At the Mobile World Congress in Barcelona, the focus appears to be on the battle between OTT players (rather, Internet companies providing services to customers over telecom networks) and telecom operators, and the former continues to provide services, at times to the detriment of telecom operators. Manoj Kohli, CEO International and Joint MD at Bharti Airtel, when asked what he thinks about their relationship with OTT players, said that telecom operators and OTT Players “need to work together, and learn to live together. I believe we (telecom operators) can lift the level of usage of all these services, and customers propensity to use more and more, rather than continue this unnecessary tension. Of course, there are commercial negotiations that are important, and we do commercial negotiations all the time.”
At all the carrier centric sessions at the Mobile World Congress, the worry for telcos has been the impact of services like Whatsapp, Viber and VoIP, which are being provided free of cost to customers, or at a fraction of the cost of telco services; telecom operators are calling for these services to be regulated and/or made to pay telcos for being made available to customers, essentially going against the principles of net neutrality. Airtel has consistently said that services like Google, Facebook and Twitter need to be charged for being provisioned to customers. Excerpts from our interview with Kohli’s colleage K. Srinivas (more here )
MediaNama: So when it comes do data consumption, where do you stand on charging sites like Google for letting consumer use them?
Srinivas: (laughs) I knew you were going to ask about this. The notion is that everything on the Internet is free. So Google doesn’t charge the customer, Facebook is free. There are billions of dollars of investment going in. This is not just an Indian issue, it’s a global issue. We’d not even rolled out 3G and 4G has dawned upon us. The industry, and the costs of rolling out, building a backhaul. Backhaul costs in India are backbreaking. In South Bombay, if you want to put up a kilometer of fibre, the Right of Way cost is almost about Rs 1 crore. Show me one business model, with the data consumption going up, that supports these continuously increasing costs. The data ARPU the world over is flat to declining. The notion that telecom operators are making tons of money is incorrect. Show me one company in India or anywhere in the world that is thriving on data. You need to have the right kind of model. There is no free lunch.
MediaNama: But as a customer, I’m paying you for this access.
Srinivas: If you’re paying me 100 bucks for 1 gb, but beyond that you’ll have to pay.
MediaNama: So don’t charge me Rs 98 for 2gb.
Srinivas: At some stage, Rs 98 will become Rs 200 for 2gb.I’m not getting into whether this pricing is right or wrong. Even on voice, the current rates are not sustainable. Every single operator is sitting on huge sets of investment. This pricing for data or voice is not sustainable. Lets build the right business model. On one side you compete, and on another you collaborate. The point you were making (in your post) was that I need Google and Google needs me. Very true. The issue is that the amount of investment that goes behind. Tell me one product or commodity in the country which has not changed its price upwards in the last 10 years, or even the last one year. You’ve seen everybody drop prices. I pay in dollars for all my investments and I earn in paise. There is significant investment.
Kohli also applauded the OTT players for their work in providing services: “OTP players have come in and developed fantastic services. Look at the work that Facebook had done, Twitter, Google. Lots of apps have been built. We should be grateful, because they’ve helped 2G and 3G to take off. This drives penetration and innovation. We need to move on social media, and the fifth wave of telecom is going about connecting for better health, consumer electronics, machine to machine, which will be phase 5 of the Internet revolution. The phone has to be the bank, ATM, diabetes checking machine, blood pressure machine, it has to be an all in one machine.”
Notes from Kohli’s talk:
- On Africa: We’re going as deep as possible in the African markets. Transformation which is overtaking the developing world, the top 7 markets for mobile Facebook are from Africa. Swaziland has 92% penetration, and Nigeria has 82% penetration. People in the developing world are going to mobile. The fixed broadband penetration is low, and this is an opportunity for us is huge. 23% of our mobile customers in India (around 41 million) are using data. In Africa, we have 14 million of our users are using Internet. The putting in of infrastructure has been a fantastic start in Africa.
- Preferred spectrum bands for 3G and 4G: 3G needs to be on 900 MHz. 3G needs huge coverage. For spread populations like Africa, LTE needs to be in 700MHz, and we’ll promote it because it spreads. It covers the highways. We want to take the Internet to the masses. We need right of way for fiber deployment, at free or a nominal cost. Taxes on mobile services reduce affordability
- On Devices: ”The world will be only smartphones. We need affordable high speed dongles at $10, and low cost smartphones at $30. The market needs to handle the grey market for devices better.” and “We don’t believe in handset subsidies, because the tariffs are low, and we can’t deal with a double dip. We do bundle and brand. We sold 3 million handsets in a month with Nokia, once, as a bundle, not as a subsidy.
- A billion new customers will come from South Asia and Africa. 3G will make a bigger contribution. 4G will account for 1 in 5 mobile broadband connections. Society needs broadband.
- Cost of switching: “The cost of moving from 2G to 3G is lower, and, and from 3G to 4G will be lower too. I believe that this change is good for us.”
- India’s app ecosystem is growing faster because of the propensity of Indian IT, and of people to create apps. Africa is a little slower.