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Mobile VAS: Video Consumption and Future

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As a part of my industry research project I worked on mobile video entertainment sector in India. This report is my attempt to create a dummies guide on MVAS and video consumption in India. I know ...

As a part of my industry research project I worked on mobile video entertainment sector in India. This report is my attempt to create a dummies guide on MVAS and video consumption in India. I know there is a major scope of improvement and would love to know your feedback.

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    Mobile VAS: Video Consumption and Future Mobile VAS: Video Consumption and Future Document Transcript

    • Mobile VAS: Video Consumption and Future Mobile VAS: Video Consumption and Future 1|Page
    • Mobile VAS: Video Consumption and Future 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 2|Page
    • Mobile VAS: Video Consumption and Future 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 3|Page
    • Mobile VAS: Video Consumption and Future 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. 4|Page
    • Mobile VAS: Video Consumption and Future 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 5|Page
    • Mobile VAS: Video Consumption and Future 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 6|Page
    • Mobile VAS: Video Consumption and Future 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 7|Page
    • Mobile VAS: Video Consumption and Future 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. 8|Page
    • Mobile VAS: Video Consumption and Future 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] 9|Page
    • Mobile VAS: Video Consumption and Future 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 10 | P a g e
    • Mobile VAS: Video Consumption and Future Source: BDA Analysis 11 | P a g e
    • Mobile VAS: Video Consumption and Future 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 12 | P a g e
    • Mobile VAS: Video Consumption and Future  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 13 | P a g e
    • Mobile VAS: Video Consumption and Future 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 14 | P a g e USSD & STK
    • Mobile VAS: Video Consumption and Future 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 15 | P a g e
    • Mobile VAS: Video Consumption and Future an influence on deciding the end user price as well as the potential revenue share expected by the VASP 16 | P a g e
    • Mobile VAS: Video Consumption and Future 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 17 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 18 | P a g e Mobile Premium Services Industry Register managed by
    • Mobile VAS: Video Consumption and Future 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. 19 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 20 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 21 | P a g e
    • Mobile VAS: Video Consumption and Future 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 22 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 23 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 24 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 25 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 26 | P a g e
    • Mobile VAS: Video Consumption and Future 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 . 27 | P a g e
    • Mobile VAS: Video Consumption and Future Figure 2.2 Open access model Figure 2.3 Service & Revenue flow in Open access model 28 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 29 | P a g e
    • Mobile VAS: Video Consumption and Future 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] 30 | P a g e
    • Mobile VAS: Video Consumption and Future 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] 31 | P a g e
    • Mobile VAS: Video Consumption and Future 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 32 | P a g e Gaming
    • Mobile VAS: Video Consumption and Future 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: 33 | P a g e
    • Mobile VAS: Video Consumption and Future 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: 34 | P a g e
    • Mobile VAS: Video Consumption and Future 35 | P a g e
    • Mobile VAS: Video Consumption and Future 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 36 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 37 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 38 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 39 | P a g e
    • Mobile VAS: Video Consumption and Future 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 40 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 41 | P a g e
    • Mobile VAS: Video Consumption and Future 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. 42 | P a g e
    • Mobile VAS: Video Consumption and Future  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. 43 | P a g e
    • Mobile VAS: Video Consumption and Future 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/ 44 | P a g e