This is an ‘exclusive’.
No, Marketer’s Kaleidoscope is not into breaking news. But this is a news item probably not yet reported elsewhere.
Am informed by my ‘source’ in the mobile industry that India’s Internet subscriber numbers quoted by the TRAI – which as of March ’09 were pegged at 13.54 million overall and of which 6.22 million are for broadband alone – do not include the numbers for mobile broadband.
What’s mobile broadband ?
This is the wireless, high-speed Internet access currently being offered by Tata Indicom and Reliance Communications under the brand names Tata Photon + and Reliance Netconnect Broadband + respectively. Access is available on notebooks via USB sticks (dongles) . Tata launched the service last December and Reliance did so in Feb this year.
The mobile technology used here is EV-DO (the 3G of CDMA) which ‘supports’ a
download speed of 3.1 Mbps and an upload speed of 1.8 Mbps. The speed delivered is claimed to be superior to even the DSL speeds currently available, if one were to go by Reliance’s claims. In addition to good speed, the advantage is that this is plug and play i.e. no wires or cables needed.
The EV-DO technology is Qualcomm’s, and they are providing their QSC6085 chipset to two Chinese companies, Huawei & ZTE. Huawei & ZTE use this chipset to manufacture the USB sticks, which are then in turn imported by Reliance & Tata.
Market trends & acceptance
These services meet a key need of corporate customers.The indications are that they have been a hit. A total of 130,000 subscriptions were sold in a recent month. The total subs to date have crossed 800,000. The estimate for 2009 end is 1.5 million.
The service quality of both Reliance & Tata is reportedly similar. Reliance Net Connect +, however, is outselling Tata Photon + , 2 : 1 . Since their pricing is on par, one presumes this is due to the better reach of Reliance : Tata Photon + is available in fewer areas.
Now, even BSNL had launched it’s EV-DO service – and was the first to do so – last Sep 2008 – though not successfully.
And TRAI is not currently including these EV-DO numbers in their Internet stats. It does account for the other access technologies viz. DSL, cable, ethernet LAN, fibre, leased line and even dial-up wireless but not broadband wireless. To that extent, the number and growth of Internet and broadband subs in India is understated.
The immediate opportunities for both Reliance and Tata are two.
One, to convert all their notebook customers on dial-up (the CDMA 1X technology) to EV-DO. This has the following merits :
(i) While the base monthly charges for dial-up and broadband service are somewhat similar at ~ Rs.650 p.m., the broadband customer is likely to have a higher data consumption, particularly over a period of time after they have experienced video and other value-adds that broadband makes possible . Thus, the customer will over a period of time move to a higher monthly billing.
(ii) The ARPUs for these customers are 3-4 times those being achieved for their voice customers(Reliance investor presentation, Aug ’09). While with the advent of 3G there is lot of anticipation worldwide in the mobile industry about the impeding data revolution, it is broadband which is the ‘low-hanging data service’ i.e. the service this consumer buys first.
Here is an earlier report about Reliance’s order for 1 million USB sticks and with reports of a forecast that data services will in the future account for 10-15% of Reliance’s revenues.
(iii) Further, installation and activation is very easy and “can be done in minutes as compared to few weeks or even months for wired broadband” (above Reliance investor presentation).
(iv) Of course, upgrading dial-up customers to this higher speed will provide them a better experience and make them more ‘sticky’.
Having myself in the last couple of years used both the Reliance and the Tata dial-up services on my laptop, I can say that these services performed poorly in terms of speed and connectivity. I have moved to the new Tata Photon + service a month ago and the performance is fair to good. I also happen to have Airtel wireless connectivity at home. And the browsing experience of the Tata Photon + and the Airtel wireless are comparable.
Lack of aggression* ?
Despite the above advantages that mobile companies (and their customers) can derive, I believe neither player has yet moved aggressively to make the upgrades happen. Our office in Mumbai boasts of 50 odd dial-up notebook connections. Only Reliance has approached us and they did not or could not cut their USB price, maybe their purchase price of Rs. 3000 per stick is a barrier.
(*Update on Sep 18 : Today I saw ads for both Tata Photon + and Reliance NetConnect + on TV on HBO within the very same movie, in fact just a couple of minutes apart. Looks like the companies are now getting to be aggressive).
I get a feeling that better speeds are yet needed.Hopefully, the release of extra spectrum through the forthcoming spectrum auction for 3G will make this too happen.
The second opportunity for these mobile broadband players is to convert all new laptop users.
To this end, Reliance has bundled it’s service with Dell’s notebooks. All Dell notebooks will come with 6 months ‘unlimited download’. Tata has tied up with HP Compaq to offer the USB at Rs. 1200 (against the list price of Rs. 3,500) on new netbooks sold. More initiatives are to be expected.
One current limitation : the USB dongles do not usually work well with desktops. This is because desktops are usually placed in a room at ground level and – at that low level – the USB sticks have poor wireless connectivity.
Fuelling broadband growth : from 7 million to 12 million
Thus, the penetration of these services will be determined by the universe of notebooks available.
1.5 million notebooks (including 73K netbooks) were sold in ’08 – ’09 and the market is expected to grow by 25% to reach 1.9 million notebooks in ’09 – ’10. Assuming a life span of three years for a notebook, that’s an installed base of 5 million notebooks. That’s 5 million additional mobile broadband subscribers waiting to happen. With the right aggression, this can all happen soon and significantly grow the current installed base of 7 million odd broadband subscribers.