In a statement announcing a deal with Facebook and Whatsapp, Morten Karlsen Sorby, the nominated CEO of Uninor, has said that the company is changing the way it is approaching selling data services to customers: “We are moving out of data and moving in to Internet. Internet is the way in which customers consume data and our approach will be to make that usage the cheapest among all operators,” adding that “Selling Internet as rupees per MB is like selling air or train tickets as rupees per kilometre. What customers do with Internet is to use it for services like Facebook or Whatsapp. Our plan is to make these services the cheapest on Uninor. For us, internet will always be about affordability and relevance, Sorby added. Yesterday, Uninor announced plans to offer Facebook at Rs 0.5 per hour and Rs. 1 for a day of Whatsapp.
As analogies go, this is a terrible one as people don’t use just one service or website in a day. This is unlike an airplane or train ticket which people buy when they have to travel to a destination, which is rare, in comparison. Maybe Sorby can also explain why the company charges for voice calls per second or per voice minute, since that is also similar to selling air or train tickets as rupees per kilometre. Why don’t they also charge customers on the basis of who they’re calling? That’s an approach similar to charging customers for data on the basis of which app or website they’re using.
This statement – “moving out of data, moving into Internet” – reminds us of a similar one from Airtel’s India CEO and Joint MD Gopal Vittal, and is a sign of things to come. During its recent conference call (read here), Gopal Vittal said that the company is trying to change the vocabulary away from megabytes and gigabytes into songs and videos with initiatives like the Re 1 Entertainment store launched in August last year. Airtel also has a partnership with Google to offer its subscribers with free access to Google services such as Google Search, feature phone friendly version of Gmail & Google+.
Airtel doesn’t yet have a partnership with Whatsapp, but both these developments are indicative of a shift that Indian telecom operators are taking towards creating “Data VAS”, essentially preferential access for some apps and services, at the cost of others. One way of doing that is by offering preferential treatment in terms of latency and bandwidth, while another is in case of offering better rates. Telecom operators probably see offering data as Rs per MB as more of a pipe function, which, as we had explained earlier, is a situation they want to avoid. Instead, they want to do what they used to with Mobile VAS in 2008: read this, and especially Viren Popli’s comment on telecom operators:
“As content providers, we should be able to survive on the basis of our ability to deliver our content and services. The operator should focus on filling up the pipe – to find new ideas. I build a toll road, and the more traffic that goes through the toll road, the more money I make. But if I sit down and value every truck, and what’s the value of what that truck is carrying so I can get a share of the trucks content, kind-of takes away from the business of building toll roads.”
Case in point, with the data VAS situation: Facebook at Rs 0.5 per hour and Rs. 1 for a day of Whatsapp. In comparison, Twitter, Google+, WeChat, LINE and others are comparatively more expensive.
This creates a situation where consumers are more likely to use services that the telecom operator is pushing at them because they’re cheaper to use, or are faster. Either that, or they’re likely to use these services more than their alternatives. Making these services cheaper makes competing services comparatively more expensive.
Feeding the beast?
As an independent observer, to us it appears that, in the process customer acquisition land-grab, Internet companies are being far to greedy and essentially feeding the beast. We wouldn’t be surprised if telecom operators begin charging Internet companies ‘carriage fees’ for such preferential access in the future. Internet companies who are currently participating in these deals will not have grounds (moral or legal) to oppose such preferential treatment that goes against them. Today, your service will be cheaper, tomorrow, someone will pay the telecom operator to make their service cheaper than yours, forcing you to do the same. The only entity that will benefit from this situation is the telecom operator.
We do think that it is time that the TRAI looked into how things are developing in India from a net neutrality perspective.
Some quick notes from the Uninor announcement regarding Whatsapp and Facebook:
– The Whatsapp and Facebook plans are starting with Gujarat, and will be followed with Maharashtra and Goa shortly. The plans will be extended to all of Uninor’s circles within a month.
– Uninor has seen the highest Internet consumption in Gujarat and Maharashtra & Goa. In Gujarat, Uninor’s Internet revenue has grown by 88% in 2013, and in Maharashtra, every fourth Uninor subscriber is an active Internet user.
– Telenor has a global partnership with Facebook and Whatsapp “to create dedicated products with Facebook and Whatsapp, provide better than market tariffs for these services, share customer usage trends and co-market the offering.”
– “For us to deliver hourly, daily, weekly and monthly offerings for unlimited Facebook at a single fixed charge, Uninor has had to map as many as 10 distinct entry points through which a subscriber enters Facebook. Each has been mapped and integrated into the system such that the subscribers get these cheapest tariffs, no matter how they enter Facebook. This extensive work took over 2 months with teams from Uninor and Facebook working together,” said Amaresh Kumar, Chief Product Officer of Uninor who is also leading the company’s new strategy towards Internet.
– Part 1: WhatsApp’s Business Head Neeraj Arora on Carrier Deals & Voice, Biz Dev Plans, India, Payments
– Part 2: WhatsApp’s Business Head Neeraj Arora on Integration Of Services, The Facebook Deal & Why He Joined Whatsapp
– WhatsApp Hiring Business Head For India, Few Other Markets