Have you ever searched for tutorials on 3G from your mobile phone? Most likely, your answer would be no but if I had asked the same question for search on PC, chances are that many of the telecom professionals could have searched for it. Here lies the difference between search on PC and search on mobile. The search algorithms that worked for PC are unlikely to work for the mobile. On the mobile, most of the search queries are around navigation, direction and local search.

Search has been an integral part of internet. In fact, search is the very first functionality that any new user of internet uses. However, this is not true for mobile internet. The mobile search is yet not anywhere near the adoption levels of online PC based search.

How is Mobile Search different?

The fundamental difference between the mobile search and PC search is the access device. The screen size of the mobile phone is a constraint and hence the internet search results need to be modified. Even the input keyboard is different and the search string could be shorter which means the search result has to be intuitive.

The second difference is in the usage pattern of mobile. Unlike PC, the mobile phone is a ubiquitous device and people normally search for “at the moment” kind of thing. This means they search for nearest restaurant, retail points, service centers or mobile content. Their need is immediate and the patience or tolerance is low. They are looking for relevant results that are actionable like they need a taxi that can reach them fast and they should be able to book the taxi using their mobile phone. This means that the result needs to be location aware and should also give the phone number of the taxi company.

Thirdly, the consumer expectations changes with the time of day for the search results e.g. an afternoon search for restaurants means that the results should be about restaurants amenable to business meetings whereas, in the evening the same search should retrieve fun places like pubs or lively music restaurants.

Lastly, the difference is in the frequency of search and the number of attempts for each search. On PC, a surfer changes his search string multiple times before he gets the right results while on a mobile, nobody is likely to change the search string more than a couple of times. Also, people search at least 4-5 different things on PC everyday but a typical mobile internet user searches something only once in 4-5 days.

Why is mobile search languishing behind the PC search?

The number of search queries on mobile was not even 2% of that on PC in 2007 (m:metrics reported 27 million mobile searches per day in 2007) and the main reasons for this dismal performance were

• High cost of internet impacting the usage
• Low penetration of mobile internet, e.g. in Europe, the mobile internet penetration is barely into double digits
• Experience of mobile internet due to small screen size
• Unavailability of search engines relevant to the mobile phones

Future of Mobile Search

The mobile search should be able to utilize all the resources (location, camera, voice, etc.) that the device has to offer to retrieve socially relevant results that can give confidence to the user in almost every situation even if he is alone or in a completely unfamiliar environment. I am listing below five different types of mobile search which hold a lot of promise in future. I have also included a few videos for each search type to demonstrate how it works.

• Local Search: The biggest benefit a mobile phone is that it is location or context aware. Both GPS as well as non-GPS devices can provide location co-ordinates based on different technologies. The search needs to take the location co-ordinates into consideration while churning out the results. Thus search for a television should give me the retail points in the vicinity. I would expect the search to take into account my past queries as mobile device is a personal device and is unlikely to be used by multiple people. Local search or Yellow pages seems to hold the maximum potential for mobile search as well as for mobile advertising.

InfoSpace Mobile Search Video

www.youtube.com/watch?v=hMdoxge2VNI

• Voice Search: Imagine, you are driving car and need to find out about location of a particular movie hall. Will you be comfortable in inputting the search string on a web page? I would rather pull up my car on a side and quickly call somebody to find out about the hall. Voice search is very useful in such circumstances. Also, not all mobile phone owners are literate or comfortable with internet but everybody is comfortable talking. Google, Yahoo and Bing, all have voice assisted search but Chacha takes the voice search to another level as its search engine utilizes crowdsourced workforce to answer the queries. Another application, Vlingo lets you control your mobile phone with the power of voice. With Vlingo, you can simply speak to your phone to send a text message or search the mobile web.

Voice Search with Google

www.youtube.com/watch?v=yJdyWiEwY1U

• Visual Search: Apart from location, the other key feature of a mobile phone is a camera. Camera is like an eye and should be used to as a key input for search. Imagine you could search the Internet just by taking a picture of something, such snapping a picture of a music CD to look up reviews and listen to the tracks, instantly getting information on a product featured in a magazine, or looking up recommend places to visit by taking a picture of a famous landmark.

www.youtube.com/watch?v=COqGIM5dkXw

There are two types of visual search that particularly excite me are Point & Find and Augmented Reality. Nokia’s Point & Find requires you to simply aim the camera of your Nokia phone at any object in meat-space and the Point & Find application will access relevant data off the Internet. Point & Find uses real-time image processing to recognize real-world objects in a Nokia database of virtually tagged items using the phone’s camera, Internet connection, and GPS data. The software also recognizes bar codes and supports category-specific text-entry search.

Nokia’s Point & Find

www.youtube.com/watch?v=TqW5zBTYbt0

Augmented reality takes Point and Find a step further and adds information and meaning to a real object or place. This means if you are a tourist in a completely unknown place, you can get all the information you want to search by just holding the camera phone in front of the building or place. Another example of finding the nearest tube (metro) is in the video

Nearest Tube

www.youtube.com/watch?v=U2uH-jrsSxs

Another form of visual search is through the bar codes (2D). This kind of search has been explained in my earlier post on Mobile Ticketing

• Social Search: Since the mobile phone is personal and has a phonebook, a social graph of the user can be produced using the information from phonebook and the online social behavior. A search engine may give results that are relevant in general but if it can access your social graph and boost the ranking of search results that your friends have deemed to be important. It would preferentially show results that were more fun and more relevant to you in your social context. This kind of search would excite the digital natives.
• Vertical search: The most frequent vertical search on mobile is entertainment. abphone is a mobile search engine that focuses on multimedia content that you might want for your phone e.g. images, video and games.  They have created a really simple mobile search interface to a range of different content databases. Similar vertical search could emerge for shopping of consumer durables (television, music system, etc.) that would not only compare the features but also give a comparison on the best deals in the locality or city.

Google Product Search for mobile

www.youtube.com/watch?v=Y20cmESMZWo

The talk about the huge potential of location based services (LBS) has been around for a long time now and had almost died down a couple of years back. However, with the increasing focus on mobile applications and penetration of GPS based mobile phones, the focus is back on LBS. I feel that the earlier hype on LBS was premature but now the market is ripe for such services. With dwindling mobile services revenues of the mobile operators, location based services are seen as new growth area. The CDMA operators in Japan and US are already ahead of GSM in terms of GPS adoption but the GSM is now catching up.

What are Location Based Services?

Services which use the location co-ordinates of the end-user to improve the relevance, context, and value of the application are defined as location based services (LBS). As per the Webster’s New World Telecom Dictionary, LBS are services offered by cellular radio providers that are sensitive the physical location of the terminal device. Such services include descriptions of and directions to restaurants and other retail establishments in proximity. However, now the services may not only be offered by carriers alone.

The location based services can be classified into four types  as depicted in the figure below (Click on picture to view the enlarged picture):

Maps and Navigation are the basic services and I firmly believe that these services are the basic hygiene and increasingly it may not be possible to monetize them. However, there is huge potential from the tracking, information & application services and context advertising would be a way to monetize these services with maps serving as the basic framework. The revenues from the applications utilizing location would help fund the navigation services. Free services and applications would help increase the initial adoption.

Technology behind the location co-ordinates

A key requirement for location based services is to get the co-ordinates of a location with as much accuracy as possible. Cell-ID was one of the first methods of collecting location data but different methods have evolved over the years due to efforts to increase accuracy of data, reduce cost of acquiring data and carrier’s reluctance to part with the location data. The key methods are listed below:

1. Cell-ID: This method estimates the position of a handset based on the knowledge of its serving base station. The accuracy of this method is around 100-500 meters.

2. Global Positioning System (GPS): A GPS receiver calculates its position by measuring the distance to at least three GPS satellites. The accuracy here is around 100 meters.

3. Uplink Time Difference of Arrival (U-TDOA): Handsets are positioned by measuring the time difference of arrival of the same signal from the handset at different base stations in the network. U-TDOA can deliver positions accurate to about 50 meters.

3. Hybrid (A-GPS): Assisted GPS (A-GPS) technologies improve performance of GPS by aiding the receiver by providing data such as time, satellite ephemeris or initial location estimate. Network-based hybrid positioning technologies, for instance Cell-ID in GSM/UMTS networks and AFTL in CDMA networks, are primarily used as fallback methods when GPS location fails, or as course position determining methods for A-GPS.

Apart from the above, there are alternate methods that have emerged like Skyhook and Google. Each of the cell towers and Wi-Fi points have a unique ID number which form a part of the databases of Skyhook and Google. The unique IDs are then mapped against the GPS co-ordinates and hence anytime a user is attached to a particular cell-site, the location co-ordinates of the cell site are pulled out of the database to determine the location of the user. Google is able to provide its local search services using this method of determining the user location.

Value Chain of Location Based Services

The value chain has evolved over the last ten years and has emerged from an entirely carrier centric chain to a multiple inter-dependant, independent entity value chain. The value chain for Location Based Services is shown in the figure below (Click on picture to view the enlarged picture):

Another key entity that is not mentioned in the above figure (Value Chain) is the Handset Vendors. Handset vendors have played a key role by introducing GPS handsets. The number of models that had GPS functionality tripled in 2008 over 2007.

What have been the barriers to Location Based Services Adoption?

Traditionally, the mobile operators have been at the forefront of offering any new service to its subscribers as they have had control over the network as well as the consumer. They have had direct access to the subscriber due to their billing capability. No wonder, they considered offering location based services as their core right and hence refused to share the location data with other entities. At the same time, they did not have the resources to focus on this services and the mindset required to be successful in this business was also missing. Over a period of time, the other entities developed ways of by-passing the operators (e.g. Google, Skyhook, etc.) and started to offer services without the operator role. Increasing penetration of GPS devices is also taking away the role of operators and hence we are now seeing some traction rebuilding in this space.

High data cost has been another reason for low penetration of LBS. Mobile internet use is core to serve the location based services and due to high costs, the adoption of mobile internet has been low. Apart from Japan and Korea, even today the mobile internet penetration is less than 10%. With the introduction of flat rate data tariffs, I hope, the mobile internet penetration would grow faster.

The other issue is that of a proper business model and the monetization of LBS. These services are still in search of ways of monetization. It is very difficult to sustain the high costs involved in getting the location data without charging a high fee for the services. However, the consumers are not likely to pay much for these services and hence it is important to look at context advertising as an alternative source of revenue.

Potential of Location Based Services

There have been a lot of barriers in the past on the adoption of LBS. However, now the industry seems to be getting its act together in terms of value chain and is likely to test various monetizing methods to hit at the right business model.

ABI Research predicts that location-based services will be a $13 billion business by 2013 vs. $515 million in 2008 (Link). Currently, personal navigation is the most popular service but in future, friend-finder, local information searches, family tracker applications, and enterprise applications (including workforce tracking and fleet management), will gain traction. Friend-finding and taffic information are anticipated to be the next services to be launched for mass consumption.

The increasing popularity of location based services is clear from the increasing number of applications using context/location on Apple application store (Refer Figure below).

Also Read

Potential of Mobile Social Networking

Navigation – In search of the right business model
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Indian telecom market is currently the most attractive telecom market with a lot of interest being shown by foreign players. Since in India, the fixed line subscribers are not even 10% of the mobile subscriber base, in this article, I am going to talk about mobile subscribers and its market only.

The country was divided into 23 circles when the mobile phones were introduced in the country. Separate licenses were given out for each of the circles in 1994. The circles were classified as Metros, A, B or C depending upon the revenue potential for the circle with Metros & A circles expected to have the highest potential. The following table lists the current telecom circles and the mobile subscriber base in each of them:

The figures below are a snapshot of key operator indicators by for GSM (Click on the image to view it clearly)

The figures below are a snapshot of key operator indicators by for CDMA (Click on the image to view it clearly)

There are many innovations that have helped reduced the cost of ownership of mobile phones. The figure alongside (source: TRAI) is a snapshot of how the subscriber base increased as the tariffs reduced due to innovations and government interventions. India is the now the second largest market in terms of mobile subscriber base after China but still it is at 48% teledensity and adding 15-17 million new subscribers every month.

Indian market is not only the most attractive but also the most competitive with over seven operators in each circle and another five new operators likely to start operations in the near future. Nowhere in the world does any country have so many carriers. The dominant players are Airtel, Reliance, Vodafone, BSNL (state owned), Idea and Tata. Reliance and Tata offer CDMA technology while all the other players are in the GSM space. GSM has a 75% share of sbscribers and now even Reliance and Tata have either launched or in the process of launching nation-wide GSM services. Apart from the current players, there are several new players like Aircel, Unitech-Telenor, Shyam-Siestema, Etisalat that have got the license and spectrum to launch mobile services in several telecom circles. Shyam-Siestema is the only player to launch CDMA services while all the new operators are in the lucrative GSM space. The adjoining figure gives the market shares of the operators in India. It is a fragmented market with the biggest operator (Airtel) garnering only 23% share.

ARPU (Average Revenue per User)

India is a predominantly prepaid market (93% of all subscribers are on prepaid) with low ARPU and high minutes of usage(MoU).The GSM ARPU is Rs 144 (~ USD 3.2) per month with a usage of 411 minutes per month in the quarter ending Dec, 2009. Similarly, CDMA ARPU stood at Rs 82 (~USD 1.8) with a usage of 318 minutes per month. There is a wide disparity in the rural and urban teledensity with rural teledensity at 20% vs. urban teledensity of around 103%. The chart below gives the progressive wireless penetration in rural and urban areas.



Regulatory has played a big role in development of Indian telecom market by brining in the competition at the right time and by removing bottlenecks. However, there are a few pending issues that still need to be resolved like the 3G spectrum auction and allocation, Mobile Number Portability and 2G spectrum allocation policy.

Given the low tele density in the country, the subscriber base is expected to grow at a brisk pace. Government expects the mobile base to cross 600 million by 2010 and most of the new additions are expected to come from rural areas where the mobile penetration is still low.

(All the data is sourced from COAI, AUSPI and TRAI which are the leading industry associations and regulatory bodies)

Resources on India Telecom Industry

1. India Subscriber Database – Circle-wise, operator-wise from year 2000 onwards (updated till Apr’10)

2. Presentation on India Telecom Market

2. Download the latest TRAI report (Released Jul’10) to access key telecom indicators

3. ARPU Revenue Analysis – Oct-Dec 09-FINAL- Circle-wise ARPU data for GSM networks

4. Case study on How Indian Carriers make 40% EBIDTA margins at 2 cents a minute

5. Report (based on actual numbers) on Internet Usage in India – Comviva India Mobile Internet Study

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Human beings have always lived in communities and have extended the communities whenever they got an opportunity to do so. Internet was a great enabler for communities and people started to network with long lost friends and found new friends. Now mobile has unique features that can extend this experience for communities

 Always on and always in pocket – Mobile is a ubiquitous personal device and is hence the best medium of access for social networking. The updates can be sent and received on the go. When accessing the internet on PC, one is accessing the information about some past event and not real time. In contrast, with mobile phone one can take part in the event, capture it, provide comments and share all this with others. Mobile phone therefore provides richer social interaction. Twitter is a shining example of being part of the event. During the Mumbai terrorist attack, the Twitter updates were faster than the media updates which increased its popularity in India.

1. Camera – Camera on the mobile phone is a convenient tool in the hands of the users. The photos and videos can be directly uploaded from the mobile phone to the social networking website. In case of a digital camera, the process is not as easy as it is not connected to the internet.
2. Location – Mobile phones are location aware and hence can add another dimension to updates which is presence or context. Even the non-GPS mobile phones can pass on the location data on the basis of triangulation of the cell site data. This would help the communities to develop around a certain location or geography. User generated context information on point of interests or restaurant reviews would be very useful to a traveler. Dodgeball allows users to set up publicly-articulated social networks of friends so that they can broadcast their location to the individuals’ mobile devices. For example, when users get to a bar or cafe, they can “check in” by sending a text message to Dodgeball such as “@ Irish Pub.” Dodgeball then broadcasts their location via text message to people in their Dodgeball network. Users can also be alerted when friends of friends who have checked in to Dodgeball are within a 10-block radius. GyPSii, Google Latitude and Pelago are other good examples of location based social networking. ABI Research estimates that by 2013, the global revenues from Location based mobile social networking would be $3.3 billion (Link)
3. Phone Book – So far, mobile phone book was considered as an important asset of a phone. However, now there are phone directories on Facebook and LinkedIn as well. The users can use both the online as well as the mobile directory and it is possible that the users could soon stop using the phone directory as the online directory would be more up to date. Even the mobile phone book can be used as a starting point for creating a community. Zyb was launched as backup to the mobile phone is now a social networking site around the contacts. Zyb can be used to find out who has you in their phones as a contact and even discover friends of friends. In a survey conducted by Stratemerge Inc., 2008, 87% of the respondents agreed that the combination of Social Network services and phone address book would appeal to mainstream consumers (strongly agree:30%, agree:57%)
4. Additional Access Device – Many users in the developing world do not have access to PC but have mobile phones and hence can use only mobile social networking. MyGamma, a social network run by the BuzzCity has over 3 million in Asia and Africa. These 3 million people have mobiles as the only way to get on to the internet. 

 What is the size of the Online and mobile Social Networking?

 As per ComScore, over two-third of all internet users across the world are active users of social networking. There are 1.1 billion active internet users in the world and out of them 738 million people use social networking sites regularly (pure social networking sites not counting blogs. Including blog sites, 76% internet users use conversational sites).  42% of time spent on internet by users is on social networking sites. Almost 46% of Facebook users are over 35 years of age and surprisingly even the gender split is almost equal.

Considering that almost all the current internet users are mobile phone users as well, there is an opportunity of getting the current online social network users to mobile phones which in itself is over 738 million people. Add to this the millions of people in the emerging countries for who mobile would be the first internet access device, and then the opportunity is huge.

Visiongain believes that revenue from mobile social networking and user generated content will grow to around $60 billion in 2012

Advances in smart phone, browser and web application technologies are boosting the take-up and usage of mobile social networking sites through improved user experience and engagement. In a forecast last year, eMarketer had estimated that the mobile social networking users would exceed 800 million by 2012.

At Nokia Developer Summit 2009, MySpace reported that their mobile usage increased almost 450 percent in 2008, with 7 billion mobile page views per month. Vice President of Mobile Operations John Faith revealed

“We’ve seen greater user engagement in MySpace mobile applications than we have on the mobile web. Smartphones are creating a culture of expectations among users.”

400 K MySpace applications on Blackberry were downloaded within a week of its release. Mark Zuckerberg of Facebook claimed at Davos in February, 2009 to have 25 million mobile users which is a five fold increase in one year and out of 25 million mobile users, 10 million users are in US alone. Facebook has over 8 million users on Apple iPhone and 6 million users on Blackberry.

There are over 4 billion mobile users in the world which far outstrip the internet usage (1.1 billion) and hence if the mobile social networking is adopted on mobile, it would help increase the mobile internet usage even for general surfing. This would be good news for carriers who are under EBIDTA and revenue pressures. I would write about the benefits of social networking to the carriers and what should the carriers do to increase its adoption in my next post. Till then stay tune!

Check out the top mobile social networking sites in 2009 on Sociable Blog

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The global economic activity was at its peak in the last few years before the current economic crisis hit us. The businesses were expanding and there was a dearth of right skills leading to a situation where a number of companies were chasing fewer individuals but now the situation is just the reverse; there are more individuals chasing fewer jobs. There are more jobs vanishing in the thin air than getting created. Its not that there are no new jobs being created but there is a need to upgrade skills and develop competencies in the new areas. Business Week in its cover story on 30^th April came out with an astounding statistics – In the midst of the worst recession in a generation or more, with 13 million people unemployed in US, there are approximately 3 million jobs that employers are actively recruiting for but so far have been unable to fill. That’s more job openings than the entire population of Mississippi.

The current crisis is the worst that anyone of us has ever seen and we should be prepared for a long haul. All the players in the telecommunications industry are cutting jobs. The operators, vendors and the content owners are seeing reducing revenues and hence find the current manpower cost on their P&L as unsustainable. Though I do not have a count of the number of people who have lost their jobs in the telecommunications industry but my estimate is that is could be anywhere between 5-8% which is huge. At the same time, we find that the same companies that are reducing manpower are also hiring which looks surprising at first but if we analyze little deeper, we would realize that the companies are adding competencies that they lack today and are preparing themselves for the new emerging business models. IBM recently announced its intent to hire 4000 analytics, a skill that it wants to develop in-house. At the same time, some companies are also taking this crisis as an opportunity to replace their current high cost resources with young and low cost resources that can bring a fresh breath of air to the organizations. Where does this leave us as employees? Are we at the mercy of our employers and is there anything that we can do? I believe, there are many ways of fighting the current crisis some of which I am going to list below

1. Estimate the worth of your current skills – Professionals should continuously keep valuing their skills and monitor the rise or fall in the valuation. A good way of doing so could be by testing the job market once in a while even if you are not interested in a job change. It is just like the options valuations that the companies do for themselves. The purpose here is not to switch to a job that pays more but to find out if your skills are still relevant and valued by the companies
2. Benchmark the skills with future industry requirements – Visualize the future of the industry and try to predict the future business models in the telecom and adjacent industries (Well you need not predict but just read the predictions from Analysts and Bloggers!!!). Analyze the skills that would be required 3-5 years from now and then map the gaps between your current skills and the skills required in future. This would be like a mirror staring right in front of you and then there would be an urgent need to take corrective actions. The current crisis and lower level of activities could be a good time to upgrade your skills or take some time off to go back to the school. You may be tempted to figure out if your HR manager still has funds for training!!!
3. Join a company that values your skills the most – The telecom ecosystem is moving towards an open ecosystem. However, at the same time, the different players are moving across the value chain to garner higher share of the value chain. This means that the players moving across the value chain would need new skills that are presently not available in-house. This is an opportunity for a person to move from one set of players in the ecosystem to another. To illustrate this point further, recently a number of device vendors announced their intention to launch application stores which so far were within operator’s domain. Application store management skill could be quite common within the carrier domain but is uncommon with a device vendor and hence the device vendor will value that skill much more than a carrier. Similarly, a smaller start-up company sometimes is not able to attract good talent and hence values the scarce skills more than larger companies. If you have fairly good faith in the startup’s business model and its ability to through the current crisis, then do consider this option
4. Broad base your skills – Focus on a few skills that can be transferred across industries which would give better headroom for survival. Strategic Planning, business development, marketing, sales, etc. are a few functions that are similar across different industries and hence people with these skills have a lower risk as compared to people who are in technical functions. Getting a business degree, especially when you have been laid off may not be a bad idea
5. Develop new skills – The previous points were about enhancing your current skills but however, if you are in a role that has no future demand in any company or industry, it is better to look to develop new skills as the demand for your current skill is unlikely to come back even in future. Decide your future career based on the promise a career holds out for you just like a 19 year kid would do while deciding his career options
6. Build relationship – I cannot emphasize the importance of building relationships especially in such times of crisis. Referrals would become even bigger with companies looking to reduce their recruitment costs and improve the quality of talent they hire. Network with your alumni, ex-colleagues and others from your industry. Blogging could be another way of establishing yourself as an industry expert but be sure about this option as it exposes you to other industry experts.
7. Be open to moving across geographies – The telecommunications industry may not be growing in Europe and America but are certainly expanding in emerging markets like BRIC countries (Brazil, Russia, India and China), Africa, South East Asia, etc. If one is prepared to leave shores in search of opportunities abroad, then it would be worthwhile to explore options in the emerging markets. India is currently adding close to 12-15 mn new subscribers every month (almost twice the population of Australia – just to give a perspective, no offence meant). There are new operators who are planning to roll-out networks in the next couple of years and they are short of experienced people as they themselves have no experience in the telecom space. Greenfield project, challenging marketplace and cross-cultural challenges – recipe for a great learning experience. Even in good times, everybody wanted to have China or India on their resumes and now there is a good reason to do so. New operators are rolling out CDMA and GSM networks in Middle East and Africa as well. Let there not be any impediment to your mobility. Business Week claims that the recent housing bust has reduced the mobility of Americans and perhaps of the people in other parts of the world as well because people who own their own house do not want to leave their city
8. Fed up with Financial Crisis? Try Antarctica – There is no harm in taking a long break to decide on your priorities with a cool head and in the bargain do something that you wanted to do for long but never had time to do, i.e. pack your bags and go on a long vacation (please backpack to save money). But remember not to break the momentum!!!

There is a skill shift happening right there and right now. This requires training for us and our kids. The schools need to teach the skills that would meet the needs of the future and not just the needs of the past. This is good time to hone your skills in the emerging telecom areas like convergence, platform development, mobile services management, etc. When the economy starts to recover, then you would be in demand.

Request all the readers to add to the above list on how to avoid and survive the job loss

Surviving The Job Loss Video

www.youtube.com/watch?v=sk5vSkt7f1A

A mobile virtual network operator (MVNO) is a company that provides mobile phone service but does not have its own licensed frequency allocation of radio spectrum, nor does it necessarily have the entire infrastructure required to provide mobile telephone service. As per the MVNO directory 2009, there are 366 active MVNOs and there are another 89 potential MVNOs. The concept of MVNOs was coined by Sir Richard Branson of Virgin Mobile in UK in 1999 and Virgin is still the largest MVNO with over 4 million subscribers in UK. There are currently over 50 MVNOs in US and Netherlands. However in almost every country, the share of subscriber base with MVNO is less than 10% 

There are various forms of MVNOs depending on the value chain activities they cover. The figure below provides an overview of the various activities performed by different entities: 

Image Copyright with Telecom Circle

 The fourth entity depicted as MVNO in the above diagram is essentially the “Thick MVNO” and is the most prevalent form of MVNO.  Key examples of Thick MVNO are Virgin, Lebara, Helio and while that of Mobile Virtual Network Enabler (MVNE) are Ztar, TMNG, Convergys and ASPIDER Solutions. 

What does MVNO offer?

MVNOs normally try to leverage on one of the three strategic assets – Brand, Distribution or Existing Customer Base. The existing customer base can be non-mobile customer base that can be cross-leveraged for mobile services. There are MVNOs that try to offer better services for their customers, e.g.  Rabo Bank launched its own MVNO to serve its banking customers better. Communities of interest can come together to form a community MVNO, e.g. fans of Manchester United or McLaren can potentially brand an MVNO to display their sporting affinity. Wal Mart can use its distribution reach and loyal customer base to venture into the MVNO space.

The key strategic asset that MVNO brings to the table also defines its positioning in the market place. The broad classification of MVNOs is as follows

Business MVNOs focus on catering to the mobile services needs of business houses, e.g. Abica in UK offers cost savings on business mobile, landline and broadband services

Discount MVNOs provide cheaper services to their customers and price is their key differentiation

Niche MVNOs focus on a specific niche of the market and charge a premium for the brand

Ad Funded MVNOs have a business model that is based on advertisements and offer to provide free mobile services to their customers return for viewership of the advertisements, e.g. Blyk in UK

Ethnic MVNOs targets ethnic communities or other communities of interest by offering significant value to their customers, e.g. Lebara in UK offers reduced tariffs to its ethnic customers for calling their home countries

Convergence MVNOs are set of MVNOs that leverage on convergence, e.g. BT Mobile in UK and Italy. BT Mobile encompasses not only GSM but all wireless telecoms technologies and leads the field in Fixed-Mobile convergence­

Why do carriers (MNOs) find MVNOs attractive?

Operators look at MVNOs as an outsourcing partners to either reduce cost or increase productivity by reaching out to more customers profitably. No market is homogenous and consists of various segments which may not be equal in size. Operators may find it difficult to profitably target all the segments. MVNOs are a medium to implement a more specific marketing mix to suit the needs of the niche segments. MVNOs also help carriers reduce their costs as they take away a significant portion of operator costs like customer service delivery, billing, marketing, etc. MVNOs are able to offer these services at a lower cost by leveraging on their current assets. MVNOs may also help increase the revenues by way of reduced churn and increased ARPU.

Operators are particularly interested in MVNOs to better utilize their excess capacity. They can off load their excess capacity at marginal costing (at a discount to the normal tariffs) and can thus offer discounts to specific segments without having to offer it to its entire base.

Future of MVNOs

Despite the benefits that MVNOs can bring, the current share of subscribers in most of the markets they operate in is less than 10%. I am not sure if any MVNO is really making enough money to cover its expenses. The reason for this is that there is now a new entity in the form of MVNO that is trying to gain a pie of the value chain without increasing the value of the chain. This means that the margin needs to come from the carriers or through operating efficiencies. There is not enough inefficiency in the operator domain and hence the high margin opportunities are limited. The carriers are already under margin pressure and have a threat of getting marginalized and hence feel squeezed with the arrival of MVNOs.

An MVNO is only as strong as its ability to differentiate its services. An MVNO can differentiate itself through niche segments, its distribution depth and loyal customer base.

According to Whitey Bluestein, widely recognized as the creator of the first MVNO when he developed a virtual network operation for pre-WorldCom MCI in the mid 1990s,

There are three key areas that most new entrants simply have not thought out either tactically or strategically: distribution, customer churn and industry technology.

In many cases, the MVNOs do not have a clear technology roadmap and hence are not able to transition from 2G to 3G to 4G. Being asset light (read headcount), most of MVNOs have a limited ability to forecast future trends, pace of technology changes and hence miss out on opportunities. They have limited access to latest handsets in the operator driven markets unless they tie-up with the operators themselves for the handset deals.

Also Read: The future of Data Only MVNOs

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Mobile payment is a part of the mobile transactions and is catching the imagination of a lot of people. This is clear evident from the number of comments I got on my last post “Mobile Payments – Will the Consumers Adopt it”.  In the last post, I had discussed the consumer issues. Now I am going to talk about the emerging business models in the mobile payment space and the pros and cons of each of the model.

In any payment mechanism, the key entities of the value chain are 

1. Merchants – accept payments from the consumers by reading the card at the Point of Sale (PoS) machine
2. Acquirers – hold merchant accounts and manage merchant payments
3. Payment networks – Connect and switch transactions between merchants & issuing banks
4. Issuers – manage consumer accounts and also take the associated risk
5. M-Wallet/Stored Value Account (SVA) – Issue and provisioning of the mobile wallet/SVA (only if case mobile payments) 

There are essentially four models in mobile payments:

Carrier Dominance Model – In this model, the carrier is responsible for all the roles across the value chain, i.e. carrier is the acquirer, payment network as well as the issuer. The carrier provides the mobile payment application to the customer. The customer holds a prepaid or a postpaid account with the carrier. When the customer pays through his mobile, the bill is charged to his prepaid or postpaid account. The entire network and interchange is managed by the carriers themselves. The PoS is also provided to the merchants by the carrier. The payment to the merchant can be made using NFC or Peer-to-Peer SMS.

DoCoMo used this model by creating an e-wallet using Sony’s FeliCa technology for its NFC based proximity payments and GCash is another example of operator centric Peer-to-Peer SMS based payments. Mobipay in Spain is based on carrier dominance model as well.

However, it is unlikely for this model will succeed in the long run as the carriers need to behave like a bank here and carriers are not banks!!! The merchant and customer trust is missing in this case or to put it in other words, the level of trust for a carrier is not at the same level as that for a bank. Moreover, the cost of recruiting a merchant is too high and there are no synergies expected from the current carrier operations on this count unlike banks which already have business relationships with the merchants. The carrier carries the maximum risk and reward in this model. The risk appetite of carriers may vary across regions and geographies. It would be a significant change to operator business as operators would need to focus on new areas which are very different from their traditional core.

Bank Dominance Model – In this model, the financial institutions takes the center stage and is similar to current credit card system. The merchant acquiring banks and issuer banks could be different and the payment network could be managed by yet another financial institution like Visa or MasterCard. The only difference here is that instead of the credit card, the phone is waved in front of the PoS. This model leverages the existing card payment system. The mobile wallet is issued and provisioned by the banks just like the credit cards.  The payment to the merchant can be made using NFC or Peer-to-Peer SMS. MasterCard Paypass based mobile payments is a prominent example of this model.

I do not think the banks are going to show interest in this model as the incremental commissions may not be large and the operators may not allow the banks to adopt this model. In markets where the handsets are subsidized, the operators may demand a disproportionate revenue share. Moreover, the carriers always have the option of blocking the service and in a way it is the carriers who decide what applications can be loaded on the subsidized handsets

Collaboration Model – This model is about collaboration between the carriers and the banks who can distribute the roles of the value chain amongst themselves. The carriers typically are responsible for providing and provisioning m-wallet on the consumer’s hand phone apart from the providing the POS equipment to the merchants. The roles of acquirer, payment network and issuer remain with the financial institutions; one or more financial institutions may collaborate together in assuming the roles of acquirer, payment network and issuer.

Collaboration Model is seen as most feasible because it allows the stakeholders to focus on their own core competencies, opens the door for new revenue from incremental services, drives customer retention and loyalty, and responds to fundamental demand from customers. All in all, this seems to be a good model. In a survey conducted by Smart Cards Alliance, 86% respondents supported this model as having the greatest potential for long term success. However, there are complicated relationships and hence complexity in negotiating deals amongst players. SK Telecom Moneta is an example of real-world rollout of collaboration model.

Peer-to-Peer Model – This model is has been made popular by new entrants in the payment industry like Paypal, Obopay, mChek, etc. The 3^rd party company acts as a conduit between the customers, merchants and the bankers. The 3^rd party service provider takes the payment from the customer, deducts its commission and passed on the payment to the merchant. It also pays the payment processing fee to the bank or the payment gateways like Visa/Master. The transaction is done Peer-to-Peer between the customer and the merchant. This model is significantly different from the other three models I have discussed and it threatens to eliminate the existing payment ecosystem as the role of the banks and the payment networks gets diminished. Moreover, the money can be transferred from one person to another in this way. Hence this model impacts the business of money transfer (international and domestic remittances). This model is particularly applicable in the emerging markets where the vast majority of individuals do not own a bank account.

Banks feel threatened by this model and so do the carriers. However, it is beneficial for the merchants as it promises to lower the transaction fee. To the 3^rd party players, scale is going to be the critical success criteria and the number of merchants on the network is likely to define the customer acceptance. Paypal and Obopay are good examples of this model but none of them have been able to build the scale required to even threaten existing banks

Factors that would influence the consumer adoption and prevalence of the business model

Regulatory is going to define which business model would be ultimately adopted in most of the emerging markets. The central banks across the world are reluctant to allow outsiders (read non-banks) to run the mobile payment service. The insistence on having a bank as collaboration partner ensures a significant role to the banks.

Standardization in the product and processes could be another factor that would determine the consumer adoption. Major handset vendors are yet to come out with their NFC handsets. Broader alliance between the banks and carriers is required to develop an open platform and a common mobile payment platform. The common platform should develop in a way that the cost of handset should not be a deterrent for consumer adoption

What’s in it for the ecosystem players?

The opportunity is big for all the players and what is needed is collaboration between them so that the opportunity can be profitably exploited. According to Mckinsey in its latest report titled “Making Mobile Payments Pay”, the small transactions (< Euro 20) value in Europe is $ 200 billion per year and for mid size (Euro 20-40) transactions, the value is $2.5 trillion per year. On top of this, the annual international remittance is to the tune of $250 billion. Even 0.5% transaction fee on the above gives a huge potential for the mobile payments.

The need of the hour is to work out a ”Just & Fair” collaboration amongst the different players. This opportunity would not only help reduce the risk of marginalization of carriers but would also help the carriers increase their EBIDTA (also read case study on how can carriers earn 40% EBIDTA margins with 2 cents per min of voice). The players need to understand that the consumers value simplicity and security which can only be provided if all the players collaborate to arrive at the common platform and build enough trust in the minds of the consumers towards this service.

Read the last post – Mobile Payments – Will Consumers Adopt?

Below are videos on Mobile Payments which could be of interest to the readers

GCash Payment System Video

Mobile phones and banks, banking transactions future trends

The views expressed in the blog are my own views and do not reflect the views of my employer
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Google dominates the web and is trying to ensure its dominance spreads to mobile Internet too. The Google Voice announcement is step towards this goal.

Since last week an intense debate has been going on across the telecom world about Google Voice, aimed at disrupting the telecom and Internet industry: A bunch of Internet phones and messaging services are christened as Google Voice. Actually a Googly remix of GrandCentral, a start up it bought in 2007.

The debate is that how would this impact the carrier business? I guess the bigger question is that how would this impact Google’s most awaited innovation in the Telecom business – The Google Android Operating System?

So far, the only luck Google Android has had is globally tying up with unlucky Motorola; in return Motorola has announced focusing only on Android Platform. Overall Google hasn’t had much luck getting the most important U.S. phone companies (since US market is ahead on the adoption curve) to sell Android phones. The G1 from T-Mobile has not been a resounding success as Apple’s products.

I believe carriers should be happy with Google Voice, as it will reinforce their focus on data usage by consumers, Google Voice still forces consumers to use their phone, and arguably makes it easier to use a fixed line and cellphone. So if the drop in fixed line revenues is a concern, with this and awareness of Internet on Mobile/Phones, consumer’s contribution to data usages will only increase.

While at some stage like in US today, Google may threaten to eat into local airtime revenues, and provide cheaper packages for International and National calls. But still consumers would need to subscribe to cellphone (or fixed line) service, and use the air time which consumers pay for. The chances are that this service will increase consumer’s data usage on the carrier roll.

I feel Google perforce is antagonizing the operators and forcing them to innovate their business model. The past has made it clear that the carriers like to run businesses within protected walls, otherwise why is Ebay’s Skype not one of the standard offering on handsets/service networks?

Would Google voice make carriers vary of Android? I guess the answer is not simple, while consumers may push for Android based devices, Carriers would reinvent the rules of the games to operate in their walled garden.

With Google Voice’s introduction one thing is for sure; Google is ensuring that its dominance spreads to the mobile Internet.

Continuing with my previous article on the “Marginalization of Carriers”, in this post, I would discuss the current and emerging business models in the wireless industry.

The key activities in the value chain of the business model are Service Creation, Identity Management, Service Provisioning and Billing. The key players in the ecosystem are the carriers, handset vendors, platform owners (e.g. Symbian, Android), application providers and the content partners. In different business models, different ecosystem players try to control most of the activities. There are broadly 4 business models that exist today in some form or the other.

1. Carrier Dominance Model: In this model, the users visit the portal screen of the carrier and download/use services from the portal (also called the walled garden). The walled garden directs the user’s navigation within particular areas, to allow access to a selection of material, or prevent access to other material. Traditionally, the carriers have followed the walled garden business model and controlled all the entities of the value chain of the business model. This model got prominence when the wireless industry was in infancy. The carriers took upon themselves to offer end to end solutions to the users. In this model, the content providers need to tie-up with the carriers for their presence on the carrier portal. The carrier is responsible for marketing of the service to the users and also for billing and collection. In return, the carriers charge a huge revenue share (as high as over 50-60%) plus the user access charge. Common examples of this model have been Vodafone Live, NTT Docomo’s i-mode, Airtel Live. AOL followed the most successful walled garden on the web and at one point of time, as per Economist magazine, 40% of the time Americans spent on web was within the confines of the AOL walled garden
2. Device Dominance Model: In this model, the device vendor is controls the device, platform and the content & application partners. Service provider tie-up with the device vendor who puts the service either on its application store or on its own portal. In this case, the device vendor controls the key activities of service creation, identity management, service provisioning and billing. Carriers get the access revenues and have a shared responsibility for identity management. This results in the highest differentiation for device vendors but the least for the carriers. In this situation, the data adoption and usage is normally high and the revenue share is better for the content partners. However, the content partners are expected to take some load of marketing, billing and care in return for higher revenue share. Also, the development cost of services is likely to be high as separate development is required for each device vendor. Common examples of this approach are Apple and RIM. Both Apple and RIM have complete control over the value chain and they decide on which services to offer
3. Platform Dominance Model: In this model, the mobile OS platform takes the dominant position. The platform is available across many device vendors and hence the development effort on part of the content and application partners is lower. There are limited service differentiation opportunities for the carriers or the device vendors. The content players need to partner with the platform owner. The carrier gets the user access revenue and the service revenue is shared between the platform owner and content partner. In this model, the platform replaces the device vendor in the device dominance model. The content partners get better revenue share (up to 70%) in return for billing, care and marketing. Symbian and Android are examples of this kind of approach
4. Application Dominance Model: This model is very much similar to the web model. The application is accessed using the carrier as pipe. The carrier gets the user access charges but entire service revenue goes to the content and application owner. The activities of service creation, identity management, service provisioning and billing are all done by the application owner. The marketing and care responsibilities also lie with the application owner. The role of the device and platform owner does not change in this case. Due to multiplicity of the devices and platforms, the service/application development cost is very high. Facebook, Linkedin, Google gmail client could be examples of this approach. However there are not many examples of paid applications in this model

There are many changes taking place simultaneously in the wireless space. The platforms are changing from proprietary in-house operating system (OS) to proprietary industry OS to collaborative open industry OS. Carriers are lowering the walls of the walled garden due to demands of the users as well as pressures from the content and application vendors. New opportunities are evolving which enable the content providers to completely by-pass of the carrier. All these changes require a change in the business model in the wireless industry

The emergence of the optimal business model needs to ensure that the consumer interests are taken care of and the consumer interests are the weakest if the entire or most of the value chain is controlled by one single large player. In that respect, the platform dominance model probably is best suited to the consumer needs. Due to higher base, the development costs are likely to be lower and all the ecosystem players are likely to have an equal say in the platform dominance model. However, the outcome of the success of any business model would depend on the outcome of the power play between the different entities of the ecosystem

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The mobile tariffs vary a lot across the globe and in some countries it could be as high as 35 cents/min. However, Indian carriers have consistently delivered over 40% EBIDTA margins at a tariff less than 2 cents/min. This article presents a case study on how Indian operators manage high returns at such low prices.

Situation: India has the second highest subscriber base after China at 350 million. The telecom sector was thrown open to private players in 1995 with the launch of mobile services. At the time of launch, the tariffs were very high at 50 cents/min for outgoing as well as incoming calls which meant that only 2-3% top income individuals could afford the service. Gradually competition was introduced in the Indian market and soon it was clear that volumes only could bring profitability to carriers. The number of players in each telecom circle went up from two to four to seven in 7-8 year’s time. At the same time, CPP (Calling Party Pays) and IUC (Interconnect) regimes were introduced in the country resulting in free incoming calls. As competition grew, the focus shifted to mass market and the tariffs started to come down. Indians responded well to the tariff drops and soon India emerged as the fastest growing market. The chart (fig 1) below shows the how the fall in tariff led to high growth.

Indian carriers were clear that they need to reduce tariff to stay ahead of the competition and the mobile services cannot remain a niche service. They followed the following seven steps to attain their aim:

Paradigm shift from ARPU to revenue per min – Indian carriers stopped looking at the ARPU as one of the performance measures. They started considering themselves as the producers and sellers of minutes. Hence the new metrics emerged like the revenue per min and the cost per min. This meant that they needed 40% margin on every minute they sold to achieve the objective of 40% EBIDTA margin. Once they defined the tariff per minute that they could realize from subscribers, they got the target for cost per minute. I would rate this single change in the mindset as the biggest game changer

Outsourcing non-core activities like IT, network – The Indian carriers created many firsts on their journey of cost reduction. Network was considered as a core function of any operator but in the quest of reducing the cost, the Indian carriers outsourced their networks in the year 2003 to the companies that best know how to manage the networks. They roped in companies like Ericsson, Nokia Siemens to manage their networks. Multi-year managed network deals were struck that guaranteed continued business to the network companies at a low cost. It was a win-win situation for both the entities. The carriers managed to change the cost type from fixed cost to usage based costing (based on erlangs per min) and more importantly, they managed to scale up their networks faster on consumer demands. The managed service companies charge on the basis of peak capacity (in erlangs) and the carriers are free to utilize it as they wish. This has resulted in creative tariff plans like night calling to make the traffic pattern more uniform and reduce the peak load. As with any outsourcing deals, the cost came down significantly with enhanced efficiency. Later the carriers emulated this strategy in the area of IT and call centers. Companies like IBM are entrusted with the responsibility of scaling up the IT infrastructure as per the changing needs of the carrier. The deals managed to make the IT cost a variable cost normally at ~2% of the gross revenues. These deals gave the carriers a chance to fight against the best of the world. After the outsourcing of the call centers, the next likely target function for outsourcing could be customer activation and service provisioning. In the end, the carriers would have the responsibility of just managing and owning consumers. Who knows, even that could be outsourced to MVNOs!!!

Focus on Prepaid – The carriers in India have focused on the prepaid market (currently over 99% of new additions are prepaid and over 93% of base is prepaid). Prepaid has a lower cost structure and lower channel commissions which means lower cost to the carriers. Currently, the prepaid card is much more attractive in terms of value than postpaid. Postpaid is currently being subscribed only by corporate connections as a bill is required by corporate. Higher prepaid proportion means lower billing costs, lower bad debt and even lower customer service delivery cost as prepaid customers are much less demanding when it comes to service. The flip side to this is that the churn (3% of base every month) is very high as the loyalty is low amongst prepaid subscribers. The acquisition cost being low, this is not yet pinching the carriers but I believe soon the focus would shift to consumer loyalty

Economies of scale – With falling tariffs, the subscriber net additions started to jump (a mind boggling 15 million subscriber net additions in Jan’09 in India). This ensured that the operators reap the benefit of economies of scale. They started to reduce the tariffs even further filling up the network with minutes. Since the cost increase was in steps due to outsourcing deals, the cost per minute started to fall faster than the revenue per minute and hence the EBIDTA margins stared to increase

Infrastructure sharing – Virgin Mobile may have introduced the concept of site/infrastructure sharing but it is the Indian carriers that followed it with whole heart. Currently, over 40% of the total sites in the country are shared with an average tenancy of over 1.5 per site. This has resulted in huge savings in network running expenses. The operators are now willing to share active infrastructure if the Government so allows. There is strong co-petition in the Indian market

Low cost distribution, e-Charge – carriers developed the low cost distribution model keeping the channel margins low and compensating the channel by way of volumes. They also focused on reducing the transaction costs and India was one of the first few countries in the world to introduce electronic recharge. The electronic recharging eliminated the need of the paper coupons thus reducing the need for multiple stock keeping units at the retail level. This resulted in lower cost to the carrier and low working capital requirement for the channel and on top of this, there were no stock out situations as well. In 2005 itself, electronic recharge was over 85% of the total recharge in the market. The electronic recharge facility helped carriers introduce micro-charge which exploded the market. The recharge could be done with a value as low as 20 cents. This resulted in higher usage leading to further reduction in cost on account of spreading of costs over a larger number of minutes.

Low Acquisition cost (no handset subsidy) – In India, the handset is not sold along with the SIM card. The handsets are distributed and sold separately by the handset vendors. This significantly reduces the requirement of working capital and other inventory carrying costs. The carriers can have a much leaner organization with no handset subsidy burden. In a country like India, where there is no social security number and enforcement agencies are weak, the bad debt should be significant for carriers. Carriers did a smart thing by staying away from the handset subsidy game.

The regulatory framework has been very strong in India and has continuously ensured lower tariffs and consumer interest safeguard. This ensured that the tariffs are transparent (though they are far too many!!!). Regulators also ensured sufficient competition in the market and are in fact planning to introduce mobile number portability soon. They recently awarded licenses to 4-5 new players in each circle taking up the number of players in each circle to 12. This would mean that India would be by far the most competitive market in the world.

All the above initiatives led to tight Opex control by carriers which are reflected in their cost structure (fig below).

Though the cost structure does not throw light on the absolute cost, the cost distribution when compared to other carriers in the world can provide ample pointers to the areas of cost reduction that the carriers in other countries can focus on. Indian operators are on the lookout of acquiring other operators in Africa and Middle-east as they believe that they can replicate the Indian experience there as well. The economies of scale may not be present in smaller markets but does it not call for cross-border consolidation especially in Europe? I am sure that if follow the simple steps of the Indian carriers, the consumers in the other parts of the world may soon enjoy the low tariffs as they are there in India