Mobile VAS: Video Consumption and Future

Mobile VAS: Video Consumption and Future

Mobile VAS: Video Consumption and
Future

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Index
Executive Summary

4

Overview of VAS in India

6

Value Chain of Mobile VAS

13

Technical Arrangement/VAS Platforms accessed by customer

15

MVAS Business Model

16

Regulatory Frame Work for MVAS by TRAI:

18

Revenue Sharing Model of MVAS India

21

Discrepancy in MIS Reports

23

TRAI's Open Access To VAS

25

Video Content Consumption on MVAS

31

Mobile Content Consumption

32

Current video products available on MVAS

34

Price Points & Products

37

Need Gap

39

Challenges for Mobile VAS

40

Discoveries and Awareness

43

Bibliography

45

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Executive Summary

The Indian mobile telecom industry has shown immense growth. As of March 2012, it reported
919.7 million Mobile subscribers. The total urban mobile subscriber base stands at 596 million,
while there are 323 million rural mobile subscribers in the country. However, the mobile telecom
industry is challenged by decreasing Average Revenue Per User (ARPU) given the huge
subscriber base but high expected future adoption rate of MVAS could help in increasing the
ARPU. A varied demographic distribution, changing lifestyles and shift in consumer preferences
amongst rural, urban, and sub-urban consumers, add further fillip to valued added services,
which can yield high returns if implemented strategically. The Indian telecom industry is all set to
register high growth rates with assorted MVAS products targeting particular segments of
customers in variable price ranges.

The Indian MVAS industry reported unprecedented annual growth of 36 percent to reach USD
3,533 million in 2011. We estimate that the industry will touch USD 7,106 million by 2016,
registering a year-on-year growth rate of 15 percent. Already a significant rise in disposable
incomes has drastically changed the consumers’ spending pattern with regard to mobile devices
and value added services. This has been the major reason for the high adoption rate of Smart
phones, loaded with a variety of applications, especially among urban users.

The MVAS market has been broadly classified into four segments i.e. information services,
communication services, M-commerce and entertainment related MVAS. Focus of this report
will be on how Value Added Entertainment services will be the primary growth drivers
accounting for the highest adoption rate among mobile users in the near future. Further, the
growth potential of the different MVAS segments will not only be confined to urban areas, but is
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also expected to register high adoption even in rural parts of the country. Thus, along with the
rise in demand from varied mobile value added services in urban India, a considerable rise in
mobile subscriber base in rural India promises huge revenue potential for players in the MVAS
value chain.

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Overview of VAS in India
Telecommunications had traditionally been a voice communication service. The services today
have moved beyond their fundamental role of voice communications to a variety of non -core
services, which in telecommunication parlance is called Value Added Services (VAS).Value
Added Services are enhanced services, in the nature of non - core services, which add value to
the basic telecom services.

Value Added Services add value to service, enabling the subscriber to use the telephone,
particularly the mobile phone or any end user terminal device for a host of purposes like sending
short messages, pictures, play games, listen to music, read news headlines, astrology, get flight
information, surf Internet, mobile banking including mobile payments etc.. In times to come
people will buy mobile Phones or any end user terminal device not just to remain connected but
to express themselves in a variety of ways

Traditionally, speed has been considered as limiting factor in growth of value added services.
The ongoing roll-out of 3G and 4G services could potentially address this gap. India is a young
nation with over 64% of its citizens below the age of 34 years and with literacy rate of around
80% amongst the age group of 15- 24 years. The nation’s growth and employment opportunities
have made the younger generation mobile with the rising income. Though current
VAS adoption is limited to select set of services, this combination of age, income and people’s
mobility promises a great future. Growth is expected to continue and even accelerate and
mobile penetration expected to go up to nearly 100% by 2015.

Traditional VAS has been primarily SMS-based, with Babes, Bollywood and Cricket the largest
content drivers VAS services contribute approximately 10% of total wireless telecom revenues
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for Indian operators is, projected to touch 48000 Crores. Most VAS services are provided over
SMS, IVR and WAP. Revenue growth has been driven by SMS (including P2P, A2P, P2A),
contributing over 55% of total VAS revenues Babes, Bollywood & Cricket remain the killer
content, whether for SMS alerts, ringtones / CRBT, games, wallpapers, etc.

Rural applications initiatives have launched in pilots, and are likely to grow quickly in less
developed geographies because of the willingness to spend on services which enhance
livelihood.
900
800
700
600
500
400
300
200
100
0
Mar'04

Mar'05

Mar'06

Mar'07

Mar'08

Mar'09

Mar'10

Mar'11

May'11

Growth of Wireless Subscribers (in millions) [Source: TRAI]

The significant change in lifestyle, changing user habits and increasing popularity of social
networking sites etc are shaping future telecom. The fast technological evolution, high
processing capabilities of hand sets, huge memory availability, and high speed Internet
connectivity capable to support different applications is changing the way the mobile has been
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used till now. A variety of applications will be possible to be delivered through MVAS which
include music & videos downloads, jokes, quiz, news updates, traffic updates, railway enquiry &
ticket booking, astrology, commercial transaction alerts, mobile banking etc.

The users of social network sites such as Facebook, Twitter, LinkedIn and YouTube etc are
increasing day - by - day. As on July 2011, Facebook had more than 750 million active users
out of which more than 250 million are currently accessing Facebook through their mobile
devices. Twitter has 175 million registered users as on September 2010, of which 37 percent
use their mobile phone to tweet. YouTube has more than 2 billion views a day including 100
million views on mobile a day [Source: TRAI]

Data services over mobile networks are gaining popularity in India also as more and more
wireless subscribers are subscribing for data services. The total number of wireless subscribers
who have subscribed for data services has increased more than 12 times from 31.30 million at
the end of March 2007 to 381.40 million at the end of March 2011

Presently approximately 50% of total population of India is below the age of 25 and more than
65% hovers below the age of 35. This makes India one of the youngest countries in the world.
The younger segment of the telecom subscribers are generally major consumers of such MVAS

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450
400
350
300
250
200
150
100
50
0
Mar'07

Mar'08

Mar'09

Mar'10

Mar'11

Number of Wireless subscribers subscribed to Data services (in millions) [Source: TRAI]

There is also great potential for growth of Mobile Value Added Services in rural India. Since
mobile penetration in urban India is already very high, the service providers are looking for
opportunities in areas so far the rural areas will be the focal point for further growth of mobile
telephone services. Simultaneous provision for development of
customized value added services such as crop price alerts, microfinance, scheme information,
installments dues alerts, weather alerts, banking, mobile payments etc. through mobile
telephones would encourage the rural population to subscribe to mobile telephone services

Presently, the Mobile Value Added Services market in India is centered on entertainment, music
and cricket. The socio-economic structure is changing with enhanced emphasis on networking.
Apart from simple applications like e-mail, instant messaging, educational information, text chat
etc, the focus is shifting to applications like video download, advertisements, gaming and video
chat.

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With the proliferation of 3G and BWA [4G] services, users would get abundance of value added
services developed by independent service providers with plethora of business combinations
and technical implementations. Accessing the Internet on mobile devices, downloading music,
pictures, playing games and even sending multimedia messages will be extensively used by the
customers. Service convergence such as voice with Mobile TV & IPTV, device convergence at
the user end and network convergence at core will facilitate the rapid adoption of value added
services by the consumers.

With increasing subscriber base total revenue of telecom service providers has also been
increasing. However, over last few years, while subscriber base has grown rapidly the revenues
have not kept the same pace leading to a revenue gap
2000000
1800000
1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
2004 - 05

2005 - 06

2006 - 07

2007 - 08

2008 - 09

2009 - 10

2010 - 11

Revenue of Telecom Service Providers (Rs. in million) [TRAI]

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900
800
700
600
500
400
300
200
100
0
Mar'05

Mar'06

Mar'07

Mar'08

Mar'09

Mar'10

Mar'11

Growth of Wireless subscribers (in millions) [TRAI]

Average Revenue Per User (ARPU) from wireless services has also come down due to
increased competition and reduction in tariffs. As ARPUs decline and voice services get
commoditized, the challenge for mobile service providers would be to retain customers, develop
alternative revenue streams, and create a basis for brand/service differentiation. Provision of
value added services, in addition to voice, on 3G/BWA networks which have wider bandwidth
pipes, can also help service providers realize better returns on their investments. Creation of
different value added services meeting the need of the customers could provide an opportunity
to overcome these challenges and bridge the revenue gap

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Source: BDA Analysis

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Value Chain of Mobile VAS:

A typical value chain in the MVAS industry encompasses content creators/providers, mobile
advertisers, aggregators, technology enablers, telecom service providers and end users or
subscribers. Content aggregation and provision of technology platform is usually performed by a
single entity known as Value Added Service Provider (VASP). It is also to be noted here that in
the value chain of MVAS, telecom service providers are very big entity in comparison to the
content providers/content aggregators who are basically SMEs. Mobile handset manufacturers
have also started playing an important role in the VAS value chain. Advertisers are also looking
for higher delivery of marketing activities through mobile VAS platform.



Content/App Owner: The first stakeholder in the value added services value chain is
the Content Authors/Producers or copyright owners known as content owners. These
entities provide the core content which drives the VAS –

which may be owned or

sourced by them. Examples include the music companies, movie production houses,
media companies, TV channels etc. Their offerings include copyright of songs,
entertainment news, movies, television listings, movie trailers, and promotional media
content. Advertisers are also producing content for promotion and delivery of marketing
communication to consumers through mobile VAS platform



Aggregator: These are the companies that aggregate content obtained from various
content owners/providers, convert it into the digital or any other suitable format and
make it available to technology enablers (value added service providers) or telecom
service providers

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

Technology Provider: These entities also called as Value Added Service Provider
(VASP) provide the technology layer for the telecom networks, which in most of the
cases also performs the task of Content aggregator. The technology layer often includes
a VAS platform, Mobile Application development & hosting, MIS & reporting tools,
operator billing, collection & payment settlement engine. Technology enabler may or
may not be dependent on content developers, e.g. mobile phone back up facility does
not require any content from the developer but the solution is directly provided to the
telecom operator.



Network Operators: Telecom service providers own the access network & end users
and also provide end - user billing & collection for the provision of VAS. They have
commercial agreements or arrangements with the VASPs for providing the VAS



Handset Manufacturer: In some cases the Mobile handset manufacturers have direct
agreement with content owners or VASPs for content which are embedded in the
handset or terminal device. An example of such content is games coming with the
mobile handset. They also provide features such as on-device portals which are
accessible through embedded links provided in the handsets

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Technical Arrangement/VAS Platforms accessed by customer:

Different technical arrangements or platforms are presently being used by telecom service
providers for delivering Mobile Value Added Services based on the type of content. For example
SMS are used for downloading monophonic ringtones, whereas WAP/GPRS platform is
used for downloading polyphonic and true-type ringtones. Some of the MVAS delivery platforms
are following:


Short Messaging Service



Interactive Voice Response



Wireless Application Protocol [WAP] and General Packet Radio Service [GPRS]



Unstructured Supplementary Services Data [USSD]



Call Management Services



SIM Application Tool Kit [STK]
SMS (P2P)

SMS (P2A,A2P)

Voice/IVR

WAP/GPRS

6%
9%
40%
25%

20%

Source: IMAI report on mobile VAS in India:2010

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USSD & STK

MVAS Business Model
The MVAS market is basically a three-player market comprising of content owners, content
aggregators/enablers and mobile operators. There are two business models through which the
content is delivered to end consumer:


On Deck Model: In this model, the telecom operator undertakes the branding, marketing
and selling of mobile VAS content. The billing is also done by telecom operator and it
collects the revenue from subscriber. As a result, it retains the largest portion of revenue
(60-65%) and the rest is shared among content aggregators and content developers.
recently, in the Indian market on deck value added services, service platform including
gateway/middleware is provided either directly by the telecom service providers or by the
Value Added Service Providers (VASPs) In the 1st case VASP only provides the
content. In the second scenario VASPs provide technology platform along with content.
Commercial arrangements exist between telecom service providers and Value Added
Service Providers (VASPs) for providing these services. In some of the cases the
VASPs do not own the contents but they have arrangements with the content
providers/content developers or copyright owners known as content owners. In the
commercial agreements, compliance to copyrights, digital rights management including
sourcing of the content is the responsibility of VASPs



Off Deck Model: In this model, the VASP sells content directly to subscribers.The
content can be provided either through the operators' portal or through their short code.
These short codes are uniform across all telecom service providers. The economics in
this model are opposite to that of on deck model. In this model, content developers and
aggregators retain 60-65% of revenue whereas 30-35% is being passed on to the
telecom service providers. Off-deck VAS provider needs to integrate with multiple
operators to be able to use the same short code to provide services to subscribers
across carriers. This can increase the cost and time of integration Also, the operator has

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an influence on deciding the end user price as well as the potential revenue share
expected by the VASP

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Regulatory Frame Work for MVAS by TRAI:
Presently, Indian MVAS industry is young and evolving. MVAS providers are not regulated or
licensed and mainly they act as service partners of telecom service providers. The telecom
service providers are the core in the value chain as they own network infrastructure and have a
large customer base. VAS providers aggregate different type of content and enable the content
suitable to be transported on mobile network. Both telecom service providers and VAS providers
complete the value chain for providing VAS to customers. Telecom service provider and VASPs
enter commercial agreements for provisioning of MVAS. There is no standard format of
agreement and, telecom service providers being the core of the MVAS value chain, usually
dominate in finalising the terms and conditions of the agreement.
The framework for issue of licenses for some value added services already exists, particularly in
respect of Voice Mail/Audiotex, Unified Messaging etc. The Department of Telecommunications
had notified the revised terms and conditions for Other Service Providers (OSP) category on
31st May, 2007. As per these terms and conditions, 'Other Service Provider‘ means a company
providing Application Services. Application Services have been defined to mean services like
tele-banking, tele-medicine, tele-education, tele-trading, e-commerce, call centre, network
operation centre by using Telecom Resources provided by Authorized Telecom Service
Providers.
In view of the growing significance of value added services, possibilities of various
new/enhanced value added services in 3G, BWA and Next Generation Networks (NGN)
environment, it may be appropriate to consider whether the licensing system is to be resorted
for licensing of mobile value added service providers. Migration to NGN could change the
existing service providers‘ business models. The service independence from core network in
case of NGN could encourage Value Added Service Providers to launch innovative services and
sector specific solutions. A possible consequence of such new developments may change
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service provisioning profile. A sizable number VASPs providing many innovative applications &
value added services could emerge and traditional network service providers may become pure
access providers. This could change the business model of the existing telecom service
providers to an extent, which may require regulatory measures.
In view of the growing and likely unprecedented expansion in these services and their
contribution to the revenue stream of telecom service providers, the importance of bringing a
suitable framework cannot be over-emphasised. The framework could ensure a level playing
field and transparency between content providers/aggregators and telecom service providers.
There are divided views on the issue of bringing independent MVAS provider under licensing
regime. One of the key arguments in favour of a licensing regime for value added services is to
ensure that consumer‘s interests as well as the interest of smaller VASPs are safeguarded. The
licensing will allow the independent MVAS providers to seek interconnection with QoS from
telecom service providers. As a licensee they can also approach TRAI/TDSAT for resolving their
issues. On the contrary it is argued that looking at the large number of entities involved, some of
them being very small, it may be difficult to bring them under licensing regime. Further bringing
these small entities involved in MVAS value chain will unnecessarily burden them with the
various obligation attached to a license. At times this may be counterproductive and suppress
innovative entrepreneurship.
Separate licensing regime is available for value added services in Singapore, China, Malaysia,
Bahrain and some African countries. On the other hand in some countries there is no need to
obtain a license to provide value added services and a simple intimation is sufficient. For
example in Australia, all suppliers of Mobile Premium Services are required to just submit
company details to the
Communications Alliance.

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Mobile

Premium

Services

Industry Register

managed by

The Authority in its recommendations on ―Spectrum Management and Licensing Framework‖
issued in May 2010, recognized the need to develop a healthy ecosystem for value added
services and indicated to initiate a consultation process separately to identify measures for the
proper growth of the VAS industry, including bringing them under the licensing regime. The
Authority also recommended that all future licenses should be unified licenses and that
spectrum be delinked from the license.

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Revenue Sharing Model of MVAS India:
Presently telecom service providers and VAS providers enter into mutual commercial
agreements for provisioning of value added services. These agreements contain various terms
and conditions including the conditions as to how the revenue generated through provision of
MVAS will be shared between VAS providers and telecom service providers. Content is an
important ingredient for plethora of value added services being provided by telecom service
providers. For these services, the telecom service providers mainly depend upon the VASPs but
concerns have been raised by some of the stakeholders that VAS providers do not get
commensurate returns. It is reported that Mobile service providers dominate the MVAS market
to a significant extent, by determining MVAS service fees, by selecting VASP according to their
service portfolio they want to offer, by excluding service providers who do not generate sufficient
revenues, by monitoring service contents and by controlling service access and billing.
According to various reports, telecom service providers typically retain the bulk of the revenue
(around up to 60% to 65%) from MVAS depending on the type of content that is being delivered
to the users. The rest of the revenue is shared among copyright owners, content developers,
content aggregators, and technology enablers. According to market reports, in case of content
with copyright, the mobile service provider is reported to get 60% revenue; a technology enabler
gets 15% while content developer and aggregator together gets 15% share in MVAS revenue.
The copyright owner gets balance 10% of MVAS revenue. In case of content without copyright,
mobile service provider is reported to receive 65% of the revenues, a technology enabler gets
20% and balance 15% goes to content developer and aggregator. However, these are not the
standard percentage of revenue share and vary across the service providers based on the
mutual commercial agreements and type of content.

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It is said that the telecom service providers justify their revenue share with 3 costs – cost of
building the market (i.e. entry & license fees, branding, customer acquisition etc.); cost of usage
of the infrastructure, interconnection and finally cost of billing and collection.
On the contrary the content providers/content aggregators (VASPs) severely complain and
express their concerns that they do not get adequate share as telecom service providers retain
large share of revenue earned through mobile Value Added Services. As per them it makes
return on investment (ROI) of VASP unattractive, not enough to encourage faster capital
investments required to grow the VAS industry to the desired level. In the absence of a suitable
revenue share for both VAS provider and service provider the development of VAS, which is
essential both for development of the economy as well as the telecom sector, could suffer.
Adequate revenue share for VAS providers could make the market attractive for the entry of
many entrepreneurs in the VAS business. On the other hand, better margins from MVAS for
telecom service providers could meet the revenue gap from core services and attract
investment in the network expansion. The revenue share may also be dependent upon a
number of factors such as the nature of technology, utility of content, demand from the
customers and innovation involved. There may be some VAS which may involve higher degree
of innovation and utility than some other applications which could be commoditized. In this
scenario it may be necessary that the innovative VAS solutions be rewarded suitably so as
promote innovation. Accordingly, revenue share could become a function of the innovation and
utility involved in the concerned VAS.

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Discrepancy in MIS Reports
The revenue earned through MVAS is decided based on the information recorded in
Management Information System (MIS). Both VAS providers and telecom service providers
maintain their respective MIS for arriving at the revenue accrued through provisioning of MVAS.
As per the industry feedback, there are often differences in billing between the MIS of telecom
service providers and the MVAS providers. It is also reported that there is a lack of transparency
in statistics of content transactions, absence of credible systems to address disagreements and
grievance redressal mechanisms. In the absence of a system validating the number of data
downloads or transactions between MIS of telecom service providers and the MVAS providers,
the account provided by the service provider may prevail due to higher bargaining power. This
may lead to differences in the actual revenues earned between telecom service providers and
the MVAS providers. Sharing of information between telecom service providers and the MVAS
providers can lead to reconciliation between MIS of telecom service providers and the MVAS
providers in a transparent and fair manner.
Due to the discrepancies in MIS reports and operators higher bargaining power most of the
content providers have to explore overseas market to recover cost. Such control and high
handedness results in market inefficiencies and scalability constrains for VAS providers.
To resolve such differences TRAI has started standardization of short codes: One of the
primary requirements for provisioning of Mobile Value Added Services is to get a short code.
DoT has allowed the access providers to allot short codes themselves (Annexure III & IV).
Accordingly short codes are allotted by telecom service providers to their content providers
including for SMS based services. Short codes start with level 5 with minimum 5 digits in the
short code. Content providers need to individually reach out to telecom service providers for
allotment of short code. It is up to the individual telecom operator to accept the request and
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allocate the chosen short code to the VAS provider. According to industry information, a varying
amount of fee is required to be paid to each of the service providers for ―allotment‖ of short
code. The short codes accepted by one operator may not be accepted by others and also there
is no timeline defined within which the service providers are bound to approve/reject requests
for short codes.
A framework having well defined procedures and parameters (like fee, timeframe) for allotment
of code may be desirable for speedy rollout of the value added services. To enhance
competition in development and provisioning of innovative services, the short-code ownership
and service agreements with service providers could be decoupled. The short-code numbers
could be obtained centrally so that one short-code number is active across all network
operators. These short codes could be enabled through standard procedures across all
networks.
In US short codes are allocated online by an agency after paying the requisite fee. However,
value added service providers have to make separate arrangement with telecom service
providers for opening up of these codes.

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TRAI's Open Access To VAS:
There could be different modes of access to contents by customers. Based on the control of
telecom service provider on access to content, following three models are possible:
i.

Walled Garden

ii.

Open Access

iii.

Semi Walled Garden

In the walled garden scenario, users can only access content on a mobile service provider‘s
platform. The selection and placement of content is controlled by the mobile service provider.
Telecom service providers decide what goes through their network and what does not.
Customers need to choose only from the services available from service provider‘s platform at a
price fixed by the service provider.

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Figure 2.1: Walled Garden model

Presently in India generally walled garden approach is prevailing. Mobile value added services
are carried under the banner, brand and name of the service providers and the role of a VAS
provider is that of a content aggregator making the content suitable for accessing through
mobile network. The telecom service providers invest in promoting, branding and billing the
value added service along with taking care of customer service. Off deck content, accessed
over network, is also routed through the operator platform. VASPs need to host their content
with each service provider separately. If the content of a VASP is provided off deck through
network, connectivity need to be established with each operator separately. Agreements will be
made with each operator for offering the VAS content.

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Some of the services which are integrated on call-to-call basis such as caller ring back tune
(CRBT), SMS person-to-person will generally be in the domain of telecom service providers.
However, the value added services such as music, games, news, entertainment, M-commerce
etc. can be directly marketed by value added service provider. It will be desirable that
consumers can access any content and service of their choice, and not be limited to just the
selections decided by the telecom service providers. Open or non-restricted access allows a
user to obtain content from any provider offering mobile content. This content can be accessed
independent of the mobile service provider‘s platform, through a link to any of the third-party
content provider, through a Web browser on the mobile handset, by sending a SMS or
accessing IVR. In an open access environment services and applications are decoupled from
the network complexities, facilitating applications/content based services to be provided easily
and also enabling third party application service providers to compete with the telecom service
providers in the provision of services making the network more open. Open access can promote
innovation and can lead to development of various applications depending on the customer
needs.

In such an open access environment consumers pay the access/carriage charges to the
telecom service provider and for the content, charges will be paid directly to the value added
service provider. Direct payment to VASP will require some delivery mechanism to make the
payment for example online payment through credit card, net banking or mobile banking, which
are very limited in India at present. The number of active credit cards in India is only 1.82 crore
as on November 2010. Only 5% of all mobile subscribers are registered users of mobile banking
and more significantly, only 0.5% of them are active mobile banking users.

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In the absence of adequate payment infrastructure, VASPs need to approach the telecom
service providers for collection of VAS charges from customers. For post-paid the VAS charges
are added along the bill. Since majority of the customers fall in prepaid category, VAS charges
are deducted from the prepaid balance. This limits the ability of the VASP to operate
independent of the service provider and hence can limit the entrepreneurial activity. For
provision of open access to customers, it will be desirable that services offered by VASPs under
off deck model are decoupled from telecom service provider so that VASP need not to approach
and integrate with each service provider. A possible approach to decouple the services of
VASP. In this approach VASP can limit his installations to single location requiring integration
with only one service provider of his choice. Customers can access this VASP from any other
service provider‘s network through a uniform short code. The originating operator collects the
charges from the customer and passes on to terminating operator after deducting the charges
like billing, customer care, interconnection etc. Terminating operator in turn passes the revenue
collected from originating operator to VASP after deducting its charges like transit charges. This
arrangement will require a common short code to be used across service providers. All service
providers will be required to route the short code to the terminating operator where VASP has
hosted its content. Under this approach VASPs will be free to host their service under any
operator. Customers also will be free to choose any VAS from any VASP, irrespective of
VASPs‘ location. This will increase competition among VASPs for providing relevant content at
right price and also between service providers for providing best hosting rates to VASPs
bringing efficiency in the system, which in turn could boost MVAS market .

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Figure 2.2 Open access model

Figure 2.3 Service & Revenue flow in Open access model

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In the semi-walled garden scenario users can access both, the content available on the mobile
operator‘s platform, as well as directly from other value added service/content providers. Users
often have easier access to the content on the operators' platform, but will likely demand access
to content beyond that selected by the mobile operator. This model was adopted by NTT
DoCoMo when it launched its iMode portal in February 1999. Three different types of content
sites could be accessed from iMode: official iMode sites accessed through the iMode button on
the phone, independent sites reached by typing a URL and corporate intranet sites.

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Video Content Consumption on MVAS:

With a surge of Smart phone sales, hectic life schedules and increase internet penetration
consumer's habit of consuming video content is changing rapidly. There has been a steep
decline in live content viewing giving rise to new avenues of video consumptions like Pay per
View, Video On Demand, Video portals and Mobile TV, IPTV etc

In India: Time Spent on smart phones: 2.5 hours per day and per user, less than a
quarter on calls and messages, 40 percent online [Source: Neilsen Report Q4 2011]

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Mobile Content Consumption
57 59

53 53

41
27

9

10

26

9

25

23

29

27 29
20 22

5

Mobile

Tablets

Source: Neilsen Q4 2011 Mobile Connect Device Report

As showcased in above graph, Tablets are used for reading, watching longer format video
content i.e. TV Shows, Movies, Sports or stream Online Radio and on the other side mobile
handsets are more used to stay connected on social media and music consumption.

Current trend and easy access to high speed internet showcases that smart phone/tablet
users are more and more viewing longer format of video programming: [Source: Ooyala]

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60%
48%

50%
41%
40%
30%

29%

Quarter 1

Quarter 2

30%
20%
10%
0%

Quarter 3

Quarter 4

% of viewing time spent on videos over 10 minutes in length

Mobile Videos already account for 59% of all mobile data usage amongst 3G users:

Data Usage Share
Videos
1%
File Sharing

4%

Data

26%

M2M
60%
9%

Source: CISCO 2012

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Gaming

Current video products available on MVAS:

Videos content on MVAS is genre driven and scatter with all most all the Content Providers
offering the same content across all platforms i.e. On Deck, Off Deck and Applications:
On Deck: On Deck is an operator's portal which is a sort of market place, multiple content
providers offer their content at various price point to subscribers base. Followed are few screen
shots of Idea On Deck Portal i.e. Idea Fresh:

Off Deck: Off Deck is sort of brand store where content of a specific content provider is visible,
content provider himself host the content in their domain and Banners, Keyword, CPC [Cost Per
Click] Newsletter, SMS burst etc are used as marketing tools to drive traffic to this domain:

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Applications: Applications can made accessible as a native application to a phone or it can be
downloaded from App Stores of the OS providers like Nokia Ovi Store, Google Play, iOS Store,
Windows Store. Application host streaming of content which are Long & Short in format which
include current shows, classics and gossip updates. these application can be free or paid
depending up on their pull value and services they offer:

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Price Points & Products:
These videos products are sold at various price points in different product bundles. Price point
can vary from Re 1 to Rs 99 depending up on the novelty of content and demand factor.
Product Bundles help content provider to distribute content to greater masses, since India as a
market being extremely price sensitive , such product classification entice users to subscribe
more. few examples are as follows:


Subscription: Such product offer users a bundle of 15 to 30 videos over a period of 1
month/30 Days



Video Alerts: it's a unique proposition where delivery vehicle for the content is SMS.
Once the user subscribes to this service, depending upon volume of content subscribed
he would get a daily/weekly SMS alert of the video URL.



Value Packs: These are bundle of videos of a specific genre at a very affordable price
i.e. 5 Videos for Rs. 10. these 5 videos need to be consumed in a stipulated time set by
the content provider and operator. this duration is mentioned in T&C clearly.



A Le Carte: Pay per download is most viable product as user needs to pay for videos
that he has consumed . this gives him a flexibility to select videos of his choice.

Important point to note here is that over and above the price of video, user will also be
charged for Data Used to consume/download content. generally data charges are
retained by operator and are not share with content providers. SMS/Promotion is also
beared by the content partner and not operator.

Content Offered: As mentioned earlier, content is very genre driven and there is a dire need for
local/regional content due to mobile's rural penetration. followed are the most offered genres

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across MVAS platforms:


Babes/Glamour Videos: This genres offers glamorous babes at exotic location,
photoshoots, Bikini Fashion Shows and other model videos.



Bollywood: Bollywood Celebrity Interviews/Music Videos/Trailers/Events/Gossip



Comedy: Stand Ups, Gags, Funny Movie Scenes, Pranks etc



Devotional/Spiritual: Short discourse and other devotional content is offered under this
category



Cricket: Snippets of old match, cricket interviews, live score etc.



DIY [Do It Yourself]: This includes personal grooming, fitness, cookery, fashion & style
etc.



Regional: Region specific content on Devotion, Gossip, Celebrity Interviews etc

apart from this other genres like Hollywood, Travelogue, Sports etc.

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Need Gap:

There is a dire need and a propensity to pay for utility driven local programming which is very
region specific. most of the content offered is in English/Hindi which is closely related to general
entertainment. Utility content in local regional languages is still rare and scarce. standard search
trend indicates user search for 'Lo So Mo' content i.e. 'Local - Social - Mobile' it is imperative
that operators/content providers provide such content which will be entice Rural India to
contribute to ever decreasing ARPU of MVAS.

Demand for news updates through VAS is high and operator and VAS value chain players
would need to address the challenges in delivering news updates in multimedia at a reasonable
cost. The bird’s eye view of VAS shows that future adoption of communication and
entertainment VAS is higher than that of information and transaction VAS.

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Challenges for Mobile VAS:



While there are 900M+ subs, mobile operators are highly fragmented: There
are six mobile operators with around 100M+ subscribers – that’s basically the size of
AT&T or Verizon in the US. Then there is a long tail of regional operators as well – 12
operators in total. This creates an environment of intense competition, where
unprofitable price points are common and revenue share models are an absolute
requirement. Further complicating this fragmentation is the fact that all of the operators
are divided into 23 circles (basically states) – often with independent networks,
organization structures and management teams in each circle. Operators are starting to
consolidate network resources.



Mobile Operators driven market: Operators are extremely demanding and expect
vendors to take all the risk. share of revenue between operator and vendor is uneven.

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With vendors bearing the marketing/promotion cost along with cost of content
production. it is not a very lucrative option for small players. Most content offerings
therefore are based on movies, music and cricket. This has led to lower volume
consumption and little differentiation. Operators justify claiming lion’s share for VAS due
to cost associated with network, billing, marketing and subscriber acquisition



India is not a single market: India has many regional languages and dialects as well
as cultural norms and demographics across the country. For example, while everyone
has heard of Bollywood, there is also ‘Tollywood’ in the Telugu speaking state of Andhra
Pradesh or ‘Kollywood’ in the Tamil speaking state of Tamil Nadu. Needless to say, this
is extremely important when launching a nationwide consumer service in India. The long
tail in India’s case is the majority of the population, so regionalizing your service and
marketing strategy is an absolute must.



Feature phones still dominate: While smart phone penetration is increasing rapidly
with nearly 60M smart phones today, this still is only a mere 6% of subscribers – the
lowest penetration of any major mobile market in the world. Moreover, 95% of the
market is prepaid and many subscribers carry more than one SIM card depending on
price points at the time.



Data Plan Penetration is amongst the lowest in Asia: Only 8% of subscribers
have a data plan today. This is, by far, the lowest penetration of any major mobile
market globally. It is quite common to find an iPhone user that doesn’t even have a data
plan and just uses wifi hotspots. This means if you want to have a service for the
masses, you either have to make it work without data (ie, voice, USSD, SMS, etc) or
figure out a way to upgrade target users to data plans.



Indians are amongst the most price sensitive in the world: With stiff
competition and price stingy consumers, mobile ARPU’s have fallen to less than Rs.120

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month. Consumers have near zero brand loyalty and often choose based solely on price.
If a service is free, it will easily gain tens of millions of users. however challenge lies in
how to monetize this large user-base?


Mobile traffic is moving fast, ad-spend to mobile are not: Mobile represents
15% of global Internet traffic and is growing at a rate of 1.5X per year and is likely to
maintain this pace or accelerate, according to the Mary Meeker Report. However, admoney are not following the users on mobile. Even in a mobile marketing savvy market
such as the US, the gap between dwell time and advertising dollars on mobile
represents a $20 billion opportunity.



Trust remains a barrier to the growth of mobile content and commerce: The
mere idea of mobile commerce and payments still worries many consumers. They’re
instinctively uneasy about the notion of any kind of digital wallet held within a device
that’s so easy to lose or have stolen. The research reflects this trepidation, with 35 per
cent of respondents admitting that concerns around trust are a barrier to purchasing
more from a phone. Interestingly, though, only seven per cent of mobile media users are
resistant to m-commerce because they had ‘had a previous bad experience’, which
indicates that the reality is perhaps more benign than the perception.

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Discoveries and Awareness:


Lack of Awareness: Customer are not aware of kind of services available on the mobile
and hence most this promotion and services are taken as spam not utilized to their
benefits. Consumer education is need of the hour for VAS to grown and tackle every
decreasing ARPU [Average Revenue Per User]



Insufficient Marketing: Poor VAS branding and insufficient marketing from operators
and low investment in educating customers about it is one of the biggest barriers in
consumers exploring the VAS portals/services, recently Airtel has started advertising
about their Re. 1 store through TV Media before that there haven't been any strong
promotions done to promote the videos content by any operator.



Operators High Handedness: Operators control the come promotions, distribution and
content offering for both On Deck & Off Deck portals giving very little control to the
content owners.



Complex Navigation: Navigating and searching for content on WAP portals is not very
user friendly, very little thought has been given to user experience and interface. there
has been no proper categorization of genres or search functionality which has actually
made users reluctant to explore such content portals.



Lack of Consumer Profiling: Content localization, which is the need of the hour can
only be achieved after studying the dynamics of the lower tier cities and rural regions.
However, there hasn't been a conscious effort to profile the rural user to understand his
tastes and choices by either the telecom operators or VAS content providers.

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

Data Mapping: There aren't any widely used solutions of mapping data combined with
relevant local information in India so far, which makes marketing promotions and
consumer targeting extremely difficult inspite of mobile platforms's ability to deliver
refined and accurate data.



Complex Indian Society: India's diverse and complex culture can be hindrance in
finding common points across regions. The existence of so many Indian languages
makes content localization all the more tricky for a large user base.



Decreasing ARPU: VAS players need to find alternative revenue streams to be able to
market their product to increase consumer demand and every decreasing ARPU



Insufficient Promotions: VAS players largely depend up on operators to promote their
products/services and often operators not so focussed on aggressive promotions.



Mobile Advertising: To recover operational and production cost VAS players have to
depend on mobile advertising for new customer base acquisition or alternate revenue
avenue – Mobile advertising includes SMS ads, banner ads, game ads and audio ads



Mass Content: Often VAS players have to offer generic content and cannot afford to
experiment with niche content as they continue to see ROI as a challenge based on the
operators rev-share split and high operational cost.

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Bibliography

Books & References
Future of Mobile VAS in India - Stanford University and BDA Connect
VAS Landscape in India - PWC
Deloitte ASSOCHAM MVAS Study
IAMAI Evolution of Mobile VAS in India July 2012
The Shallows - Nicholas Carr
Grown Up Digital - Don Tapscott
Neilsen: Q4 2011Mobile Insight
CISCO 2012 - Mobile
The Future of Technology [The Economist] - Tom Standage

Website
http://www.trai.gov.in/ConsultationDescription.aspx?CONSULT_ID=390&qid=1
http://mefminute.com/category/mef-asia/
http://www.pwc.in/en_IN/in/assets/pdfs/publications-2011/vas_landscp.pdf
http://www.streamingmedia.com/Articles/Editorial/Featured-Articles/Streaming-MediaPredictions-Whats-in-Store-for-2013-86826.aspx
http://videomind.ooyala.com/research-and-webinars
http://www.iamai.in/

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