Is there a way out of OTT-Telco stalemate?

While Bharti Airtel that recently withdrew its plan to charge customers for VOIP data awaits the consultation paper on the subject from TRAI and hopes a balanced way out  in the OTT-Telco stalemate, Voice&Data  explores the App Economy Ecosystem to figure the direction industry is taking in India

By Nandita Singh

Consider this. India mobile app economy in the following two years is forecasted to grow more than four times from its current estimated size of $150 mn (2014) and is said to breach $600-650 mn by 2016 with paid apps accounting for more than 50% share. This translates to over Rs 2,000 crore from paid apps by 2016.

This data was released by Rajat Kathuria, the director and chief executive of Indian Council for Research on International Economic Relations (ICRIER) and his research assistant, Sugandha Srivastav. Kathuria was talking about how apps are becoming central to our lives to a select group of media, earlier this year, in Goa, at a meeting organized by LIRNEasia, an ICT policy and regulation think tank active across Asia Pacific.

Now factor this.

According to analyst firm Ovum, globally, the telecommunications industry is set to lose a combined $386 bn between 2012 and 2018, from customers using over-the-top (OTT) voice applications such as the market-leading Skype and Lync, both owned by Microsoft. And you get the drift about the quantum of the overall loss in revenue for telecos, in India as well, where the trend has already moved to high data traffic, primarily VOIP applications, and declining voice traffic.  According to the telecom industry survey conducted by Voice&Data along with research firm, CMR (published in July 2014 issue of Voice&Data) while wireline data services have grown 13% YoY in FY2013-14, mobile data services recorded a growth of over 30% YoY during the fiscal. This is juxtaposed with a decline of 11% in wireline voice services and a growth of just 10% in mobile voice services in FY 2013-14.

Writing on the ‘Wall’ 

The writing is on the wall. And trying to block these OTT players is not going to help the telecos. While disruptions are the order in any industry, this one, is a Tsunami that is forcing down the existing structures, leaving little choice except to build afresh. Things have visibly changed from 2008 onwards after the launch of Apple store. Since then, the ecosystem has only grown to become more dynamic and complex. Use cases are getting presented and consumed with such agility from rank new players that the way a society functions is set for a tectonic shift. Some say, these trend shifts are the rumblings of the millennials coming-of- age. Generations, just like people, have personalities. Some well-regarded sociological research documents state everybody born after 1980 is a millennial. Another research disputes 1980 as the year, and classifies 1984 as that point in the demographic history when first of the millennials were born –in a world that was distinctly different from what GenX, lived in and contended with.

However, being a millennial is more of an attitude than a generational characteristic. Almost all the app entrepreneurs and intrapreneurs I spoke with, in an effort to get a sense of ground reality, were well in their mid-30s, some even 45+ with 15-20 years of solid technology-focused education and careers behind them. The primary reason they are getting on this app tide, is a desire to make life easy, free, and of course they want to change the world to suit them and their needs. I am sure you have heard of bitcoin and its ilk – which is to say they have defined their money as well and are mining it.  Or Taxi service Uber, which is having various kind of run-ins with established structures across continents. It is creative chaos out there, policies and systems are finding it difficult to keep pace with the rapid changes that are shaping the new, information driven economy.

Take for example, case of a product called foneplay from Qualzoom Technologies (2008). It is a phone launcher that is available in Play Store and had half-a-million downloads in the very first month it was made available. The actual product for the company, however, is advanced APK that allows deep customization and app building. It is licensed for business applications. The ready stack reduces the go-to-market time for businesses and generates revenue via ads and in-app purchases.

“Axiom Telecom in Dubai is foneplay’s largest distributor for Middle East and Africa (MEA) region. We have tried some bundling with Micromax, and have worked with Sony Entertainment, Panasonic and Microsoft. More recently, we have tied-up with Disney Movies and are doing launcher with contests, promotions,” informs Debashish Roy, head of business development at Qualzoom.  Roy believes that the relationship of an OTT player is symbiotic with telecos, OEMs and ODMs and that there is a lot to gain in working together. The company works with MVNO FreedomPop in the US. Roy suggests, Qualzoom can enable a teleco to launch its own app store and they can further allow their subscribers to publish their customized apps there, be it free or paid. “There is a use case for it,” he says.

Use case reigns

Reverie, a start-up that came in existence in 2009, offers language-as-a-service (LAAS) on a cloud platform. Its three founders, brothers Arvind and Vivekanand Pani, and their colleague SK Mohanty who has expertise in languages in computing, have not looked back since winning the QPrize from Qualcomm in 2011. “English literacy in India is less than 10%, but overall literacy is about 75%. Extrapolate this data to mobile user base of 850-900 million in India, and you realize that we are talking about an addressable base of 600 million people in the country who are literate but not in English,” says Arvind Pani, making a point. Reverie currently has deployments in 22 languages, of which 11 are Indian languages. It is banking on delivering citizen services to just about every state in India. “We are looking for partners in Thailand, Burma, Singapore, and Middle East as well,” adds Pani, who has set a $100 million company goal for himself and his team.

The next billion in India is set to have their first ever broadband experience on mobile devices. “These mobile users having their first exposure to Internet on their budget mobile devices have expectations that are different from the users of the PC era who have now migrated to mobile devices,” elaborates Pani emphasizing that it’s time companies give local languages the requisite importance and look at it all afresh.

The information economy which is being led by apps is being fired with an explosive budget smart phone proliferation across demographics in India. “This connectivity to the “next billion” can be used to bridge the service deficit,” says Sugandha Srivastav of ICRIER.  M-Health, M-Governance, M-Banking, M-Education – all of it are high impact applications that will improve the general quality of life.

Telecom operators may have a role to play in delivering all this by providing competitive revenue shares to app developers. Also, required is local app distribution platforms that provide 70-30 revenue shares to developers. The country is home to over 300,000 developers and consumers are downloading 100 mn apps every month, on their smart devices. However, app discovery remains the biggest challenge for developers. Innovation in app distribution is the key.

Innovation, the Jugaad

Apps Daily is perhaps the country’s biggest success story in consumer apps distribution. The company has a retail app distribution model that is just right for India market, where awareness and connectivity remain major adoption issues. With 800 of its sales staff on ground and 350+ distributors the company reaches out to all 250+ major cities and is expanding aggressively. “Our pricing of under $20 for just about every bundle from games to security subscription has hit the bulls-eye,” informs Arun Menon, CEO of Apps Daily. His mind, these days, is consumed by challenges associated with scaling-up the business. As far as business model goes, the company wins hands-down.  He is looking at expanding in education and healthcare apps and is focused on building and delivering great value through the new offering-in-the-works.

Not only Apps Daily sells its own apps through physical outlets it also circumvents unfavourable mobile-payment regulation by allowing payments in cash that makes it very convienient for its target market. There are a number of innovative models for monetization such as in-app advertizing, in-app purchases, advertizing, subscription and freemium model that the companies are experimenting, however, the competitive edge will come from innovations that create value by disruption.  “For example, Apps that allow for a new degree of device customization or Apps that replace previously paid-for-services or say an ability to search for in-app content without downloading the app,” says Sugandha Srivastav of ICRIER throwing in some suggestions.

Founded in 2011 by Akash Surekha, Hoopz, an innovative start-up got acquired by Pune-based Persistent Systems, earlier in 2014. It focuses on in-app content discovery and curation of quality content as a platform offering that allows gesture-based auto search, within any app that a consumer is using. It uses, the screen that is open as its point of reference and context, making it really effective and improving the overall customer experience of broadband. “However, operators in India are yet to sell self-branded bundled devices with such offerings,” says Surekha. He has been working with ODMs such as Spice Mobility and Xolo for bundling and is tapping internet services bundling with Xiaomi. “But it’s most effective as use case and business case when it is bundled with operator branded devices,” believes Surekha who also works closely with companies such as Intel and Qualcomm.

However, what will also help is faster, better, more affordable mobile devices with better battery life and great network coverage at affordable but high broadband speeds. And a lot of other issues need to be addressed such as interoperability, healthy competition, self regulation on issues of consumer privacy… the action has begun. These are early days. A lot more action on every front is in the offing.

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