The telecommunications space in India has changed a lot over the past months. Reliance Jio’s launch has started a pricing war while the merger of Reliance and Aircel will make competition even tougher. As the battle for market share intensifies, what should carriers do and consumers demand to increase service quality?
In the past mobile operators focused on providing calling and messaging services to consumers but now the focus is on mobile data and content. This is evident in consumer behavior as people mostly use their smartphones for apps, not to make calls or send messages. Messaging has largely moved to data through apps like WhatsApp, Hike, WeChat, Telegram and others, and same may happen to calls. That’s also the reason why the pricing war between carriers in India is focused on data and not the other services.
But there is one major issue with the focus on data. Data by itself is a “dumb pipe” where the key factors for the consumer are quality and cost. But focusing only on these aspects creates a downward spiral where more investment in infrastructure is needed to increase data speed while less revenue is generated due to the need to lower prices.
Carriers who want to gain an edge will have to think one step ahead. What is it that consumers want to do with this data? They want access to quality content, which means carriers can’t think about just providing data but how to give consumers better access to content. Those carriers who are able to do so will go on to win, as this is a stronger value proposition than cheaper pricing.
The average consumer wants generally the same type of content: app stores (e.g. Google Play) to download apps and games, bouquets of social media services to connect and stay in touch with their close ones as well as society in large, a music streaming service and a video streaming service on which to spend their smartphone time. In India’s case, e-learning is also a notable category with the country having the biggest number of students in the world.
Carrier and digital service provider partnerships are nothing new in the telco space. Either users get a free service for a limited duration (“soft bundle”) when signing up for a telco offering or the price of the service is added to the user’s postpaid bill (“hard bundle”). With roughly 98% of Indians having a prepaid SIM card, hard bundles don’t really work well. Soft bundles run into a roadblock when the free trial period runs out. What will motivate subscribers them to continue paying for the service after free access ends?
More importantly, can users even pay for that content and what’s the carrier’s cut of this payment? In India, a large body of content is available for free and the freemium model has not taken off so far. The difference between free and paid content is not very apparent. This image has been further reinforced by large digital merchants focusing on user acquisition, not monetization. But carriers need to push for a behavior change with users who are accustomed to getting everything for free. And we already see the shift taking place: Indian gamers now spend as much as gamers globally on average.
Yet access to payment methods to facilitate this increase in digital spending is complicated. Very few Indians have the capability to make online payments, with credit card penetration in the country at just 2%. This means that beside the “soft bundle” deals to get users on board, carriers need to help merchants monetize the content as well. If the paid content is accessible on one network but isn’t on the other, users are less likely to leave for a competitor, even if their mobile data plan is cheaper.
Partnerships with service providers can not remain only in the user acquisition stage because today merchants are already shifting from acquisition to monetization. This means the carriers need to keep up and provide a user-friendly, widely accessible payment solution to their consumers. Fortunately, this is already available through direct carrier billing. But in order to increase its uptake and generate additional revenue in the process, simply having the payment method available is not enough.
Data analysis and dynamic data driven user interface is the key to growing revenue from paid digital content. International merchants entering the Indian market don’t know much about service pricing, user behavior etc. Our own experience shows that once carriers and service providers work together on service design, marketing and delivery revenue can grows 3-4 times.
Unfortunately we sometimes see a new service being switched on and both the carrier and service provider assuming that money will start flowing in. But users need to be guided to the payment, especially in India where most people are used to free content. Regardless of the service, this means promoting payments to subscribers in owned digital channels as well as retail spaces.
Carriers should also assist service providers in both pricing of the payments, accounting for user spend capabilities due to predominantly prepaid SIM card usage with significantly lower account balances compared to Western markets. Dual SIM usage in payment behavior tracking and difference of income and access to mobile data between circles is also something not to be overlooked.
The basis for this is setting up a payment tracking system which allows to monitor purchases in real time. Looking at data on an aggregated level helps understand behavior patterns and customize service offerings to consumers. This also helps mitigate payments fraud which is bound to increase as carriers partner with large merchants whose card-based payment systems are already under scrutiny by criminals.
If consumers are not convinced that accessing paid content through carrier billing provides them with a better online experience, once the “soft bundle” deals with service providers run out, consumers will just turn to another carrier with a cheaper offering and the “more data, at a cheaper price” downward spiral will continue.