Thomas K Thomas

Have telcos hit a dead end?

THOMAS K. THOMAS | Updated on August 11, 2012

A file photo of the launch of Airtel's Ring Back Tone service in 2004   -  Business Line

Whether it's in business processes or consumer services, innovations from telecom companies are down to a trickle.

Telecom companies haven't been doing too well over the past few years. Except for one or two players no one else is really making any money. The reasons for the current mess ranges from too much competition, unviable tariff, slump in subscriber growth and the regulatory uncertainty over spectrum. One side effect of all this is that operators have put the idea of innovation on the back burner. This was not the case a few years ago when India's telecom industry was hailed for its business innovation. For example, Bharti Airtel's low cost business operations through a revenue sharing outsourcing deal for IT and network equipment has become the global benchmark. There was also a lot of innovation happening in the domain of tariff plans and value-added services. The operators' resilience to thrive despite offering the world's lowest tariff has even formed case studies in management institutes.

Change of pace

But this has now changed. When was the last time an operator came out with an innovative tariff plan, an interesting service or a business process that can termed as ‘out of the box'? Take the example of 3G services, where telecom operators bid astronomical sums to buy airwaves to protect their valuations. But after this move, they haven't done much to compel subscribers to start using the services. As a result, more than a year later, telcos are not getting much traction on 3G services. Proof of this is in the stagnant share of revenue from data services. A year ago data contributed to about 15 per cent of operators' revenue and this figure has not changed, despite the launch of 3G services. That is because apart from access to the Internet, none of the mobile companies have offered anything different on the 3G platform. The days of ‘build it and they will come' are clearly over.

Even in the value added services segment, the last major innovation from the operators was the caller 'ring back tone' which became a huge hit. Handset makers like Apple and Nokia and operating system developers like Android grabbed the opportunity building exciting new applications and services for users. As a result, operators have lost considerable ground in a market which they monopolised at one point in time.

Just an excuse?

In their defence, telecom operators claim that they are being bogged down by the regulatory uncertainty on spectrum pricing, auctions, etc. That's an argument difficult to buy. The telecom sector in India has always been unstable as far as regulation is concerned. In fact, some innovations like the calling party pays, which made incoming calls free, were a result of regulation. Besides, business operations have always been separated from regulation and policy. Why should the regulatory mess at the Telecom Ministry in New Delhi stop the Karnataka circle head from doing something innovative?

Globally, in countries like Japan and the USA, mobile users get a plethora of services and application on telecom networks. These range from fun applications like movies and music to more serious services like mobile wallet and healthcare delivery. Some of these have been talked about in India as well but operators are not pushing these services enough.

To be fair, some new players did try to be different in the market but many of these efforts were not backed by business logic. For instance, Tata DoCoMo started the per-second billing which was great from the consumer standpoint but ended up squeezing the entire industry. Uninor is another player which tried to innovate with its dynamic calling tariff. This allowed operators to get benefits of different tariffs depending on the network load. Uninor also tried to innovate with its business processes through a partnership with Wipro aimed at reducing costs of internal IT systems. As a result of these innovations the company was consistently adding over a million new users every month making it the top performer among the new players who got licences in 2008.

But it is the incumbents who own 95 per cent of the subscribers and they need to get back to the drawing board and start innovating. Indian consumers are looking for much more than just voice and Internet access. They deserve to have access to what users in Japan and US are getting out of their telecom networks.

Published on February 19, 2012

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