free, 'lite' version or upgrade to a pricey, 'premium' version. It's a competitive market out there, and a reasonably free market.

Is Internet Access a monopoly or a scarce resource?

In the early days of telecom (30 yrs back in developed markets, 5-15 yrs back in several emerging markets), customers had no choice, whether it was voice services or data connectivity. Regulators were introduced in most of these markets to break incumbent monopolies and encourage competition. Even until a few years ago, customers had very few choices for broadband connectivity, one or two service providers at most in any market. But that has changed. Wireless broadband access has emerged as a reasonable alternative to wireline, particularly in developing markets that have had very poor wireline in any case. Most markets have at least three such providers; extreme cases like India have 6-7 (and growing) wireless operators. Of course, these broadband networks (both wireline and wireless) have failed to keep pace with the exponential growth in Internet traffic demand but that does not reflect scarcity or monopoly behaviour. 

Regulators, I believe, should aim to make themselves redundant. That can only happen by encouraging competition, not just in terms of numbers of players, but also ensuring that each of the players has the requisite resources to be an effective competitor. Regulations should define the minimum acceptable performance levels, for customers and competitors; beyond that, effective competition should take care of creating sufficient customer choice.

Broadband Networks: No longer commodity utilities

For long, telecom networks have been called the pipes, equating them with other utilities like water pipelines and electric wires. Broadband networks, as critical to human existence now as the aforementioned utilities, have features that set them apart from the other pipes. For one, as mentioned earlier, they are no longer primarily provided by local or national government bodies and are not monopolies. In addition, the "content" that flows through them is also varied, competitive and unregulated (unlike water or electricity), The highway example is an interesting one, with several similar characteristics to the broadband network. As one of the industry experts in TKT's article says:

It's like any toll road in the country where every type of vehicle gets to use the expressway but the toll charges vary depending on the type of vehicle.

Everyone can use the roads to travel as they please, however, there are several rules that govern how traffic flows on the roads. There are certain roads (highways or expressways) that place limitations on who (or what type of vehicles) enter the road and charge them in a differential manner. Traffic on these roads is regulated in different ways; certain types of vehicles get priority to use fast lanes and some have to stick to the slower ones. On some roads, the authorities may mandate some capacity to be reserved for public transport by creating special bus or taxi lanes, even if it slows down the rest of the traffic. Finally, in specific circumstances, private roads can be built and the owners determine what they are used for and how. What do we gather from this:

A) Rules of what is allowed and what the charges are should be clear to the users (and to the regulators)

B) Differential treatment to users is permitted. In the light of (A), users can choose what they prefer. (By the way, roads are a near monopoly or maybe duopolies; telecom networks, we have established earlier, are more competitive than roads)

C) Certain capacity of the 'public' infrastructure can be reserved or set aside for critical usage or public interest. 

D) Customers can, in certain circumstances, negotiate and build private infrastructure and use it the way they want.

As a Broadband customer, I would be willing to pay a premium for a network that understood my priority applications and provided a superior performance for such core services, even at the expense of other stuff. For instance, I would surely like to access my enterprise applications (Intranet, Mail, etc.) much faster / better than say, a YouTube video. A doctor providing remote medical assistance would surely want her tele-medicine application to not be choked mid-way through the procedure. On the other hand, a movie junkie (perhaps the doctor, on vacation) would want nothing more than super-fast download of the latest iTunes movie (in HD). Should we let this be left to fate (or best effort, in Internet / telecom parlance)? I say, No. Internet service providers need to make their networks more capable, to discriminate intelligently and individually across different types of content / applications. In a world where our lives are going to revolve around the cloud, networks have to become more than dumb pipes. Intelligent networks will create more value to the customers as well as the content providers. 

Maybe most customers do not want such intelligence. Maybe most content providers do not care about it. But for the few that want the choice, let regulation not take it away and relegate them, in the name of neutrality, to an "average" experience.

I welcome your comments and feedback, particularly because the "Net Neutrality" debate is still not defined well enough in developing markets.

Posted via email from Global Gyan

iPad - the device for the gaaks.

Most of us have become experts at seeing what isn't, so we miss out simple 'what is' facts. The other problem that we face is that of wanting everything, everytime, everywhere.

Apple's latest creation, the iPad, has underwhelmed the tech media and analysts; they are unable to see why somebody would use a large smartphone or an inferior laptop. Many others are aghast at the iPad's lack of Flash support or multi-tasking. That there aren't two cameras to support photography and video-chatting has let down a few more. Of course, some can't get over the "i" jokes and worse still, the "pad" jokes.

I beg to differ. I see here (and in a few other such devices) an opportunity to expand the market for digital services. Take it beyond the tech workers and fans of gadget blogs, take it beyond the home and office use, take it beyond the developed markets. I firmly believe that iPad has the opportunity to define its market, not as a large smartphone or as a cheaper/smaller laptop but as the primary digital device for the GAAKS, as against the geeks! (More about the gaaks, later.)

Broadband penetration remains relatively low in several emerging markets, not only because of supply constraints but also because prospective customers do not see value in the service. The primary interface device is a computer that is as "complex" as it is expensive. Most kids and senior citizens (all 45+ would qualify!) that have not received "formal" IT education would not venture to use a computer without assistance. Even when they do use a computer, it is rarely for its computing or processing power but really for the purpose of communication, media consumption and sharing. Finally, the keyboard is the most counter-intuitive input/control device that puts-off even highly educated people, leave alone those that aren't.

It is obvious that the next Broadband access device has to be developed using the same principles that have made mobile phones and media players accessible to several billion people worldwide. Simple and intuitive user interface that helps in communication/sharing and digital media management. A device that two-year old kids can manage and so can 60+ old grannies. Something that the neighborhood aunty will find as appealing as students focusing on their courseware. Something that the average-J can use to be more productive at work. Move over geeks, we need to serve the grannies, aunties, average-j, kids and students. The GAAKS.

Using a few personal, albeit anecdotal, experiences, let me outline needs of the gaaks in the context of a digital device:

Grannies: Simple visual control-interface, limited need for typing. Big, bright screen; large icons. Mostly photos, videos and music. Reading books. The occasional video chat. Home use.

Aunties: Cool looks. Fit in handbag. Idiot-proof controls (Oh, did I delete something!?). Music, videos and photos. Calendar. Facebook. Mail reader and forwarder. Home + nomadic use.

Average-J at work: Portable. Simple but secure. VPN/Exchange connectivity. Mail, Calendar & Contacts. Notes. Presentations (on-screen or projector). Document editor. Corporate apps. Occasional media (IT rules permitting). Mobile use.

Kids: Rugged (4-feet drop proof). Delete-proof. Intuitive physical & visual interface. Music, videos, games. Education apps. Occasional books/comics. Anywhere the parents want a silent kid.

Students: Cool looks. Portable (fit in a ruck-sack with other assorted stuff). Social networking. Music, videos, photos & games. Camera or camera-phone interface. Search. Reading books & making/sharing notes. Everywhere use.

(I have described generic / average usage scenarios. There are bound to be exceptions in each of these categories. Have also not included stuff that can be done using pretty much any mobile phone: yakking, texting, FM radio, etc.)

Which device is more likely to serve these large user segments: a laptop-variant or an iPod Touch variant? Remember, most of these people already have access to a mobile phone, so they have basic voice and narrowband connectivity. A bigger, brighter and more capable iPod Touch or an iPhone appears to be more relevant to these users than a laptop or a netbook. The iPad may not yet address all these requirements but from a hardware perspective, it appears to have all features (except a video camera for chat: surprising but not a deal-breaker). The interface and software are almost ideal for the gaaks; a few rough edges should get resolved through software upgrades.

Us geeks will still buy the iPad because, well, we just have to have it. It will add to the bag-load of devices and accessories that we carry with us everywhere. The significance of the recent Apple announcement is that a whole new, untapped market is about to open up. What they call "blue-ocean" stuff in management consulting parlance. More power to the gaaks.

Broadband in India - Praying for Better Times

(This article, in this form was published at PuneTech.com on Jan 11, 2010)

India has about 7 million 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. had declared 2007 as the year of broadband, and a target of 9mn subs was set for the year. Even two years later, we are way behind! Just so you know, China has over 80 million broadband subscribers.

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

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 37 million fixed lines, of which only about 30% – about 10mn – are even 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 more than 400million wireless connections in the last 8 years, as against none in the fixed line space. While lack of focus on wireleine by the incumbents, BSNL and MTNL is an important factor, the blame must really be borne 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.

No Encouragement to Competition

It is well-recognized that the mobile revolution in India has been driven primarily by competition: at least 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 3G & WiMax) is generally expected to become the competitive alternative – but there has simply been no urgency in creating the policy environment to encourage wireless. Spectrum â the essential ingredient to rolling out wireless networks â has not been made available for Broadband; the proposed spectrum auctions have been postponed several times in the last 2 years.

Can something be done to salvage the situation?

Unfortunately, in the short term, I see no option for the customers and private operators. During 2010, 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. If spectrum auctions happen in Jan-Feb 2010 as currently envisaged, 3G and WiMax services should become available in most metros towards the second half of the year.

The Broadband market will have to wait till 2011 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. Singapore is experimenting with getting 100Mbps to every home by 2012; we hope to get to about 1Mbps in the top 100 towns by then.

Every year, since 2005, I have been hoping that the next year would be the year that broadband becomes widely available in India. I have been proven wrong before; I pray that things change this time around.

2009: Sad Year for Indian Telecom; 2010: Unlikely to be better

I spent the entire Oh-Ohs (00's) decade working on telecom. NTP '99 heralded the real opening up of the Indian telecom sector and every spare hand was diverted to telecom... and boy, has it been an exciting ride! More than 500million subscribers were added during this period; we have seen tariffs hit all-time lows; 8 new submarine cables connected India to the rest of the world... the achievements are endless to recount here.

However, I am saddened by the manner this decade ended. 2009 has to count as the year that promised so much but delivered almost nothing. The most talked about disappointment, of course, was the postponement of the 3G & BWA spectrum auctions. What is more disconcerting was that major decisions that would have created true customer choice - Number Portability, MVNO and Internet Telephony - were put off, on some pretext or the other. Even the one decision (this year) on Calling Cards could not be implemented because the terms and procedures are yet to be finalized.

Most people are happy about the entry of new (mobile) operators and consequent reduction in tariffs. I am not so sure, though. Adding new (facilities-based) players to a reasonably crowded market is not necessarily in the best interest of the industry or the customers. While it does result in some short-term pricing benefits, the common resource used by all of them is scarce spectrum -- the more fragmented it gets, poorer the quality of service. So while we have so-called lowest tariffs, we also have poor service levels. Instead, the Government had the opportunity to introduce new forms of competition (& customer choice) through MVNO and Internet Telephony, but dragged its feet on those decisions.

Telecom policy-making was at its worst this year, with no clarity on who was responsible and in what direction we were headed. What we needed was an NTP 2009; what we got was EGoM meetings and TRAI consultation papers.

2009 saw Bharti losing out an opportunity to become a global leader in the mobile business; in fact, none of the Indian companies could capitalize on the recession (& low valuations) in developed markets to make any large, bold moves/acquisitions. Intense tariff pressures in the domestic market dented their valuations - most analysts reacted with a Sell on the Indian telecom sector, probably for the first time in the last 5-8 years.

Will 2010 be different? I do not see much cause for cheer: the fundamental problem around policy-making is not likely to go away in a hurry. 3G & BWA auctions might happen in early 2010 (only because the Government is counting on the auction money in this financial year!), but networks/services would be available only towards the end of the year, in a limited manner. The camps on both sides of MNP, MVNO and Internet Telephony are strong and therefore, I expect status quo will prevail - for all practical purposes.

It will feel good to be proven wrong.

DoT permits Long Distance Calling Cards in India... Finally!!

In 2000-01, I spent several months working on a business plan for - at that time - one of the largest opportunities in Indian telecom: the imminent opening up of the National Long Distance (NLD) market. It was estimated at Rs 12000 crores (~$3 Billion) in size and was a BSNL monopoly. Private operators were almost salivating at tearing away chunks of this business... while tariffs were expected to drop dramatically (60-80%), there was also expectation of significant price elasticity. Even if only 50% of the market was addressable (due to infrastructure limitations), a fair share amongst 4-5 players could result in about Rs 1000 crores revenues in 4-5 years. Towards this opportunity, a few operators were ready to pay Rs 100 crores licence fees and offer Rs 400 crores bank guarantees.

Major investments were planned on building out national fiber backbones and setting up switches and points of interconnects at all district headquarters (as per the roll-out obligations)... project cost for NLD was estimated at Rs 1000 crores at least. However, there was one highly critical assumption behind these NLD business plans...

The assumption was that private operators would be able to gain meaningful share of the NLD market, even though BSNL (&MTNL) had more than 80% of all phone connections then. This was to be made possible by a major regulatory move: implementation of Carrier Access Code or Pre-Selection within some months of the NLD market opening up. (See this very detailed article on the NLD opportunity from those times...)

The TRAI did issue the appropriate order to implement the technical changes that would permit customers to choose their NLD (and ILD - international long distance) operator, and not be bound by their access provider's choice. However, for several years, most of the operators refused to implement this order under various pretexts, usually raising technical objections and creating the scare that customers would have to "pay a lot" for it. TRAI tried following up, but soon gave up. A couple of years later (about a year ago), it formally dropped the plans for implementing CAC/Pre-Selection but permitted the use of Calling Cards by long distance operators to access customers directly. A year later, after doing the rounds of the DoT, this has now finally been implemented as an amendment to the NLD and ILD licences.

Why is this at all important?

First, from a customer perspective, NLD and ILD services are still a monopoly of the mobile operator. While it is true that customers have choice of several mobile operators, that is not the same as providing choice for long distance services. In particular, in the absence of Number Portability, no customer is going to give up the phone number to get a better long distance tariff plan. Given that spend on NLD and ILD is a considerable proportion of the total call spend, customers have the right to choose their operator. It is a well-established practice world-over, and it is even a surprise that it took seven years for this to be resolved in India.

Secondly, from a pure contractual perspective, operators acquired NLD and ILD licences and made huge investments on the basis of a regulatory structure that would have enabled them to access the market in a particular manner. By changing the regulation post-facto (or by not implementing it for years), the regulator and the Government have adversely affected the investment decisions. On a stand-alone basis, most of those business plans are nowhere close to realization; of course, growth of captive subscriber base - much more than that anticipated in 2002 - has compensated integrated operators, but policies and investments cannot be based on anticipation of accidents or good luck.

What will be the impact?

For customers, the impact on NLD call rates might not be dramatic since tariffs have fallen quite a bit and are almost on par with local rates. But, competition from calling card operators might give rise to some innovation in bundling and customization, beyond just pure price cuts. In ILD, the impact is likely to be much more. Access providers have typically premium-priced international call rates, even though the wholesale cost of carrying the call is much less. There is a high likelihood of ISD call rates dropping with the advent of calling cards, particularly to competitive destinations like the USA. Business customers can also look forward to interesting packages and bundles in the near future.

So, later, much later, than we had anticipated, and in a partial manner (no CAC, only calling cards), Indian customers will have choice of long distance providers... soon. I hope.

Is Indian Broadband Overpriced?

New World of Communications: India Broadband: Under-fulfilled Potential

Price of Broadband services, it appears from the poll & comments I heard from various people, is the biggest inhibitor to adoption of the service in India. So, let's examine the pricing issue here.

Since pricing is directly linked to what is being purchased, we need to make some assumptions.

Mr. Novice has recently purchased a computer and wants to figure out what the Internet is all about. He is quite OK with 256 Kbps onwards speeds and does not need more than 2Gig downloads per month. On the other hand, Ms. Savvy has been on the Net for long and has recently got a office laptop that she wants to connect from home. In addition to work stuff (email mostly), she is also looking forward to improving her online social networking, as well as getting some latest content for her iPod. She would like at least 512 Kbps (perhaps more) and expects her data transfer to be about 5Gig a month. Finally, Master Gamer has just convinced his father to get the home PC connected to the Net, and can now avoid those trips to the cybercafe for his dose of WoW. He knows all about Internet speeds and service levels, and prefers an unlimited connection of at least 1 Mbps; his only concern is that he lives in a distant suburb of a mini-metro.

Based on my evaluation of various service providers and tariff plans, I would recommend the following choices:

1. Mr. Novice is better off taking a 256K DSL connection on his landline at an additional cost of Rs 500 (total about Rs 600 with voice). If DSL were not available, the next best alternative would be a data card (not 3G) with a plan cost of about Rs 700 per month, but an upfront CPE cost of about Rs 1500.

2. Ms. Savvy could take a 512K DSL connection or a fixed WiMax connection (if DSL were unavailable) at about Rs 1000 to 1300 per month; alternatively a 3G data card would have an upfront cost of about Rs 2000 to 3000, and a monthly charge of about Rs 1000 with the added advantage of mobility for the laptop.

3. Master Gamer would be lucky to get a DSL or Fiber connection at his home; his only option is likely to be a fixed WiMax 1Mbps connection (a 3G data card could work but may not give him the assured high speeds that he requires for gaming). This would cost nearly Rs 2000 per month for unlimited data transfers.

Evaluation:
First of all, it is not at all easy to determine what is the appropriate pricing / plan available from service providers. While there is value in choice, too much of it can also lead to confusion.

Now, let's compare the price-points with other benchmarks. I first checked Singapore and USA, but most operators in those markets had plans of several Mbps... ahem, not easy to compare our 256K plans. I looked towards China next (our favorite comparison) but I had to go back a couple of years to a period when 512kbps was the most popular connectivity there. A typical 512Kbps unlimited plan cost about Rs 1000; current prices are at similar levels but for more bandwidth.

In 2007, according to this article, average prices in North America & Western Europe for 4Mbps speeds were about Rs 2500 per month; while tariffs are not necessarily proportional to bandwidth, this should translate to about Rs 600 per 1Mbps. Eastern Europe had prices of about Rs 2000 per 2Mbps, or Rs 1000 per 1Mbps.

(Note: these are are just rough calculations using public info for benchmarking, directionally correct, I believe.)

From the above, it is clear that tariffs in India are more than what many other markets have, but there is one big difference: all these markets have either a very strong DSL market or have a competitive cable industry (in some cases like USA, both). If we look at a market like South Africa that has very high mobile/wireless penetration and low fixed line coverage, we find that price-points for 3G data cards are at about Rs 1500 per month, which are not dissimilar to the India plans.

Conclusion
Prices in India are perhaps somewhat higher than what they ought to be, but not by a large margin, given where we are on the adoption curve/scale and infrastructure availability. So, while price is stated by most as the inhibitor to adoption, the real issue must lie elsewhere. Otherwise, every market that started with high tariffs (including Indian mobile) should have stalled like Indian Broadband has...

We will continue looking for answers...

India Broadband: Under-fulfilled Potential

For years, we have been talking about the upcoming Broadband revolution in India, yet it remains an elusive dream. We, of course, find fault with Government policies on fiber roll-out and spectrum auctions yet it is not clear what is inhibiting customers from adopting Broadband. There are instances where Broadband is available (from one or more operators), however, network fill-factors are quite low, abysmally low in some cases. "Availability of last mile" cannot be the issue in such circumstances... there has to be something more.

Over the next few posts, I will try to uncover the customer perspective towards Broadband services, service providers and adoption-related issues. I will use a few snap polls to answer specific questions as well as conduct a few focused discussions with existing and potential customers to get their perspectives. Your inputs through comments would, of course, be most welcome.

Telepresence is evolving; Mass availability still eludes

Nine months ago, I had written about this new Aha! technology that had the potential to be the killer app for business communication services. It is heartening to note that Telepresence has developed considerably during this period. In particular, the last couple of weeks have seen a flurry of announcements: more public rooms at business centers and hotel chains, demo of inter-carrier connectivity of Cisco telepresence rooms and the promise of cheaper telepresence equipment.

Yet, Telepresence remains a premium service, in spite of Cisco's protestations, available to a few hundred enterprises worldwide, and even at these early adopters, it is usually restricted to a few locations each. A 3-4 room in-house implementation will set an enterprise back by about a million bucks, hard to come by in these hard times. While the business case for the investment is quite robust, most CFOs don't want to wait for 3 years for payback.

What can change this, and what can we learn from other technologies that have succeeded in the hockey-stick phenomenon of adoption?

1. Interconnection

Interconnection is at the heart of communications, yet Telepresence is only now beginning to get interconnected. Inter-vendor interconnection is still some time away. It's a shame if you have implemented TP across five of your offices but cannot connect to your customer, supplier or partner locations. OK, you might be able to connect to other rooms that use the same equipment vendor as yours, but there are at least 3 major vendors and many other emerging ones. Until such time the major TP vendors like Cisco, Polycom and HP do not get together to enable interconnection, the value of TP will be limited.

2. Open / Standards

The last thing that Telepresence needs is exclusive tie-ups and restrictions. For the technology to proliferate and fulfill the promise that video-conferencing failed to deliver, we need the same open standards approach that has helped, for instance, GSM to emerge as the global mobile system. Vendors holding technology / feature roadmap cards to their chests or favoring one operator over the other are sure recipes for failure. We need open dialog on the future of telepresence.

3. Scale and Pricing

Few enterprises will want to shell out $1 million or more to get onto the TP bandwagon; even for sufficient public rooms to take off, the industry would need an investment of at least $100 million over the next couple of years. Broadband and Mobile industries have shown us the virtuous cycle of affordable pricing - increase the addressable market, get more users on the network, use scale to further reduce costs and thus lower tariffs. Another technique that has worked in the past to encourage mass adoption is smaller pack size (think shampoo sachets, 25c mobile recharge vouchers, etc.). Single screen and/or desktop variants as well as web-enabled rooms are required to reduce entry barriers and encourage trial. Vendors and carriers need to re-engineer the TP cost structure and commercial models. Think Tata Nano.

The next 12 months will tell us if telepresence can truly hurt the aviation industry and redefine how businesses and consumers communicate with each other.

Whither 3G and Broadband?

There have been several opinions, including a couple of editorials in the Mint , that have supported the doubling the reserve price in the 3G and BWA spectrum auctions in India. While the objective of maximizing Government revenues is generally admirable, this last minute googly and consequent confusion in the auction process will only reinforce the image of India as an uncertain investment destination.

It is indeed surprising that the issue of reserve price has been brought up now, after the auction Information Memorandum was released and the time-table announced. That the 3G reserve price would be about Rs 2000 crores was known for several months; indeed, the guidelines for auction of spectrum were announced over five months ago on 1 August 2008. Has the Ministry of Finance become aware of the "low" reserve price only now? In fact, it might be argued that since August 2008 the global (and Indian) economic environment has worsened, telecom valuations have taken a beating (down 30-50% during this period) and liquidity - even for good projects / investments has considerably dried up - therefore, the reserve price should be reduced in order to attract more bidders for the spectrum. Hong Kong did just that, and cut their BWA reserve price by 50% between October and November 2008!

Policy decisions in the telecom sector are being taken on the fly. New licences announced, terms & conditions changed, and scarce resources awarded without any sense of predictability. The number of players involved in this process are numerous, often leading to myopic and locally optimized decisions. The industry regulator has been relegated to a 'recommendator', whose opinions are occasionally sought and frequently rejected or modified. And, operators and investors indulge in guess-work and waste precious resources on creating regulatory arbitrage instead of focusing on developing new services or technologies.  

Coming back to the issue of the reserve price, what is the basis for somebody in the Government seeking a 100% increase? Why not 125% or 150% or 75%? It is the job of the regulator to study the economics of the business, analyze international benchmarks and assess current market conditions to determine the base price for a scarce asset. When was the last time TRAI was consulted to make such an assessment? What basis does someone else use to change the assessment made by an independent industry regulator? 

It would be an easy and safe decision to double the reserve price and / or delay the auction process by a couple of months. After all, nobody in the Government will lose their jobs or sleep over that. What it does to the business case of rolling out Broadband in India and consequently, overall value to the country is forgotten in the process. The tougher option is to find ways to encourage greater level of participation in the auction. A fair, transparent and well-managed auction will ensure that an appropriate market value for spectrum is determined for the first time in nearly 5 years. Opening up more spectrum slots for auction would have a multiplying effect on Government revenues as well as Broadband penetration. Clarifying some of the long pending (at DoT) regulatory issues like number portability, Internet Telephony, MVNO and calling cards would further enhance the "value" of the spectrum, particularly to new entrants and foreign operators.

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.)

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... 

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.)

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: 

MIS Asia

TMCNet

Asian Channels (doc version)

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...

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.

 

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.

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)