Google Play’s first carrier billing partnership in India (with Idea Cellular), which allows users to pay for apps and in-app purchases with their mobile prepaid balance, has been a long time coming. Discussions with Indian telecom operators have gone for years (at least four) but the bone of contention has always been revenue share. At the core of the revenue-sharing issue is how the Indian government taxes telecom operator revenue. Google’s discussions with carriers have had complications, though Mike Hayes, Director (Business Development for Android and Chrome Partnerships) avoided answering our questions about them.
How consumers are charged
At a press conference today, Idea Cellular and Google showcased how the billing mechanism for consumers will work: Idea Cellular users will have an additional option for payment using “Idea billing” available for the Play Store, and after confirming the purchase with Google, they will receive an SMS with a particular code which they’ll have to input, to verify their purchase for Idea: a double confirmation, in a way.
In addition to the amount to be paid, customers will have to pay an additional convenience fee. An example that Google and Idea showcased had the following math:
– Cost of app (Product fee): Rs 10
– Convenience fee: Rs 1.6
– Total cost to consumer: Rs 11.6
Of this, as per the Play Store policies, Google keeps 30% of Rs 10 (i.e. Rs 3), and the developer gets Rs 7. In addition to this, purchases can be refunded within 2 hours, as per the Play Store policy. Interestingly, Idea Cellular said that the convenience fee can also be refunded within 2 hours.
On the Idea Cellular network:
– 60.4 million smartphones
– 44 million data subscribers
– 11.1 million 4g phones
– 22.9 million 3G users
– 75% of Idea smartphone users have android handsets (i.e.: around 45.3 million)
Now for the tricky part
The Indian government takes a certain percentage (around 8-10%) of a telecom operator revenue as Adjusted Gross Revenue. These are referred to, in the industry, as WPC charges. Historically, as was the case with Mobile Value Added Services, the problem for telecom operators has been that if you pay Rs 100 for an app, around 12-13% of that goes to the government as overall taxes. The remaining money was split between the telecom operator and aggregator, and then between the aggregator and the store. The content owner receives a tiny fraction of the money paid by a customer: I remember a music label representative telling me that they only got Rs 6 for a song that was priced at Rs 20 for a telecom operator customer.
What is happening now, Rajat Mukarji, Chief Corporate Affairs Officer at Idea Cellular told MediaNama, is that they’re treating the amount paid for the product as merely pass-through revenue. WPC charges will only be applicable to the Rs 1.6 convenience fee that Idea Cellular earns. Of course, Idea also earns from downloads.
The process being followed by this partnership is exactly what we had outlined in 2014:
1. Take carrier billing out of the mandate of telecom license fees, and treat them as pass through revenue
2. Kill the revenue share, enforce a transaction fee
3. Enforce verification of billing
Read that post: On making Carrier Billing independent of Carriers in India
This is a bold move from Idea Cellular, and may come up for regulatory scrutiny. However, our belief is that this is exactly the way things should be: this will allow for standardization of billing, the separation between the content provider (Google Play) and the billing partner (Idea Cellular), and create an environment where content providers are encouraged to develop paid apps for Indian users because more users are likely to pay for apps with their mobile wallet. Other telecom operators should emulate this partnership. This also creates a template for prepaid wallets to follow when partnering for the Google Play store.