Jittery operators seek regulation of OTT players
The launch of voice calling feature on popular over-the-top (OTT) messaging service app Whatsapp could hit the Indian mobile operators hard, denting their revenue from domestic long-distance operations, which make roughly a fifth of their topline.
So far, the impact of free calling through OTT techniques like Viber or Skype has mainly been limited to international long distance which has led to a decline in their outgoing billion minutes. Since mobile operators don’t earn much from the highly-priced international long distance (ILD) services — less than 10% of their mobile revenue comes from ILD operation while 18-20% of the revenue is due to domestic long distance or STD — they have largely escaped an impact.
However, it is the domestic long distance calls which are now under threat of being cannibalised through free calling apps launched by Whatsapp. Though free calling apps like Skype or Viber were always available for making domestic long distance calls, their usage, so far in this segment, has been limited. Whatsapp, which has a dominant share of the OTT market with 52% of mobile users using it, poses the threat of pulling away a large chunk of STD callers to its app.
Once the shift becomes more pronounced, the operators, who had previously taken a hit as free messaging services ate into their SMS business, would lose a part of their NLD revenue too, and this could be a serious blow to them.
Naturally, telcos are fighting hard to bring the OTT players under some kind of regulatory regime wherein a level-playing field is created between them and the OTT players.
The Trai has brought in a consultation paper on the subject and the process of seeking industry feedback is on.
Proponents of OTT operations argue that if telcos lose out on voice revenue they still earn data revenue via services like Whatsapp or Viber.
However, the realisation for a mobile operator is not similar from voice calls and data services.
For instance, a minute of voice usage on mobile phone makes an operator realise around 50 paise.
In the case of a similar duration of internet-based call, popularly known as Voip, leads to a realisation of only 4 paise.
On average, revenues earned through data by the mobile operators is around 25 paise per MB of data and the average size of one minute Voip call is around 150 KB. The average holding time in voice call is of 2 mins whereas in the case of Voip calls it is around 12 minutes.
It is this difference between prices of voice calls and Voip calls that has prompted the proliferation and success of communication OTT apps.
The low cost of usage incentivises the user to have longer conversations in Voip calls as compared to traditional telecom calls.
Telecom analysts say that if the trend goes unchecked the danger is that to stop the arbitrage the operators could start increasing the threshold limit of data packs in their combined voice and data offering to maintain their realisation rates. This would be bad for consumers.
That the threat if for real gets proved if one sees the growth in the number of smartphones in India. According to Cisco VNI report there were about 140 million smartphone users in India with a growth rate of 54% in 2014.
In 2016 the smartphone market is expected to cross 200 million users, overtaking USA. Amongst the developing countries, India is second only to China in terms of the growth in smartphone users. According to the latest report 34 India has around 173 million internet users as of December 2014, with a penetration of 17% and a growth rate of 23% during 2014.
This means that as smartphone penetration increases and free calling apps proliferate the international long distance threat to voice calls would reach the home turf also.