K Srinivas is the President of Bharti Airtel‘s B2C business unit, which includes all its consumer business and market operations, including Mobile, Telemedia, Digital TV and emerging segments like M-commerce, M-Health. Part 1 of this interview with MediaNama, Srinivas mentions that the industry is losing money on 2G data, and talks about processes put in place for improving billing practices in VAS (i.e. addressing false billing and reducing unethical practices), on developer revenue shares and how Airtel is thinking about the developer ecosystem and app store integration (Blackberry is next).
(Please note that this interview was conducted before Bharti Airtel announced that it has 38.66 million data subscribers in India (3.71 million 3G), 20.6% of Airtel’s mobile user base uses data services; its data ARPU was Rs 40 per user; data usage per user was at 112 MB; and data realisation per MB was 35.3 paise)
MediaNama: How is data doing?
Srinivas: We’re seeing a pick up in data. For most people in the country, the first bit of Internet Access will come on the mobile phone. We’re seeing that adoption go up month on month in terms of active users. We’re monitoring how many are active users, how many devices are on network, what kind of devices, how many are 2G, 3G, how many customers are occasional users, regular users, hardcore users. There’s a grid that we monitor.
MediaNama: Are you seeing an increase in 2G or 3G data usage?
Srinivas: This “G” doesn’t matter to an ordinary customer. I look at it as one continuum of Internet access, whether 2G, 3G, DSL or an Internet lease port, serving the same purpose. If you’re happy with a few messengers and facebook, 2G serves the user fine.
MediaNama: But it should matter to you because you’re pricing the two differently.
Srinivas: I think 2G in India is underpriced. It is significantly below cost for the entire industry. There is tremendous amount of…tell me one country in the world which gives you 1GB for $2? On a feature phone, I want to see the number of guys who cross 2GB on a feature phone. You cannot.
MediaNama: What would your cost be?
Srinivas: I can’t give you that, but ideally 2G doesn’t matter. You go to any part of the world, and the guy says it’s $50 for 1GB, and you want to use it on 2G, 3G, 4G, be my guest.
MediaNama: I’d say…how would you respond to the notion that the data pricing is an industry creation
Srinivas: At the end of the day when you have 14 operators trying to get the mindshare…this is the same turmoil that we have in the industry today (with voice). It is struggling with the current pricing. There is an excess capactity that you’ve created.
MediaNama: But you’ve dropped 3G rates at a time when you’re worried about 2G pricing.
Srinivas: I understand, but what do I do? I take up 2G (pricing)? I’m not in a positon to do it. If you don’t drop rates…you need to see customers also adopting. As your data consumption keeps going up, you need to make it reach people who are adopters of 2G. If you keep it too high, people will not upgrade. This is a way of getting people on to 2G, and then trying them to upgrade to 3G.
MediaNama: Is there something about data consumption that has surprised you?
Srinivas: We’ve seen data consumption move up quite a bit. We are, by and large, moving to packet switching. At the end of the day, the customers need for being online, looking at content is going up day by day. When I joined this industry, the average voice usage used to be 65 minutes per customer per month on mobile. Today that is sitting at around 430 minutes per month per customer.
MediaNama: Which are your biggest circles in terms of data consumption?
Srinivas: They’re not hard to figure out. The metros are pretty large, then the AP (Andhra Pradesh), Karnataka. What is a surprise is that we’re seeing data consumption coming in from several places in small towns and villages of UP and Bihar. The younger kids of the farmers are equally interested in the stuff that urban kids are interested in – they do Facebook, download songs, (there is) video consumption. The younger generation in the rural markets are consuming as much content. It’s not the same in terms of the width of consumption, but the depth of consumption is the same.
MediaNama: How do you increase consumption?
Srinivas: World over, apps have become a big deal, and that’s something that we’re driving. Really providing a great user interface, seamless connectivity, a reason for getting online…
MediaNama: But that doesn’t exist right now, in terms of seamless connectivity.
Srinivas: These are things that are changing, albeit slowly. We are focusing on user experience. A year ago, you could not go to an Airtel online site and do seamless transactions. We are revamping Airtel.in. Airtel Live has a few tens of million customers on it every month. If you go to Airtel Live right now, you’ll see our app store with free apps. We’ve integrated and integrated the Ovi Store. Blackberry is also happening.
MediaNama: Why don’t you move to a third party billing for the developer ecosystem with a 70:30 revenue share, the way Vodafone has done?
Srinivas: We’re doing that. We’ve opened up our API with Nokia, and the Ovi store billing with Nokia is already live.
MediaNama: Is that 70:30?
Srinivas: I can’t give you the exact number, but Nokia is live, Blackberry is around the corner. We are talking to Android, and whenever Apple wants to come around…
MediaNama: But how are you looking to approach this? Can anyone come an integrate with your billing platform? Or will you take a more guarded approach, of tying up with a Nokia and a Blackberry?
Srinivas: At the end of the day, do I have the wherewithal to integrate…we started two years ago, building our own app store. We decided that that is not our core area. Why are we wasting our time? So, there is an Android, and an Ovi Store, which is doing a far better job, and if a user can pay for the apps through the prepaid billing, it’s a win-win because they’re struggling because the credit card penetration in the country is so low.
MediaNama: If I’m an entrepeneur and I have an app which requires in-app billing. Would I be able to integrate with you, instead of going through an app store?
Srinivas: It becomes easier for me (Airtel) to go through an Android.
MediaNama: But I make less money as a developer then.
Srinivas: Then what you are asking me to do is build my own app store. We have our own app store with a couple of thousand developers directly working with us. We have set up a lab called the Zing lab, which is a live test environment on the network for your app.
MediaNama: But you are going to have gatekeepers in place for app developers.
Srinivas: Tomorrow if you put up stuff that is objectionable – from a religious or pornographic perspective – we are liable for that. The regulator comes to us, and we’ve had instances where we’ve had to take action against partners because the content that they were putting up was objectionable.
MediaNama: If you’re controlling the partners, then you’re liable, but if you’re not, then you don’t have intermediary liability.
Srinivas: At the end of the day, as a brand, there is enough and more pornography on the web and I don’t need to promote that. That’s not my…
(An Airtel representative points out that it’s the operators who are getting the flack for the John Doe orders, wherein sites were blocked because of a court order)
MediaNama: I’m curious, from a VAS perspective, how is that ecosystem changing? Where do you stand on the TRAI guidelines?
Srinivas: There are two three things that we have done: We are cognisant of the issues that it is posing to customers. We have set up a subscription engine. In some way, that it’s doing is that till yesterday, every VAS partner used to connect with my billing platform, and used that. The control was not there at all, in terms of what the VAS partner was charging the customer. Every VAS partner hooks up to the subscription engine, and sends me the consent of the customer. There is one confirmtion that the VAS partner sends, and there is one which I have, and the two are tallied. We are almost done with bringing all the VAS partners behind the subscription engines.
The second one is, a lot of VAS push was happening through Outbound Dialers, which were in the control of the VAS partners. We’ve completely taken that in-house. The out-bound dialers now happens from Airtel’s side, rather than the VAS partners side. These are two key controls. While we want to build that ecosystem, we want to ensure that customers are not inconvenienced.
MediaNama: What do you do about internal issues? There is a situation where a lot of this has been mandated by circle CEO’s or VAS heads.
Srinivas: It’s like this – for every thing, there is a process. The internal messaging is absolutely clear, and there are hundred policies and codes of conduct. If someone violates the code of conduct, there is an appropriate way of dealing with it. We have had instances where we have sacked people. It is absolutely clear that you have to be transparent with the customer.
(There was an instance of a user posting an audio clip of an agency impersonating the police. Airtel says they sacked the agency)
MediaNama: Much of the VAS ecosystem is built in these billing practices, with negative billing. Now there is a quarter on quarter contraction on billing. If you were to advise a VAS company on what to do next, what would you tell them?
Srinivas: This industry has to thrive on innovation, not on hoodwinking someone. If someone has a great idea, we will create the platform in the quickest possible manner, and in the best possible commercial dealings. Instead of true product innovation…
MediaNama: Beyond that…is there something that you are looking to do to encourage India specific content? Data won’t scale beyond a point in Indian developers don’t come on board.
Srinivas: If you look at the VAS innovation, the last big innovation was CRBT. We keep saying, what is that one killer idea, but there isn’t any. The point is that a lot of these things will have to transcend on the video platform on data. Today, I don’t know, is there an equivalent of CRBT on Video? Between the VAS ecosystem, what the TRAI regulation will do is that it will force everyone to channelize their energy towards product innovation.