BLACKBERRY Vs INDIA! – The Impasse

On 2nd of July, in a complete turnaround of its previous stance, the Department of Telecom (DoT) said that there was no threat from blackberry services and the government had no objections if an operator wanted to offer these services. This comes after an impasse of almost over two months. So what was the reason for the impasse and what has finally emerged as a viable solution for both the sides? Let us have a look. 

What is blackberry?

Blackberry is broadly identified as a PDA (Personal Digital Assistant). It is designed and marketed by RIM (Research In Motion), a Canadian firm. It is a wireless hand-held device introduced in 1999 which supports push e-mail, mobile telephone, text messaging, Internet faxing, Web browsing and other wireless information services. Further features are: Large, high resolution screen to provide ample workspace; vibrant display supporting over 65,000 colors; available memory for application and data storage; Java development platform based on open standards; integrated attachment viewing; exceptional battery performance; tri-band hand-held, operates on 900/1800/1900 MHz GSM/GPRS wireless networks, allowing for international roaming between North America, Europe and Asia-Pacific.

Why the security agencies are concerned?

The Indian security agencies have concerns that the data generated by the blackberry is not only difficult to monitor and intercept, it’s even tougher to decrypt the generated data sent over the network. The security agencies feel that this could be used by the terrorist organizations to their advantage in exchanging vital information pertaining to national security and could pose a serious threat.

Under India’s Information Technology Act of 2000, the government has the right, under certain circumstances, to intercept electronic communications for security reasons and in the national interest. Security agencies say that terrorists are increasingly using the Internet and applications such as e-mail to communicate with one another.

The security agencies have some primary problems with the blackberry:

1.  The BB uses a 256 bit encryption which is by far one of the toughest in the world to break through. The present operators providing such services offer 128 bit encryption. Moreover the security agencies have the only the capability to break through a 40-bit encryption in their armor.

2.  Most of the data that is sent through the BB is routed through its server in USA and UK. The security agencies want that since it is difficult to access these data because of multiple reasons pertaining to sovereignty, diplomatic and security reasons, the proposal is that all data generated by the BB’s in India should stay within the country. And for this RIM has to setup dedicated servers in India itself.

3.  RIM should provide means to the security agencies to monitor the data, by either providing the master key to the database, or let the security agencies monitor it by bringing down the encryption level.

What RIM says? 

 

 

1.  RIM says that providing a 256 bit encryption is the USP of its blackberry model. The very reason that it provides such robust security feature is the reason it is being used by the corporate in exchanging important confidential business mails. Bringing it down to the level demanded by the security agencies will hurt its basic business model.

2.  Second, RIM says that setting up server in India will make other countries where it is operating (operates in 135 countries) demand the same. This will greatly hurt its business propositions and it is against any such demands.

3.  Then RIM feels that snooping through the users BB by the way of sending a SMS and that will automatically install itself and either let know the encryption key being used would greatly reduce the QoS and the device may behave abnormally (performance) and the user may get to know that he/she is being snooped.

4.  RIM also makes it clear that the decryption key for any data sent is not even known by it because the device which sends the data itself generates an encryption key and can be decrypted by the user to which the data is intended. And there is no such master key which the security agencies are demanding.

5. Most importantly RIM says that majority of its clients are corporate companies, and these are used by people in the higher hierarchy in these companies, so RIM has proposed that their monitoring was not of concern and the real problem in monitoring would require the individual clients. The RIM is therefore working out technological changes to help the security agencies in monitoring these individual clients.

So each side has put their point of view with the DoT, security agencies and RIM are working together to find out ways for monitoring the data and help it covert into understandable form. Hopefully this impasse seems to be breaking.

 

CARRIER SELECTION- what is it, what are the operators saying?

The latest buzz in the Indian Telecom industry already complaining against TRAI and DoT for the delay in rollout and licensing of 3G in India and has come under yet another regulatory order from the governing authority. The TRAI wants to introduce carrier selection in the India. So what is the fuss all about? Let us have a look.

Carrier Selection:

This enables a telephone subscriber to decide which operator it wants its call to be routed through when he/she is making an ISD/STD call. So say I am a Vodafone customer staying in Hyderabad and want to make a call to someone in Delhi. Unlike now where I have to stick to my present service provider (this case Vodafone) and it (my present service provider) decides how my call is routed and charges a specific amount for the call. In the carrier selection process I get to choose my own operator. This can be done by prefixing the code of the operator which I want my call routed through and whose network I’ll be using before the number to be dialed. My choice will primarily depend on two factors:

1.  Cost – operator providing cheaper call rates may be preferred

2.  Quality of Service – operator providing better QoS like voice clarity, low echo, and low latency and jitter.

So once the customer decides upon his option he’s free to use the particular operator.

This however should not be mistaken for MNP (Mobile Number Portability) where the customer uses the same number but has shifted to another operator. In Carrier selection I’ll be still under my service provider for normal call and value added services but for long distance calls I can choose the operator for carrying the voice calls. 

What’s TRAI’s Vision?

TRAI, yes the Telecom Regulatory Authority of India which has been bullying the telecom players for quite some time now. TRAI feels that the adoption of American system of carrier selection in India is largely going to help the subscribers. It also sees a general increase in competition thus pushing the prices further down. It will also spur further innovation in terms of better long distance communication and facilities (QoS). Thus TRAI believes the end user will be greatly benefitted.

What the operators have to say?

The operators believe that the present regulations being introduced by the TRAI is unfair for multiple reasons

1.  The present long and short distance call rates in India are already cheaper than most markets in the world. The call rate is generally in the range of 80 paise to Rs. 1.60. Out of this around 65 paise goes for the carriage, 30 paise is the termination charge (fixed by the operator) and rest is what goes to the operator. Therefore service providers think that they are already operating on a thin margin and there is minimal space for further reduction in call rates.

2.  Second, when the scheme of carrier selection was first introduced in early 2000 there were very few operators in the market. The scheme would have been feasible at that time encouraging competition and driving down call rates. Presently there are twelve Mobile Service providers operating in the market. Thus the service operators hold an opinion that they are already enough players to have good amount of competition and keep the prices as low as possible.

3.  Third, the cost required for setting up the Intelligent Networks for Carrier selection is huge. Rather than bringing down the cost, setting up these infrastructure and extra capital flow may lead to increased call rates. Moreover already the Telecom billing system is still maturing; there is no fool-proof system for correct billing. Due to this Mobile Telcos lose out on some revenues. Moreover increased burden in terms of setting up extra IN (intelligent networks) may tax heavily on the service providers.

4.  Finally, one more point to be taken note of is that most of the players which have a considerable customer base are already long distance players (barring Vodafone). And the competition has already driven the prices low.

The Mobile operating space is already very competitive courtesy a significant number of players in the market. Moreover they already are operating on thin cost margins. The Regulatory authority should therefore concentrate on 3G regulations and future innovations.

NOKIA SYMBIAN SYMBIOSIS

The greatest news of the week seems to be that Nokia is going to completely buy out the biggest mobile OS maker Symbian. Nokia which already held a 48 p.c. stake in the company is going to buy out the remaining 52 p.c. So what? Is it a raw deal? What does Nokia want to do with the new deal in picture? Let us have a look.

Symbian: Symbian was a company which until now designed operating systems for mobile devices. The Os was largely proprietary meaning that no one else could use it without the permission of the Symbian consortium. Yes, the Symbian consortium (Symbian Ltd.) was established on June 24 1998 as a partnership project between the big bosses of the mobile space Nokia, Ericsson, Motorola and Psion, to exploit the convergence between the PDA’s and the Mobile Phones. Soon other players joined the consortium like LG electronics, Samsung, Panasonic, and NTT DoCoMo. 

What was the aim of the Symbian consortium? The Symbian consortium aimed at developing a unified closed source OS which the members could use with some modifications pertaining to the user interfaces and development of device drivers for proprietary hardware boards. The organizations joining the consortium after paying a particular license fees which would entitle them under the Eclipse License and they could use the OS.

Market: Symbian OS is the leading OS in the ’smart mobile device’ market. Statistics published February 2007 showed that Symbian OS had a 67% share of the ’smart mobile device’ market, with Microsoft having 13% through Windows CE and Windows Mobile and RIM having 10%. Other competitors include Palm OS, iPhone OS, Qualcomm’s BREW, Google Android and SavaJe.

Current Trends and the OS (open sourcing) of OS’s (operating systems): Over the years Nokia has been the leading mobile phone manufacturer in the world. Infact every 4 out of the 10 phones sold in the world is a Nokia. But the general trend over the years in the Smartphone market has been shifting to a more ready to market device. This has led to the focus on software development for the Smartphone’s. However the developer community was not too happy. Despite the software being licensed out the developers had tough time adapting themselves to different user interfaces wherein Symbian has long served as the underpinnings for several palmtop interfaces, including Nokia’s own S60, Sony Ericsson’s UIQ, and NTT/DoCoMo’s MOAP (Mobile Oriented Applications Platform). These varying user interfaces were a problem. This is where the developer’s started shifting to the open source movements like LiMo (Linux Mobile) and then Google came out with Android. The Symbian Foundation will unify those user interfaces, which will likely make application development easier and more consistent across a wide range of phones. This is exactly what Google wants to do with Android: unify the mobile Linux community behind a consistent interface that’s compatible across a wide variety of phones and available under an open-source license. According to sources at Nokia, code will be released to the public for the first time in either the last quarter of 2008 or the first quarter of 2009. All of Symbian OS and its development tools will be made available by 2010. At this time, Nokia and its Symbian Foundation allies plans on releasing the program under the Eclipse Public License 1.0. In short, Symbian and its major interfaces are well on their way to becoming a completely open source operating system and development platform. This spells potential trouble for Linux embedded systems. Google, faced with delays in its own Linux-based Android platform, made the best of things in its response to Nokia’s news. A representative for Sean Carlson, Google’s manager of global communications, said, “Openness fosters innovation, benefiting consumers. We’re very pleased to see other major players in the mobile industry moving in this direction.”

Winners and Losers: 

1. Apple can be seen sailing through the Smartphone market through innovation. It has already created a niche market for itself through technical prowess. So it is highly unlikely that its proprietary software policy will affect the sales. It can continue to innovate and attract new customers. Thus Apple is going to remain largely unaffected by this deal.

2.  Symbian is been running on 60% of the mobile phones worldwide courtesy Nokia and since majority of Nokia’s phones run Symbian it’s obvious that Nokia does not want to lose out in the race and wants to be the market leader and develop Symbian to match the other upcoming competitors like android and the Limo. Moreover unifying the various platforms and open sourcing is going to make the developer community stick to Symbian Os and help in fostering innovation and better software for Nokia users. The developer community which was being wooed by the Open source Linux Mobile community and the Google’s fully open sourced Android are now going to stick to Symbian. Thus Nokia clearly emerges as the winner out of this deal. It is going to lose out on some revenues though the licensing but it is going to earn through other means like lower development costs and faster innovation.

3.  Google and the Linux community which share the same ideology will be losing out due to increased competition and largely because the LiMo is still very unorganized, compared to symbian which has a dedicated developer pool working towards a concerted goal. It is still Even-Stevens for them.

4.  The odd man out remains to be Microsoft and the Canadian based Research In Motion (RIM). They have for long been closed source and charging high amount of licensing fees. Microsoft’s share of 15% is sure to decline. Because unlike earlier the price to develop and time to market mobile software and Os is going to come down drastically with the opening up of Symbian and presence of other open source players like Google and LiMo. These have already brought down the cost to almost nil. So obviously companies are going to stick with Nokia-Symbian which would provide a cheaper solution and support than MS or RIM. So Microsoft Corporation clearly stands out to lose and will have to come out quickly to maintain its declining market share.

Thus Nokia-Symbian symbiotic existence and opening up is not only going to help the developers world around to innovate further without worrying about the platform and licenses, improve the time to develop and finally help bring down the prices . This will ultimately bring down the price of the mobile phones and the ultimate winner will be the end user.

 

 

An Apple a generation steps up the innovation – latest developments around 3G model and the iPhone sales issue

In 1984, there were personal computers but then Macintosh was launched and it gave us the Graphical User Interface (GUI) and revolutionized the concept of PC’s through iconic innovation! This was Generation 1; I’ll call it Epoch I.

Epoch II: Before 2004 people knew and heard digital music but then iPod came into existence and the rules of the game were changed. iPod provided us with ubiquity and the way we live the music. 

Epoch III: Before 2007 people used smart cell phones, heard music on the move, even surfed the net through these gizmos, but iPhone changed the rules of the game again. It integrated everything into one device, not only made it attractive, user friendly, easy to navigate but more importantly started the beginning of a new era of innovation.

Exactly Apple has been changing the way the game is being played. By introducing innovative products in the market through focused and dedicated approach, Apple has been bringing cool products to the consumer market. And these products are not only smart but also simple for the common man to use. This mix of simplicity and smartness defines the way Apple plays the game, and with each new product marking the start of a new generation and fuelling fresh innovations in the market.

iPhone and its business: with the launch of the iPhone Apple has created a buzz in not only the music and computing industry but it marks the entry of the innovation giant in the field of telecommunications. At the launch iPhone was available in select markets of the world with full available facilities to be used. Moreover the company released the iPhones with only the AT&T network to be used for the next one year. Second, the company did not allow third party to develop software to be running on the trendy iPhone. These factors led to a lot of negative criticism and to some extent affected the sales of the new gadget.

Surprisingly before the launch of the new 3G model, a few months back Apple came out with the SDK (Software Development Kit) for the iPhone enabling many third party companies to develop and market software for the iPhone. This gave iPhone a much needed breakthrough and helped improve sales, which had slowed down after the initial craze subsided which had sent the sales sky high. Till now Apple has managed to sell about 6 million iPhones and has targets of selling 10 million by this year end. So how is Apple going to manage it? Let us check out.

Cool features of the iPhone 3G: the 3G model boasts of a GPS (Global Positioning system) which enables the phone to track its exact location. Apart from the user friendly nature of navigating through the touch screen iPhone, it also supports 3G, i.e. the third generation of mobile systems. 3G brings along with it high speed data transfer ability, thus enabling live streaming video, faster internet access etc. Moreover another striking feature is that in case of theft iPhone completely erases all the data (which could be sensitive) present in the memory.  

Apple’s business model for iPhone 2G: Initially, the iPhones were being licensed through AT&T in a deal which entitled AT&T to share with Apple some of the monthly usage fees of the iPhone users. This helped make Apple profits through not only sales of the phone but also its usage. AT&T benefitted from the increased customer base, and with the number of value added services iPhone supported, it would help AT&T in a greater way.

 Apple’s business model for iPhone 3G: with the release of the 3G model Apple has come out with a new set of business model, it has effectively reduced the price to around 199 USD to boost the sales in mass market by making it affordable. Industry experts feel reducing the price below this would have consequences not good for Apple in a mass market model. However the deal is still not pinching Apple that much! Why? In the new deal the iPhone is going to be released worldwide in around 70 countries with the local mobile service providers promoting it. So how is Apple gaining despite cutting down the cost of the iPhone considerably?  Unlike the 2G the service providers are going to subsidize for the cost of the phone and in return they are not going to share the monthly usage fees with Apple. In this way Apple is going to lose out on some profit it could have made but it wasn’t boosting the sales so much. With the reduced cost of the iPhone and mass marketing by not only Apple but also the MSP’s the iPhone sales are going to improve and Apple is going to profit from the subsidy provided by the MSP’s. Whether it is a win-win situation for both Apple and Msp’s has to be seen. But surely Apple has adopted a strategy the major handset players like Nokia and Samsung have adopted and hopes to boost its sales.  

Apple has always been the harbinger of innovation, while we wait here in India for the release of the 3G iPhone, somewhere in the silicon valley, Apple is already gearing up for Epoch IV.

 

MVNO- MOBILE VIRTUAL NETWORK OPERATORS-Business Requirement

Definition:

MVNO’s are generally classified as operators which do not have their own network equipments and they may not have the required licenses to use a frequency band. They simply lease or buy network usage time from the existing network operators and resell it. They however do it by adding value services to the end consumer. Their business model seeks to make profit through these value added services.

Some of the other probable definitions explain a MVN operators as providers of mobile and voice data services without actually owning the access right to the spectrum they use. Consequently MVNO’s can be described as sub-groups of Mobile Service Operators. The radio capacity used to provide these services is obtained through commercial agreements with the licensed mobile network operators. Another definition of MVNO’s differentiates them from MSO’s in terms of technology (network components owned) by the MVNO like the Mobile Switching Centre, Home Location Register (HLR), and Intelligent Network (IN). 

Players:

Virgin Mobiles (UK) was the world’s first MVNO. It was actually the fastest growing Mobile operator at the time of launch adding a million customers in 19 months. MVNO’s market is basically being targeted by the already existing business houses having brand value in domains other than telecom, like ESPN mobile and Walt Disney, though the latter did not meet with much success.

Business Value Analysis:

As the telecom sector grows and more number of players enter the market, we observe the gradual reduction in rates due to increased competition. The race is always on to increase the average revenue per user (ARPU). Now we understand that setting up a telecom infrastructure is an expensive process moreover in emerging markets the roll out of infrastructure should be quick enough to achieve the desired market capitalization. We observe that major big telecom players shed huge amount of money to buy licenses to operate their services.

The main aim is always to make use of 100% capacity. But in ideal case we observe that resources are vastly underutilized. Now the existing network operators are losing out of revenue due to this. This is one reason why the incumbent operators give out some portion of their allotted airtime to these MVNO’s so that Network operators can get returns on everything they have invested. Thus say they have the capacity to provide facility to 10 users at a given time but only 5 users are actually using it. So they lose out on the revenue of 5 users and the resources are underutilized. So rather than going for unutilized sources they share it with MVNO’s so that the full utilization takes place and increase the ARPU.

Important Lesson:Let us first break up a telecom market into say the urban and rural sector. We observe that that mobile penetration is pretty good in urban areas and scarce in rural areas. Now we also know that call rates are almost the same for all operators in urban areas due to heavy competition and huge customer base they target. Now to achieve a higher ARPU in urban markets they have to come out with ways to achieve higher returns. For this they have to provide value added services. We generally observe that these big telecom network operators may not have the required expertise and workforce to work in these areas and may require huge investments. This can hamper their growth in some ways as investments are high. Moreover to setup such a unit is time consuming. These network operators having already invested heavily in setting up infra and buying spectrum look to MVNO’s to solve their problem. God Sent: MVNO’s suffer from the same problem, they must be eyeing the telecom market but they may not have the required capital to buy spectrum, moreover may not be patient enough to roll out the infrastructure. Now both the network operators and virtual network operators turn to each other to solve the problem. Generally the MVNO’s are business houses which may be huge names in other sectors. They tie up with these NO and provide these Value added services. The branding may generally be done in the name of the Virtual operator because that may create a buzz and generally attract a huge following. Thus in urban markets the MVNO’s create a niche. They target specific areas and age category. Like the Virgin Mobile provides ringtone features, music sharing among peers, caller tunes etc. and attracts lot of young population. Now these value added services attract customers to these new MVNO’s. End result: the MVNO’s profit by repackaging and selling talk times brought from the Network operator. Due to the saturated market and limited resources to invest in new innovative services, to create a brand and following out it among customers, to increase ARPU, and net utilization of its resources, the Network operator shares some part of its spectrum with the MVNO. This leads to achieve higher ARPU, indirect profit by utilizing the brand value of the MVNO and thus overall increased customer base. Thus it’s a win-win situation for both.

In rural markets the penetration is not that great. Moreover there are lesser number of players in the market. The rural markets may also not demand these value added services. Thus the MVNO’s may not be interested in delving into these areas; moreover the branding may not work. The NO may also not have a very high end, large user supporting infrastructure in these places unlike they have it in urban areas where spare facility is provided to avoid problems of congestion. Thus rural markets may not be a viable option for MVNO’s. 

Key Points:

The major benefit to traditional mobile operators cooperating with MVNO’s is to broaden the customer base (sell additional MOU’s) at a zero cost of acquisition.

• It is likely that incumbent mobile operators will continue to embrace MVNO’s as a means of deriving revenue to offset the enormous cost of building 3G networks.
• As more MNVO’s expand in the marketplace, they are likely to first target prepaid customers as a means of low cost market entry themselves.
• Most regulating bodies are in favor of MVNO’s as a means of encouraging competition, which would ultimately lead to greater choice and lower prices.
• With the advent of the MVNO, many incumbent mobile operators will evaluate the opportunity to offer supplementary MVNO services of their own. To do so, exiting mobile operators will use their established branding, service knowledge, and supplier relationships to complete against independent MVNO’s.
• In the case of Tata Teleservices and Virgin Mobile we see that Tata Teleservices is not a big name atleast compared to bigger players like Bharti Airtel and Vodafone so it has tied up with Virgin /mobile to promote Its own services by using Virgin’s Global strategy, brandname, and fresh value added services

ISSUES:

In some countries like India where FDI in Telecom sector is limited, MVNO’s have to be a joint venture, mostly with a national network operator. Moreover the tax policy has to be reduced so that the MVNO’s can actually make significant profit to exist in the market and to companies to see it as an economic viable option.

The introduction of MVNO’s is resisted by incumbent operators in some countries which have a monopoly, or which have plans of introducing their own MVNO’s because of the existence of strong brand name, customer base, time and revenues to invest in future value added services that the customers will receive.

Moreover MVNO’s setup will be a problem in areas where mobile penetration is less and still there is scope for existing companies to increase their customer base by reaching out to these people rather than trying to pull customers from other mobile service providers by luring them through value added services. Countries like India and China are examples.

There are multitudes of other things which are associated with MVNO’s like regulatory issues etc.

These may be regulatory, governmental etc.