Last week, the Indian telecom regulator TRAI issued recommendations to Department of Telecom (DoT), asking it to allow small shop owners, cafes, eateries, malls etc to provide last-mile Internet connectivity, via “Public Data Offices” (PDOs), which provide WiFi hotspots. The idea is to set up Public Data Offices (PDOs)—PCOs that work as WiFi hotspots—across the country, providing “last-mile” or cheaper connectivity in areas where connectivity is low, enabling these providers to partner with telecom operators, and re-selling Internet bandwidth.
Bangalore-based WiFi Dabba appears to be attempting this same thing: the company’s co-founder Shubhendu Sharma told MediaNama that the company is live in 100 locations in the city, and is planning to expand to over 2000 WiFi locations in the future. The startup sells data ‘voucher’ starting at Rs 2 for 100 MB of usage to customers walking into these outlets/shops. Vouchers are also available for Rs 10 (500MB) and Rs 20 (1GB). Each voucher is valid for 24 hours.
It’s worth noting that WiFi Dabba isn’t the only WiFi hotspot provider around. Telecom companies including BSNL, Reliance Jio, Airtel among others also have their own WiFi hotspots. Multi System Operator Ortel also has deployed its own WiFi hotspots in the country, and WiFi providers like Ozone buy bandwidth from telcos/ISPs and deploy WiFi infrastructure at hotels/cafes.
How WiFi Dabba monetizes
Launched in pilot mode in October last year, the company claims to have sold more than 1.5 TB of data to users via its hotspots. WiFi Dabba procures bandwidth from ISPs in Bangalore, and partners with small shops owners for reselling it as data to users. “We do not focus on Cafe Coffe Day markets, we rather focus on small eateries, juice shops and bakeries,” Sharma said. WiFi Dabba installs custom hardware/WiFi routers at the store and shares revenue from the sale of data with the retailer, with the retailer getting 80% of the revenue share. Sharma said that the company has no ads on its platform and that it simply generates revenue by reselling Internet bandwidth.
But note that WiFi providers like Ozone monetizes using advertising, and through tie-ups with third party content providers (in one instance, an Ozone tie up violated TRAI’s differential pricing rule). Ozone does not own the bandwidth; they instead buy it from ISPs/telcos, and operate as an infrastructure provider. Ortel, on the other hand, is a multi-system operator (with an ISP license) and has its own bandwidth and fibre cables. It monetizes by installing WiFI hotspots and charging users for usage.
“Pay for internet access, receive full internet access. We are not subsidised by ads or any other dark pattern. We have no free plans or trials. We do not collect any kind of user data,” Sharma said. However, Sharma did mention that at least 67% of its users are returning users. Apart from the occasional customers who visit small eateries, the company also claims to get users from nearby Paying Guests and hostels. Sharma also pointed out an interesting usage pattern among WiFi Dabba users. “People who come for their evening smokes (cigarettes), sometimes request WiFi Dabba data vouchers for change instead of actual currency,” he said.
How does the company become profitable?
In its consultation paper on WiFi, TRAI mentioned that it’s possible to provide data over WiFi at a cost of around Rs 0.03 per MB. The company is providing Rs 2 per 100 MB which translates to Rs 0.02 per MB, and is substantially cheaper than TRAI’s estimations. So how can WiFi Dabba afford these low costs, and how is it even profitable?
Sharma declined to clarify: “We cannot exactly reveal how we hit a profitability margin…but a larger part of maintaining profitability depends on what price we acquire bandwidth from the ISPs/telcos,” Sharma said. The company bears the entire cost of installation and hardware required for a WiFI connection. The shop owner does not invest in infrastructure. “Each location becomes profitable in about 4 months. When we started off as a pilot project we had 5 locations, out of which 3 are already profitable,” Sharma said.
WiFi Dabba has already applied for an ISP license and expects to get an approval from authorities to operate as a service provider sooner, but it could just work as an MVNO and merely resell bandwidth. Sharma, however, said that the company does not plan to take the MVNO route due to cost constraints. “We are not going ahead with an MVNO license because this is dependent on getting a contract done between an ISP and a company, which we believe is going to be tough to negotiate…But in the case of an ISP license, we can directly approach an ISP and buy bandwidth without negotiations” he added.
Telecom lobby COAI had responded to TRAI’s WiFi consultation stating that such a model can be allowed only via the MVNO route. “Allowing reselling of Internet services under a registration (without a license) would lead to creation of non-level playing field and would thus hamper the growth of investments in network and infrastructure,” the association added.
However, we would like to point out that an MVNO license costs at least Rs 15 lakhs on a pan-India basis for companies looking to re-sell data services. Apart from this, companies are also required to show a minimum net worth and paid-up equity of up to Rs. 10 Crore for each license they apply for. This will not allow for the proliferation of Internet via WiFi, and also hinders the very motive of providing affordable connectivity. Either the DoT should be floating a separate license for small scale resale of data, or reduce the high application requirement for an MVNO license.