Wake up in time to Facebook threats

Written by Jayati Ghose | Rishi Raj | Updated: Mar 6 2014, 07:58am hrs
The future of mobile operators in India lies in data services, says Rahul Khullar, chairman of the Telecom Regulatory Authority of India. However, over-the-top (OTT) players like WhatsApp and Facebook, who provide voice and SMS services over the internet, may not yet be a threat to the domestic operators due to underdeveloped smartphone and broadband penetration. In an exclusive interview with FEs Jayati Ghose and Rishi Raj, Khullar explains why telcos should focus on innovating data services and how the telecom environment is expected to evolve in India. Excerpts:

How disruptive can WhatsApp be when it launches voice calls in India How will it impact incumbent telecom operators

Skype that allows Skype-to-Skype calls over the internet has existed in India for over 10 years. It is legal to call a computer from another computer and that could continue. However, I do not see the government opening up the sector to OTT players like Facebook and WhatsApp by granting them mobile licences. This should protect the investments made by incumbent domestic telcos to provide mobile voice and data services.

But OTT players such as Viber, Facebook and WhatsApp provide cheap voice calls over the internet

If I make an international call to my daughter in the US over Skype, instead of using the telephone, there is a potential revenue loss on that international call to a telecom operator. This has been accounted for by telecom operators since Skype-like voice-over-internet-protocol applications have been around for a while. The problem would arise when sitting in the same mobile circle, say, Delhi, I call my daughter (who is also in Delhi) on her mobile phone using an OTT app. This would not only impact revenue accrued from local calls, it may also skew the case for STD calls. As long as broadband penetration is good and smartphone ecosystem is well developed, there is a big threat. No wonder, global telecom players are very worried about the expansion of OTT players.

But the case may not be similar in India

That is correct. The Indian telecom industry is cushioned, in a way, due to an underdeveloped smartphone ecosystem and minimum broadband coverage. 3G coverage is still patchy while there is no ecosystem for 4G handsets in India yet.

See, we now have digital forms of the traditional newspapers. All media houses have websites and apps that deliver news. Globally, many print channels have moved to digital versions, but in India even in the most urban centres we still take newspaper in the printed format. That is not going to change very soon. So, while a customer may have found an alternate and cheaper pipe to transmit messages (through SMS or voice) over these apps, the overall ecosystem is still in the nascent stage. The threat, if telcos do not wake up in time to preserve revenues, is still some years away.

How can telcos work towards preserving revenue while fending off competition from OTT players

The future is in the data market. In the next 3-4 years, telcos will have robust 3G and 4G data services and, at some point, will transition to LTE. Most telcos who bid for 1,800 MHz and 900 MHz during the February auction have data services on their mind. LTE can be provided on the 1,800 MHz band while 3G services can be deployed on the 900 MHz band. In our recently released recommendations on base price for 800 MHz, we have said that this band is no longer for only CDMA and EVDO services but HSPA and LTE also. So the domestic operators are gearing up for a fight to capture the data services market. Moreover, as device prices fall and more people move to smartphones, the ecosystem will become robust. Expansion in broadband penetration will also drive data. Domestic operators have also developed the dongle which provides on-the-go connectivity at good speeds. This is essential in India since Wi-Fi hotspots are not so widespread.

If future is in the data market, will voice die out

Absolutely not. Voice may be declining. Youth may be messaging more through WhatsApp, Facebook, Viber and other messaging apps, but voice is not dying. On the contrary, here is an opportunity for telcos to innovate on voice as well as data services to increase revenue.

Trai has given its recommendations on spectrum trading. When do you expect the policy to be in place and how will it impact the industry

It will probably be the new government which will finalise trading rules. Spectrum trading along with the new M&A norms is expected to boost consolidation in the sector. If an operator does not want to acquire another lock, stock, and barrel, but is only interested in the radiowaves held by the target, trading will enable the operator to acquire the asset without the additional liability of an entire company.