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At TiEcon2008: On OnMobile, Nokia And Entry Barriers; What They Said, Didn’t Say, And What Can Change The Game

What they said
Cutting a deal with an operator is difficult
Arvind Rao, CEO of OnMobile: In the telco space, winning your first customer is the most difficult thing. Telcos aren’t dinosaurs, but they’re very very complex entities to deal with – they’re risk averse. They’ll say ‘go deploy with someone else show me it works, and consumers want it.’ It’s a chicken and egg problem. You’ll have to wheel, deal, do anything to get your first customer, but be fair and cut a deal that you can renegotiate at a later point. We had access to all the operators through our VC contacts, but we couldn’t get a break.

Scale is an issue, and we’ve already have the distribution, revenue model, and access to the consumer
Arvind Rao: We have our platforms installed in almost all operators in India. We are migrating to a point of opening the platform, and launching the OnMobile Developer Platform. Entrepreneurs can create companies and application, and wont need to go through the hassle of negotiating with operators, discussing commercials and integrating with such huge systems. You can’t manage with 20-25 people – for managing telcos, you need Industrial strength. A telco sent us such a team to us – they liked the technology and didn’t want to deploy, so they asked OnMobile to deploy. We liked the technology, and decided to buy them. So the thing you have to think about is “Why am I doing this? Am I looking to build an institution and a large company? Or something that I’ll sell in 3 years. There is consolidation in the VAS space in India.

What they didn’t say
If you don’t partner, we’ll just take you out
Look at what OnMobile has done in South India – they went into the market, and signed up 40 odd deals with SIMCA, using the money at their disposal to take many of the existing players out. Nokia also has in the works a music service, just as Motorola has MotoMusic. With larger distribution network and operator tie-ups, if you’re not creating exclusive content or have a large community at your disposal, it looks like you don’t have an opportunity in the mobile space.

In a way, Nokia did respond to this situation – very soon the consumer will have to choose between one location based service ad the other. You don’t know who will win. When people approach the same consumer and same market from different sides, they will approach it differently. Internet companies approach messaging from a web base point of view. Operators will approach it from revenue point of view. Nokia looks at messaging as a part of every service that we offer – even N-Gage. When Nokia enters the space, we don’t just look at one payment or distribution mechanism, so there’s opportunity for entrepreneurs.

What can change the game?
Sitting pretty at the top of this value chain, but apparently not-very-interested, are the mobile operators. They’re tedious to work with, but by opening up to smaller players, they can easily take the opportunity away from Nokia, OnMobile and everyone else who’s moving from their traditional role (as a platform company or a handset manufacturer) and to a services role. A step has perhaps been taken in the right direction, with Airtel launching its incubation fund. One opportunity is in going off-portal – whatever their cost of operation, MyToday and SMSGupShup have shown that if you spend big, you can create a large enough consumer base, irrespective of the operators, VAS players and handset manufacturers.

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