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Evolution of Mobile VAS in IndiaImperatives for Exponential Growth                               July 2011 | A joint repor...
2FOREWORD Dear Reader, We are delighted to present to you this comprehensive report on the        The present version of t...
3List of Sponsors                   Platinum Sponsor                    Gold Sponsors
4Peer Review / Acknowledgements• Peer Review Steering Committee  We would like to thank the peer review steering committee...
5Executive Summary [1/5]1. The Indian non-voice market is at an inflexion point,                  As in other mobile-first...
6Executive Summary [2/5]   MIS reconciliation and dispute resolution. The issues affecting      monitoring MIS reconciliat...
7Executive Summary [3/5]  framework were evaluated. In the scenario of a licensed mobile      commercial terms with indivi...
8Executive Summary [4/5]  through an acceptable methodology (e.g. on a cost plus basis)       service providers such as ha...
9Executive Summary [5/5]   can provide a scalable, technology enabled solution to existing       Video has long been haile...
10Contents           The Indian Mobile VAS Opportunity                10           Policy and Market Enablers             ...
Global Experience                                                                                                         ...
Global Experience                                                                                                         ...
Mobile VAS Overview                                                                                                       ...
Mobile VAS Overview                                                                                                       ...
Mobile VAS Overview                                                                                                       ...
16Contents           The Indian Mobile VAS Opportunity                10           Policy and Market Enablers             ...
Mobile VAS: Challenges                                                                                                    ...
Mobile VAS: On-Deck Providers (Challenges)                                                                                ...
Mobile VAS: On-Deck Providers (Challenges)                                                                                ...
Mobile VAS: On-Deck Providers (Challenges)                                                                                ...
Mobile VAS: On-Deck Providers (Challenges)                                                                                ...
Mobile VAS: On-Deck Providers (Challenges)                                                                                ...
Mobile VAS: On-Deck Providers (Challenges)                                                                                ...
Mobile VAS: Off-Deck Providers (Challenges)                                                                               ...
Mobile VAS: Off-Deck Providers (Challenges)                                                                               ...
Mobile VAS: Off-Deck Providers (Challenges)                                                                               ...
Mobile VAS: Off-Deck Providers (Challenges)                                                                               ...
Mobile VAS: Off-Deck Providers (Challenges)                                                                               ...
Mobile VAS: SMS (Challenges)                                                                                              ...
Mobile VAS: SMS (Challenges)                                                                                              ...
Mobile VAS: Recommended Solutions                                                                                         ...
Mobile VAS: Recommended Solutions                                                                                         ...
Mobile VAS: Recommended Solutions                                                                                         ...
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
IAMAI - AML Mobile VAS Report - Slides - 2011-07
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IAMAI - AML Mobile VAS Report - Slides - 2011-07

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This document is a “distilled” version of the much larger report that Analysys Mason and IAMAI have prepared. The detailed report is available for purchase on IAMAI’s website – www.iamai.in and is an in-depth guide to each of the specific sub-segments within the mobile value added services ecosystem.
This summarised version of the report covers the following areas: The Indian mobile VAS opportunity, policy and market enablers, key trends in the mobile VAS industry in India, key growth areas in services and applications and mobile VAS industry growth forecasts
The key takeaways from this report summary are as follows:
• The Indian non-voice market is at an inflexion point, and the growth opportunity remains significant
• Similar to other mobile-first markets, mobile internet (handset plus dongles / CCDs) will drive growth in non-voice revenues while traditional services stabilize
• However, various market and policy enablers are required in on-deck VAS, off-deck VAS and SMS channels to realize this growth opportunity
• From a market perspective, a self-regulating body for settling issues between market participants can be an effective way to address on-deck challenges
• From a policy perspective, we believe that following a model of market determined revenue share with no special VAS license is the best route
• We recommend establishing an agency under the direction of TRAI to help address off-deck adoption issues and facilitate the allocation and management of a central short code registry system
• It is also recommended that a common standard for local language characters should be mandated on all handsets sold in India to facilitate growth in SMS
• Resolution of above issues also becomes imperative for maintaining market efficiency and balance of power in the evolving VAS value chain
• Among the emerging services, we believe that mobile commerce and utility services will have a significant social impact
• Finally, we believe that mobile internet adoption will result in a proliferation of data enabled services and applications around video, advertising, community, entertainment and enterprise mobility

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  1. 1. Evolution of Mobile VAS in IndiaImperatives for Exponential Growth July 2011 | A joint report by IAMAI and Analysys Mason
  2. 2. 2FOREWORD Dear Reader, We are delighted to present to you this comprehensive report on the The present version of the report contextualizes the primary question: past, present and future of that enigma which is known as the mobile “What should be done in order for the industry to move ahead?” in the value added services industry in India. In the enclosed pages, we light of “what has been in the past and what can be in the future”. So the have attempted to lay bare before you the story of the genesis and focus essentially is on urging stakeholders to collaborate in charting the evolution of this industry, the roadblocks that it faces, and the path forward for the industry. And, in attempting to do so, we have opportunities that it presents to all stakeholders. More importantly, we suggested “a particular” way that we believe will be acceptable to all have taken much pain to suggest a practical way to put this industry stakeholders. The larger appeal here, obviously, is a call for collective on a virtuous cycle to ensure sustainable progress and to identify the and effective action since this industry cannot flower with an attitude of areas that will truly see tremendous growth. “more of the same” any longer. You will appreciate that such a “first of its kind” report cannot be the With this report we have set our best foot forward with the best interests work of a single group. It is collective effort, and we have benefitted of the industry and users, and we sincerely hope you will appreciate the from detailed conversations with and feedback from more than 50 direction that has been outlined. stakeholder organizations including telecom operators, government agencies, mobile value added services companies, handset OEMs, applications developers and, last but not the least, users. We would like to acknowledge our gratitude to all of them. Thank You. We should also clarify that what you see before you is a “distilled” version of the much larger report that Analysys Mason and IAMAI have been working on for more than six months. The larger and much more detailed report is prepared almost as a step by step guide to each of the specific sub-segments within the mobile value added Dr. Subho Ray services ecosystem. In case you are serious about harnessing the President data and services opportunity that the telecom industry presents Internet and Mobile Association of India today, the larger report can be suggested as “essential reading”. Kunal Bajaj Partner and Director India Analysys Mason
  3. 3. 3List of Sponsors Platinum Sponsor Gold Sponsors
  4. 4. 4Peer Review / Acknowledgements• Peer Review Steering Committee We would like to thank the peer review steering committee for dedicating their time to this initiative and helping to identify the key issues to focus on. Producing this report would not have been possible without their inputs and feedback  Parag Kar VP, Government Affairs, Qualcomm (India & South Asia)  PG Ponnapa Chief Executive Officer- India/Asia Pac, MPortal  Sanjay K Goyal Founder & CEO, ACL Wireless  Dr. Subho Ray President, IAMAI  Vijay Shekhar Sharma Chairman & MD, One97• Acknowledgements We would like to acknowledge the following people for their extraordinary contributions  Anand Virani Business Development Lead, Services Ecosystem, Qualcomm (India & South Asia)  Chirag Jain Vice President - Marketing & Business Development, Webaroo  Mohit Narain Business Director, ACL Wireless  Rakesh Mahajan Independent Consultant
  5. 5. 5Executive Summary [1/5]1. The Indian non-voice market is at an inflexion point, As in other mobile-first markets with no legacy infrastructure for and the growth opportunity remains significant internet access, the growth in non-voice revenues in India will be primarily driven by mobile data access. The mix of devices We believe that access to relatively higher speed data on (handsets, dongles and other connected computing devices) HSPA, EVDO and LTE networks, and a renewed focus of driving this market growth will depend on the economics and carriers on the mobile data opportunity will help drive growth in maturity of the underlying technologies (HSPA, EVDO and the Indian non-voice market in the immediate future. We see LTE). In contrast to growth in the data market, we believe that the foundational elements for such an inflexion point falling in the share of traditional services will begin to stabilize or decline place with improving data access speed, increasing penetration due to multiple demand and supply side constraints. We of smartphones and feature-phones as well as increasing believe that SMS penetration will begin to stabilize unless maturity of the content ecosystem. The opportunity for growth of issues around local language on handsets is resolved, while non-voice revenues in India remains significant, as has been CRBT penetration will stagnate primarily due to the inability of witnessed in multiple other emerging markets, especially after carriers to drop prices significantly combined with the limited the introduction of 3G. However, unlike most other markets, purchasing power of incremental users India will be a mobile-first market with the latent demand for mobile data being fulfilled by internet access through mobile 3. However, various market and policy enablers are handsets, tablets and other forms of CCDs (connected required in on-deck VAS, off-deck VAS and SMS computing devices) channels to realize this growth opportunity2. Similar to other mobile-first markets, mobile internet As in any rapidly growing ecosystem, there exist operational (handset plus dongles / CCDs) will drive growth in issues which limit market efficiency and consumer welfare. For non-voice revenues while traditional services stabilize the on-deck MVAS delivery model, the issues are centered around the absence of a governing body to address operational issues such as
  6. 6. 6Executive Summary [2/5] MIS reconciliation and dispute resolution. The issues affecting monitoring MIS reconciliation and similar such operational the off-deck VAS delivery model are structural in nature, with issues is not feasible. In such a market construct, self- the low penetration of financial instruments such as credit & regulation involving all ecosystem participants has been an debit cards resulting in the carrier being the predominant effective means of addressing contractual issues and means of reaching and billing mobile subscribers. In addition, commitments, as can be seen for the advertising market in there are operational issues around interoperability, with D2C India through the establishment of a body such as the ASCI providers required to negotiate bilateral agreements and (Advertising Standards Council of India). We propose that such system integration with individual carriers. Similarly, for the an industry council should have members from the carrier SMS channel, absence of handsets with a common local industry associations such as COAI and AUSPI, mobile VAS language standard limits the penetration of SMS, which in turn provider organizations and other stakeholders as limits the reach of mobile enabled services to the mass market, representatives on a governing board. The members of this including for services like education and health. For the rapid council will include carriers, handset OEMs, technology growth of the mobile VAS ecosystem in India, these issues platform providers as well as MVAS providers. This board can need resolution, either through market mechanisms or by draft guidelines for MIS reconciliation between mobile VAS regulatory intervention providers and carriers to protect the interests of all parties, and can also act as a forum for grievance redressal, and could issue directives for action4. From a market perspective, a self-regulating body for settling issues between market participants can be an effective way to address on-deck challenges 5. From a policy perspective, we believe that following a model of market determined revenue share with no For commercial agreements between carriers, who are licensed special VAS license is the best route entities, and mobile VAS providers, who are non-licensed entities, regulatory intervention for Multiple models for potentially regulating mobile VAS providers, including bringing them under a licensing
  7. 7. 7Executive Summary [3/5] framework were evaluated. In the scenario of a licensed mobile commercial terms with individual carriers and then follow that VAS provider, the regulator can potentially regulate revenue with system integration before being able to offer a uniformly shares and other interconnection agreements between the accessible service by consumers across carriers. In addition, in carrier and MVAS providers. However, an evaluation of the a majority of the cases, the carrier has a strong influence in pros and cons of the licensing model suggests that it will result determining the end user pricing of the D2C service to preempt in significant operational and financial overheads on MVASPs, cannibalization of its own offerings. Such a model inherently without the equivalent upside. We also note that even in other limits consumer choice, and also creates a significant barrier to emerging markets that have witnessed growth in non-voice the growth of the D2C ecosystem revenues, there is no precedent of licensing of MVASPs. Additionally, if revenue shares are regulated through setting a We recommend that TRAI should establish a Central Short floor, the incentive for MVASPs to innovate to target higher Code (CSC) agency as a licensed entity to be governed by revenue shares gets significantly impacted. We therefore them. Licensing of the CSC agency will allow it to enter into propose that the MVASPs may be kept outside the licensing agreements with other licensed entities (cellular service framework and revenue shares should remain market providers). The CSC agency will issue the short code to an determined and competitive MVASP (at a predetermined price), and will communicate the same to all UASL licensees. The carriers will then have to process the activation of these short codes in a pre-defined6. We recommend establishing an agency under the timeframe, across all circles. This framework can potentially direction of TRAI to help address off-deck adoption dictate the pricing of off-deck enablers (access, hosting and issues and facilitate the allocation and management billing) using a modular approach to the different components of a central short code registry system involved, allowing VAS providers to choose the access services that they need. The formulation of a “rate card” for the services In the current market structure for short codes and premium provided by the carriers can be done by TRAI under the numbers, a D2C provider needs to negotiate interconnection regime in consultation with carriers
  8. 8. 8Executive Summary [4/5] through an acceptable methodology (e.g. on a cost plus basis) service providers such as handset OEMs, new revenue models such as ad-support as well as a shift in the level of control by various participants. With increasing adoption of mobile7. It is also recommended that a common standard for internet, handset OEMs have been exploring opportunities to local language characters should be mandated on all offer D2C services and applications through application stores handsets sold in India to facilitate growth in SMS as well as retail channels (mobile banking). In parallel, faced with increasing competition in the voice market, carriers have Since incremental mobile subscribers are coming from semi been exerting their control over the mobile VAS value chain to urban and rural areas, there is a demand for Indian language reduce operating expenses. Some of these initiatives include support on handsets. Various encoding schemes and other integrating VAS platforms into the core network, and mechanisms are currently in use for sharing local language significantly diluting the role of technology platform providers. content, but there are interoperability issues across devices. This is in turn putting pressure on technology providers to We propose mandating a standard like the one developed by introduce new variants of traditional services such as CRBT, as CeWIT for local language support on device, as well as well as integrate backward to increase their share of the carrier mandating the incorporation of this standard on all handsets spend on VAS. Initiatives to foster growth of the D2C sold in India ecosystem will help maintain market efficiency by introducing further competition and incentivizing innovation8. Resolution of above issues also becomes imperative for maintaining market efficiency and balance of 9. Among the emerging services, we believe that mobile power in the evolving VAS value chain commerce and utility services will have a significant social impact The VAS value chain has become significantly complex over the last few years, with the emergence of new There have been multiple pilots and stakeholder initiatives for driving adoption of utility services which
  9. 9. 9Executive Summary [5/5] can provide a scalable, technology enabled solution to existing Video has long been hailed as the potential „killer application‟ issues around access to information, opportunity and on 3G networks, with global 3G carriers offering a portfolio of infrastructure. With the increasing availability of quality data video based services. However, with limited spectrum access and better devices, there is an opportunity for service allocation in India, we believe that data intensive video providers to enhance the quality and deepen the penetration of applications will remain muted. On the other hand, we believe these services in urban as well as rural areas. Among these that penetration of mobile data access in conjunction with rising services, the most valuable will be services providing a sales of smartphones and feature-phones will enable the replacement to infrastructure, such as mobile-health, mobile- growth of a vibrant applications ecosystem. This will also education and mobile-banking. We believe that carriers are well include social networking and community applications, either as positioned to make a substantial social impact by leveraging an extension of their online avatars or customized for a mobile- their retail distribution reach and offering banking, payments first user base. Some of the business applications will allow and domestic remittance services for the urban and rural poor. enterprises to m-enable their field force and harness the The only limiting factor in driving the adoption of utility as well benefits of faster turn-around time and reduced working capital. as financial inclusion services is the multiple stakeholder Finally, data and smartphone adoption will also substantially partnerships required by carriers in developing the market improve users‟ gaming experience and hence adoption, and ecosystem, which necessitates significant effort and time, and also foster new business and monetization models for mobile sometime reduces speed-to-market for some of these services music10. Finally, we believe that mobile internet adoption will result in a proliferation of data enabled services and applications around video, advertising, community, entertainment and enterprise mobility
  10. 10. 10Contents The Indian Mobile VAS Opportunity 10 Policy and Market Enablers 16 Key Trends in the Mobile VAS Industry in India 39 Key Growth Areas: Services and Applications 47 Forecasts 110 Annexure: Sponsors‟ Profiles 120 Annexure: Company Profiles 129
  11. 11. Global Experience 11 Global experience suggests that share of non voice revenues grows rapidly with introduction of 3G, especially in markets with a high PC & internet base Share of Non-Voice Revenues1 by Carrier, Country (%) 1 Messaging Driven Market 60% • Messaging dominant markets with high base of non-voice revenues • Philippines 45% High Growth post 3G 2 • Markets that have witnessed an 30% average change3 of ~4% per year China: ~4.8%, since 3G 28.2% • Malaysia, Brazil Malaysia: 21.8%, 15% 64.1% Moderate Growth post 3G Brazil: ~16%, 3 45.0% • Markets that have witnessed an S Africa: 8.2%, 0% 8.7% average change3 of ~2.5% per year Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 since 3G 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 • S Africa, Indonesia, Thailand & China China 4 Unicom, China Vivo, Brazil Globe, Philippines Smart, Philippines 5 Maxis, Malaysia AIS, Thailand Telkomsel, Indonesia MTN, South Africa Vodacom, South Africa 6 Launch of 3G Services Legend2: Country: PC Penetration, Internet Penetration Note: 1. Non-voice revenues includes revenue from messaging, data usage and other non voice related activities; 2. PC penetration figures are for 2005 and Internet Penetration figures are as of 2006; 3. Average yearly change in share of non voice revenues (within total revenues); 4. China Unicom was considered rather than China Mobile, because the latter launched 3G with TD-SCDMA while the former did so with W-CDMA / HSPA; 5. Smart launched 3G services in Q1‟06; 6. Vodacom launched 3G services in Q4‟04 Source: Analysys Mason, © Wireless Intelligence 2011, Telegeography
  12. 12. Global Experience 12 There appears to be a latent demand for connectivity in markets with low PC / internet base, which gets fulfilled by mobile internet Trend of Non-Voice Revenue and Mix (Messaging vs. Data and Others) Market Trend • Markets such as South Africa% of Non Low PC and – Voice 30.4% 33.6% 12.1% 19.4% 28.0% 30.0% 14.2% 23.4% and Indonesia have a low PC / internet baseRevenue internet base and are (South 11% 12% witnessing significant growth Africa, of mobile internet within non 37% Indonesia) 44% voice revenues 56% 35% 62% 52% 76% • Markets such as Brazil which 91% witnessed a late launch of 3G Recent 3G are also witnessing significant launch growth of mobile internet 63% (Brazil) within non voice revenues 53% 56% 38% 44% (~16% growth in share yoy for 37% 24% Vivo) 9% Q1 2009 Q3 2009 Q1 2009 Q2 2010 Q1 2009 Q1 2010 Q1 2009 Q2 2010 • Given the limited PC / internet Maxis Vivo Telekomsel1 Vodacom penetration as well as the late launch of 3G, India might also be expected to Data Messaging Others witness the emergence of mobile data as the dominant channel Note: 1. For Telekomsel – some share of other VAS included within data; Source: Analysys Mason, © Wireless Intelligence 2011, Industry Inputs
  13. 13. Mobile VAS Overview 13 Recent trends in structural enablers in the market indicate that the MVAS industry in India is nearing an inflexion point Share of GPRS Enabled Handsets DEVICE The Indian Music Industry CONTENT in Total Handset Sales Revenues by Component (2010) • The device landscape in India • There is a much wider variety has changed significantly with of VAS content and services 65% the entry of local Indian 10% Others available to the Indian user handset OEMs Digital today and carriers have Music become significant 51% • Data enabled devices (both 41% distribution partners GPRS and 3G) now constitute ~70-80% of the installed Physical • App stores with inventories handset base Music into the millions across 49% multiple categories and 2009 2010 genres are being launched by most carriers, handset OEMs and third party stores ACCESS Active Mobile Data (GPRS) DEMAND Data (2.5G) Plan Tariffs (INR)1 • Mobile data is now widely Users in India • The complete ecosystem accessible with carriers across devices, access and 75 launching 3G services across content is resulting in 450 their circles of operations growing demand from consumers for mobile • Low service pricing and the 30 internet services development of innovative 90 business models such as 1 sachet pricing and pay-per- 2008 2010 site are encouraging CY2008 CY2010 Note: 1. Estimated price for entry level plan with penetration of data services unlimited monthly data usage adoption within users Source: Analysys Mason, FICCI Frames 2010, Company Reports
  14. 14. Mobile VAS Overview 14 Unlike the wireless voice market, non-voice has been slower to grow in India, as compared to many other emerging markets Share of Non-Voice Revenues1 for Select Carriers in Emerging Markets Mobile VAS in India • Though there have been many rounds of VC / PE investments in mobile VAS 60% Limited companies, only a few companies have Investment achieved scale and gone for public Globe, Philippines offering 50% • End user price for VAS has remained Affordability more or less flat over the past few years, 40% due to low level of competition Maxis, Malaysia Telekomsel, • Carrier marketing is the primary channel 30% Indonesia for creating awareness of VAS offerings China Mobile, China Awareness • Individual participants do not have the 20% resources to market their own Vodacom, South Africa products/offerings Idea, India Airtel, India 10% Vodafone, India • No dispute settlement mechanism available to VAS providers for issues in MIS reconciliation, etc. 0% Transparency Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 • Consumers wary of using mobile VAS as charges for short codes / mobile internet are not well defined Note: 1. Non-voice revenues includes revenue from messaging, data usage and other non voice related activities Source: Analysys Mason, © Wireless Intelligence 2011
  15. 15. Mobile VAS Overview 15 With the right policy & market enablers in place, MVAS can reach INR 671 bn, contributing 31% of total wireless telecom revenues in India Mobile VAS Market Potential (INR bn) • Growth will largely be driven by India emerging 2010 – 2015 as a „mobile-first‟ market – with the mobile becoming the primary means of access to the Internet for a large section of the population 31% 31%  Mobile data is expected to account for 54% of total 27% MVAS contribution by 2015, as the single largest contributor 22% 18% • As an INR 671 bn industry, MVAS also has the 16% potential to have multiple second order impact on areas such as entrepreneurship and 671 603 employment 480 368 • However, this growth is currently constrained by 291 multiple policy and market inefficiencies 213 • While various views exist on what the potential 2010 2011 2012 2013 2014 2015 solutions could be, we strive to understand the key constraints in ecosystem development and VAS Revenue (INR bn) thus evaluate and identify the key enablers MVAS Share of Total Revenue required across policy and market mechanisms to achieve this potential Source: Analysys Mason, Industry Inputs
  16. 16. 16Contents The Indian Mobile VAS Opportunity 10 Policy and Market Enablers 16 Key Trends in the Mobile VAS Industry in India 39 Key Growth Areas: Services and Applications 47 Forecasts 110 Annexure: Sponsors‟ Profiles 120 Annexure: Company Profiles 129
  17. 17. Mobile VAS: Challenges 17 The three primary reasons for the limited growth in VAS are the lack of alternate billing mechanisms, market inefficiency and lack of local language support across devices Key Issues First Order Impact Second Order Impact Challenges for On-Deck VAS1 • Market inefficiencies resulting in Affordability: Price points for VAS perceived scalability constraints for remains flat, due to lack of 1. Carrier control VAS providers competitive offerings 2. MIS reconciliation • Focus of platform providers shifting to international markets to drive higher 3. Dispute redressal revenue from their offerings Ecosystem Evolution: Lack of innovative product and service Challenges for Off-Deck VAS2 • Perceived scalability and profitability offerings, with VAS providers constraints for D2C models, due to focusing on mass market services 1. Lack of alternate payment channels high % of billing share, and lack of alternate billing models 2. No control over end user pricing 3. Skewed revenue shares when • Companies focusing on basic mass Consumer Welfare: Lack of market offerings which can drive using carrier billing consumer interest protection, with no volumes in alignment with carriers clarity on data charges and pricing for SMS/calls to short codes Challenges for SMS adoption • Addressable base of SMS limited, with only 47% penetration Investments for Scalability: Limited 1. Limited understanding of English / Roman characters • Mobile marketing / advertising on investment in this sector due to SMS also constrained perceived risk around carrier control on revenue shares and billing Note: 1. On-Deck VAS: Value added services which are available through the carrier; 2. Off-Deck VAS: Value added services which are available through D2C models Source: Analysys Mason, Industry Inputs
  18. 18. Mobile VAS: On-Deck Providers (Challenges) 18 Challenges in the on-deck MVAS space are primarily due to MIS reconciliation irregularities and the absence of a dispute redressal system On-Deck VAS Impact of these issues • Carriers have the dominant Controlled Revenue position when negotiating revenue • Carriers provide marketing support, billing and Shares shares, resulting in a high level of customer service, and therefore command uncertainty for the VAS providers higher revenue shares than in other markets • VAS providers have very little negotiating power because carriers control access to their subscribers. While carriers do reward • Lack of a standard MIS innovative services with a higher revenue MIS reconciliation process results in Reconciliation share, overall revenue shares still remain uncertain payment values and timings skewed • In addition, MIS reconciliation issues and the absence of a dispute redressal system has resulted in VAS providers having little • Lack of a representative body recourse results in no formal addressal of Dispute Redressal disputes which have a negative • Disputes between the VASPs and carriers are impact on the smaller VAS beyond the purview of TRAI and TDSAT and companies taking the cases to court is a lengthy process Source: Analysys Mason, Industry Inputs
  19. 19. Mobile VAS: On-Deck Providers (Challenges) 19 Given the high level of market inefficiency and carrier control, there is a significant amount of uncertainty in business models for TPEs On-Deck VAS Dependency of the Revenue of MVAS Provider • As the primary revenue stream of TPEs is on Carrier Revenue dependent on carriers, there is clear linkage between carrier revenue growth and TPE Total Telecom Revenue revenues (and a lagging / leading impact on • Decline in RPM due to stock price) hyper-competition • Demand in terms of MoU • Even in cases of decline of carrier voice also declining revenues (and not VAS revenues), the carriers have been known to heavily reduce revenue shares of VAS partners to protect their own EBITDA margins • Payouts from carriers are often delayed and to Revenue of a MVASP Reduced revenue share meet the timelines for compensating their will further pull down the content partners, platform providers accept • Revenue share revenue of MVASP agreement with carriers • Carriers reducing revenue payments at the carriers‟ terms and conditions • Market impact share to optimise their opex • As VAS providers are not licensed entities, they do not fall in the scope of dispute redressal through TDSAT1  In the absence of dispute redressal, VAS providers need to approach the traditional judiciary system to Revenue of a MVAS Provider resolve issues with carriers & other partners, which is extremely inefficient and costly Note: 1. TDSAT: Telecom Disputes Settlement and Appellate Tribunal Source: Analysys Mason, Company Reports, Industry Inputs
  20. 20. Mobile VAS: On-Deck Providers (Challenges) 20 This unpredictability of overall revenue and limited profitability potential has led to platform providers investing in international markets On-Deck VAS Average Revenue Share (Range) for Technology Providers and examples of Acquisitions by • Due to constraints in overall revenues, many Indian Platform Providers in International Markets technology providers are expanding to international markets with better revenue share 100% arrangements and higher end user pricing of services • OnMobile acquired 80% Dilithium Network • OnMobile claims a total base of ~1 bn (2010)1 subscribers, with 300 mn subscribers from international markets, with growing revenues 60% from this segment – 25% of revenues in FY‟10 • IMImobile acquired UK‟s WIN plc for INR were from international markets 1,170 mn (USD 26 mn) (October 2010)2 40% • IMImobile entered Europe with acquisition of • Other companies such as IMI Mobile and content distribution pioneer dx3 (2008)3 Phoneytunes have also expanded their • Mauj mobile, People Group‟s company has acquired UK based Mobango in 20104 international presence significantly, with up to 20% • One97 plans to expand to markets similar to 70% of their revenues coming from these India such as pre-paid minutes dominated markets European markets 0% India USA Europe Note: 1. Dilithium networks is a global provider of mobile video infrastructure solutions, with customers across 120 service providers and carriers in 60 countries; 2. WIN plc is a mobile content and services firm with revenues of approximately INR 2,700 mn (USD60 million); 3. dx3 is a UK based digital content delivery services provider; 4. Mobango is a UK based mobile application and user generated content store Source: Analysys Mason, Industry Inputs
  21. 21. Mobile VAS: On-Deck Providers (Challenges) 21 This is also resulting in limited long term innovation and investments, with carriers placing major focus on increasing penetration of basic services On-Deck VAS Subscriber Penetration of VAS Services (2010) • After SMS, CRBT is the only app to achieve 47% significant penetration due to carrier promotion and discovery mechanisms • VAS providers focus on mass market services 20% 17% 15% as they do not have sufficient incentive to experiment with innovative offerings for specific 6% 2% niche consumer segments. Launching a new P2P SMS Games CRBTIVR / Voice Portal SMS A2P Others service can take months • Given the high level of control of carriers and Revenue Contribution of VAS (2010) the small overall market for platform providers, larger international VAS providers largely have 1% stayed away from the Indian market P2P SMS • Buongiorno is one of the few large, global, 38% 34% P2A/A2P SMS standalone, pure play mobile VAS companies CRBT that has extended its operations to India IVR Portals Mobile Data 6% 13% 8% Others Source: Analysys Mason, Industry Inputs
  22. 22. Mobile VAS: On-Deck Providers (Challenges) 22 We believe that revenue shares are best left to market forces, given their direct impact on innovation On-Deck VAS Revenue Share Range Estimates by Type of MVAS and their Level of Content / Service Differentiation • There is no precedent of revenue share regulation in global markets 60% • Revenue shares are a commercial discussion between two commercial 50% • Very popular service, albeit stabilizing now entities and should be left to market • Network integrated forces service – harder to 40% switch providers • Allowing the market to determine the • Content is important revenue share will ensure the introduction of new and innovative 30% • Innovative service with high value proposition offerings • Very generic service • Celebrities are • Innovation and ingenuity will be procured by VASP 20% • No clear differentiator rewarded while commoditized between providers services will be compensated accordingly 10% • Setting a floor for revenue shares would unjustifiably raise the cost of 0% commodity content / services News Alerts CRBT Celebrity Talk Source: Analysys Mason, Industry Inputs
  23. 23. Mobile VAS: On-Deck Providers (Challenges) 23 Apart from revenue shares, the on-deck VAS market still has challenges with MIS reconciliation, dispute redressal & short code integration On-Deck VAS Uncertain Environment for VAS Providers • The key issues that need to be addressed are MIS reconciliation, short code administration and dispute redressal • The process of MIS reconciliation between Carrier A Carrier B carriers and VAS providers needs to be • IUC framework for interconnection streamlined to ensure timely payment • TDSAT for dispute schedules and method for data reconciliation redressal • Formal representation bodies (COAI, AUSPI) • The process for shortcode administration is • Interconnection also not optimal, and needs to have some • MIS Reconciliation • Interconnection guidelines to simplify the allocation and • MIS Reconciliation • Dispute Redressal integration process • Shortcode • Dispute Redressal • Administration Shortcode Administration • In addition, there is no formal body that the • Billing and VAS Revenue Shares • Billing and VAS providers can approach in case of any Provider Revenue Shares disputes with carriers or between themselves Source: Analysys Mason, Industry Inputs
  24. 24. Mobile VAS: Off-Deck Providers (Challenges) 24 On the other hand, challenges in off-deck VAS are primarily due to lack of alternate billing mechanisms and delays in short codes integration Off-Deck VAS Impact on D2C / Off-Deck MVAS Providers: Delays in • Individual carrier controlled and Access to maintained short codes make • These issues have constrained the growth of Premium national rollouts a lengthy and mobile VAS in India Numbers complicated process • As far as technological feasibility is concerned, SMS and WAP/GPRS are the only carrier agnostic services that can be provided • Lack of alternate billing  Even for SMS, short code services face several mechanisms results in a carrier issues from allotment of short code to deployment Carrier Control controlled off-deck MVAS industry of service on Pricing where the VAS providers cannot price their own offerings  For WAP / GPRS, TRAI has made recommendations which do not allow the carrier to block any mobile portal • MVASPs do not have the freedom  IVR shortcodes face similar problems to SMS, to choose from the access and given the importance of voice services in Carrier enablers that they would like to India, are actually a more important mechanism Arbitration on use for their service. Revenue for reaching the masses Revenue Share shares are opaque, even when using only the billing channel Source: Analysys Mason
  25. 25. Mobile VAS: Off-Deck Providers (Challenges) 25 The lack of alternate billing / payment channels has resulted in restricted growth of off-deck VAS in India Off-Deck VAS Payment Methods for Purchase of off-deck VAS State of Maturity • The absence of mass 1 Carrier Billing penetration of alternate Simple one button purchase for the Mature payment channels such as Revenue share ~40% consumers credit cards / wallets Carrier IN constricts the ability of the VAS providers to directly 2 Mobile Wallet approach and bill Consumers need Phone Number to provide the consumers 9988998899 details of mobile Nascent Password wallet if not using • The D2C VAS industry has the carrier‟s wallet Mobile wallet details Mobile wallet for purchase of thus remained very small provider‟s VAS server • Most VAS providers go 3 Credit / debit card or net banking through carrier billing to Consumers need increase their reach, and to provide details of payment end up sharing a high share instrument and Niche (~60-70%) of their revenues also go through the bank site for with the carrier for use of Payment Credit/Debit card details + Gateway second level of only the billing channel second level authentication; Processor‟s authentication net banking details server Source: Analysys Mason
  26. 26. Mobile VAS: Off-Deck Providers (Challenges) 26 This is in contrast to global markets where the off-deck VAS industry thrives in the absence of billing constraints Off-Deck VAS Mobage Town Case Study Drivers for Japan’s Mobile VAS Market Developer • 90% revenue share to mobile developers Revenue for both on-deck and off-deck content / Share services • Carriers control the device roadmap Device including handset OS and features Capabilities • All handsets are internet enabled • Flat-rate data plans introduced with a Data Plans cap on maximum spend for consumers • Market leader NTT DoCoMo adopted Carrier these developer friendly measures and Initiatives also offered flat rate data plans • Youth specific application in • Global markets such as China, Japan and Total Revenues ~ $ 1 bn Korea, have a robust D2C ecosystem; the Japan with gaming, Active Accounts 22 mn networking, avatar and news market has benefitted from an early opening of • 50% revenues from user carrier walled gardens to offer easy access to Page views / month 17 bn transactions D2C services Source: Analysys Mason, Industry Inputs
  27. 27. Mobile VAS: Off-Deck Providers (Challenges) 27 Carrier billing remains an option, but issues of no control over pricing by off-deck providers and skewed revenue shares remain Off-Deck VAS End user Price for Voice and Non-voice ARPU vs. Price of Popular Game in Different Offerings in India (2007 & 2010)1 Countries (INR)2 INR 30 30 INR 30 2500 (2%) 2171.7 2000 (3%) 20 1507.5 1500 15 15 10 10 10 10 10 1000 (17%) 10 722.3 (10%) 500 444.6 (33%) 3 3 3 161.6 119.7 54.0 44.6 42.8 44.6 0 0 Voice Premium Mono Tone Poly Tone Wallpaper CRBT India USA UK China Malaysia (10 mins SMS Download Subscription call)1 2007 2010 ARPU Game Price Note: 1. For a 10 minute call; 2007 rate assumed at INR 1 per minute, 2009 rate at INR 0.5 paisa per second, Cost of per transaction for SMS, monotone, polytone and wallpaper, monthly subscription for CRBT; 2. India (Paid game on Indiatimes), USA, UK, China (Paid game on Apple Apps Store), Malaysia (GamesUnlimited; Maxis games site); Most games in China are cracked and available for free. Number in parenthesis indicates the cost of game as a % of ARPU Source: Analysys Mason, Wireless Intelligence, Industry Inputs
  28. 28. Mobile VAS: Off-Deck Providers (Challenges) 28 In addition, MVASPs face issues in the integration of short codes, which inhibits the revenue potential from voice and SMS services Off-Deck VAS • Short code services face multiple issues, right From allotment to deployment, short codes are from the first step of short code allocation to completely dependent on the carrier service deployment and management • Inordinate delays in request processing and allotment of short codes are common within Allocation Deployment the industry • In addition, since short codes are controlled by the carriers, situations arise where some carriers have allotted short codes, while Delay: Request processing Blocking: Selective blocking and short code allocation is of codes that are considered others have not. In such a situation, services often quite delayed „competitive‟ by carriers get delayed and sometimes don‟t get launched ever • Even once allotted and deployed, short code services face issues such as arbitrary pricing Interoperability: VAS and blocking of services that are deemed Arbitrary pricing: Could be provider has to take a separate short code from troublesome especially for „competitive‟ by the carrier small VAS providers each carrier Source: Analysys Mason
  29. 29. Mobile VAS: SMS (Challenges) 29 Challenges in SMS adoption include the lack of handsets with a common standard for local language support SMS Penetration Impact on SMS Adoption: • Less than 10% of the installed base of handsets support non- • These issues have constrained the growth of Limited SMS usage in India Roman characters Availability of Handsets with • Limited local language support, • As the number of subscribers from rural areas Local Language Support means a large portion of the is growing at a faster rate than in urban areas, population (~ 90%), is not the demand for SMS in Indian language is addressed likely to continue to grow • Complexity of Indic scripts results in relatively high number of characters per word on an average • Variation in keypad layouts and standards for Indic language • No display guidelines and standards are Absence of support across vendors / devices available Standards Based Solutions for results in loss of content Local Language  3GPP, body for global mobile telephony SMS • This difference creates standards, amended the SMS standards in 2008 incompatibility between to accommodate a request from Turkey to handsets support the full Turkish alphabet Source: Analysys Mason, Centre of Excellence in Wireless Technology (CEWiT) India Reports
  30. 30. Mobile VAS: SMS (Challenges) 30 Lack of a local language standard across devices has led to limited SMS penetration to English / Roman characters users SMS Penetration Top Print Newspapers by Circulation in India SMS Penetration, 2010 (Readership, mn) 100% 100% Dainik Jagran, Hindi 55 80% Dainik B haskar, Hindi 34 75% A mar Ujala, Hindi 29 47% Hindustan, Hindi 27 50% Lo kmat, M arathi 21 Daily Thanthi, Tamil 20 25% Dinakaran, Tamil 17 A nanda B azaar P atrika, B engali 16 0% Philippines China India Eenadu, Telugu 14 Rajasthan P atrika, Hindi 14 M alayala M ano rama, M alayalam 13 Times o f India, English 13 • Apart from lower SMS pricing in Philippines and China than P unjab Kesari, Hindi 11 India, the ability to message in local language is the key Daily Sakal, M arathi 11 driver for high SMS penetration P unya Nagari, M arathi 10  The inherent efficiency of the Chinese language (average word- Dinamalar, Tamil 10 length less than 2) overcame the limitations imposed by Unicode Vijay Karnataka, Kannada 9 (UCS-2) in terms of 70- character size limit Gujarat Samachar, Gujarati 9  In Philippines, the local languages are written using the Roman M athrubhumi, M alayalam 9 script which means that the default 7-bit GSM alphabet can be B artaman, B engali 8 used (as in the case of English) 0 10 20 30 40 50 60 • Different handset OEMs use their own proprietary standards for local language text creating interoperability issues Source: Analysys Mason, Industry Inputs
  31. 31. Mobile VAS: Recommended Solutions 31 Opinions vary across industry stakeholders on the preferred solutions to address the current issues with the mobile VAS industry 1. Policy Framework without 2. Licensing with Market Determined 3. Licensing with Policy Licensing Revenue Share Determined Revenue Share • A focused licensing regime needs to • No separate VAS license needs to • A broader licensing framework, which Position be in place for VAS, including be issued – but a policy framework leaves revenue shares to be driven by regulation recommending minimum to support VAS providers is required market forces revenue shares • Licensing will ensure that the VAS • Revenue shares should be left to industry gets support on critical issues • Revenue shares remain a critical market forces, as that will help drive such as MIS reconciliation and dispute element in the mobile VAS ecosystem innovation redressal and are currently hampering growth Rationale • Creating licenses will increase the • Revenue share is a commercial and investment in the industry because agreement between entities and cannot of their low levels costs of the MVASPs and innovation will suffer as smaller VAS providers be mandated by the Government • Once revenue shares are regulated, will not be able to bear the attendant • Once off-deck services gain traction, other operational issues such as MIS costs of a license market forces will drive revenue shares would also get addressed without intervention • Formation of a self governed industry forum to formally represent • A VAS licensing framework that will • A VAS license framework that will Potential Solution the VASPs regulate MIS, dispute redressal and regulate revenue shares, and • Formation of a premium number other issues, but will leave revenue recommend measures for policy which will govern the shares to market participants implementation and monitoring operation of short codes Source: Analysys Mason, Industry Inputs
  32. 32. Mobile VAS: Recommended Solutions 32 While licensing is potentially an option to address these issues, licensing by itself does not guarantee a solution Licensing will ensure that the VAS industry gets But, licensing may not be best solution for support on critical issues such as MIS these issues as it comes with it‟s own share of reconciliation and dispute redressal additional burdens and responsibilities • Allows companies to voluntarily be indexed and • Licensing will result in high costs, including documented by TRAI, helping more clearly bring out license fee payments and operational delays as the role of third party VASPs Govt. process and approvals would be required • Allow VASPs to come under interconnection • Innovation will be hindered as launching a new regulation and thus access carrier services in a VASP will require first acquiring a license timely fashion with guaranteed QOS, and without • Increased overheads and reporting resulting from the threat of being blocked licensing can inhibit the growth of the MVAS • Address disputes redressal through TDSAT industry • Rate players in the VAS space for their compliance • Regulating revenue share will not be conducive to with best practices and standards set by TRAI and innovation, and is best driven by market forces others. Coupled with information disclosure measures, this would help in improving market functioning and dispute redressal There are other alternatives which can be adopted to help drive growth in the Indian MVAS industry Source: Analysys Mason, Response of Industry Participants to TRAI VAS Consultation Paper – Feb 2011
  33. 33. Mobile VAS: Recommended Solutions 33 Hence, a policy framework without licensing is expected to better foster market enablers for the growth of MVAS in India 1. Policy Framework without 2. Licensing with Market Determined 3. Licensing with Policy Licensing Revenue Share Determined Revenue Share • A focused licensing regime needs to • No separate VAS license needs to • A broader licensing framework, which Position be in place for VAS, including be issued – but a policy framework leaves revenue shares to be driven by regulation recommending minimum to support VAS providers is required market forces revenue shares • Licensing will ensure that the VAS • Revenue shares should be left to industry gets support on critical issues • Revenue shares remain a critical market forces, as that will help drive such as MIS reconciliation and dispute element in the mobile VAS ecosystem innovation redressal and are currently hampering growth Rationale • Creating licenses will increase the • Revenue share is a commercial and investment in the industry because agreement between entities and cannot of their low levels costs of the MVASPs and innovation will suffer as smaller VAS providers be mandated by the Government • Once revenue shares are regulated, will not be able to bear the attendant • Once off-deck services gain traction, other operational issues such as MIS costs of a license market forces will drive revenue shares would also get addressed without intervention • Formation of a self governed industry forum to formally represent • A VAS licensing framework that will • A VAS license framework that will Potential Solution the VASPs regulate MIS, dispute redressal and regulate revenue shares, and • Formation of a premium number other issues, but will leave revenue recommend measures for policy which will govern the shares to market participants implementation and monitoring operation of short codes Source: Analysys Mason, Industry Inputs
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