Can Value Addition Be Reality In Indian Telecom Market?

Vasu Reddy from Chicago
vasureddy@aol.com

On March 2, 2008 Virgin announced its entry into the ballooning Indian mobile market via value added services targeting youth segment with a franchise agreement with Tata Teleservices. Virgin provides value added services in various mobile markets around the world. Virgin doesn’t actually hold any wireless licenses. It simply brands its services in partnership with mobile operators as value added. It is quite a common practice across the globe to buy bulk airtime, add new features and resell with custom branding.
On March 4, 2008 the DOT asked for clarifications from Tata Teleservices on this agreement and asked to stop any services under the arrangement with Virgin until the agreements are reviewed and in accordance with the license issued by the DOT.

The COAI also has been asking for clarity on this agreement and has written multiple letters to the DOT, and has clearly articulated that the Virgin-Tata value added services agreement was illegal under the current license agreement. By the time the review and approval or disapproval of this agreement for value added services is completed, there will be many arguments about the wording of the license agreement and multiple interpretations of the same. When Mr. Tata went public about the deal with Virgin on the value added services there was global coverage of Virgin’s entry into the Indian market, and just 2 days after the announcements it became contentious.

The two major contentions against the deal are:

Is Virgin branding the mobile services under Tata name and marketing them to customers as per prescribed guidelines in the license agreement.

Virgin in its own way has made presentations that did not mention Tata name in promotions, and thereby ignored or simply was arrogant in assuming there will be no objections to the promotional strategies in entering into the highly competitive and extraordinarily difficult Indian market

In the already contentious Indian market where GSM and CDMA operators are at odds, the demand for new spectrum is greater than what is conceivable, every major industrial house interested in a piece of the market and all above and beyond the demand form the growing subscriber base, it will be impossible to practice dynamics of an open market where market rules will be interpreted to serve the best interests of the consumer.
Both Tata and Virgin will make every effort to point out that this value added services through Tata Teleservices is a legal arrangement that is allowed by the license and the others will make sure that the agreement and the license are at odds, while the DOT will scrutinize this and eventually provide their take on it. There is no guessing what will transpire at the end, but it does show that the Indian market is contentious, which is a fact since the beginning of privatization and it continues to be and will be, and both Virgin and Tata were not as smart in presenting the value added services in such a way the agreement would comply to the letter of the law. The law is by rule ambiguous and will cause continuous ambiguity with interpretation.

In any case, this latest instance of providing services in the Indian mobile market is challenging. It will certainly help to framing the industry rules and regulations to fit every conceivable value addition and what is, or make value addition a preference of the operator.
If the Indian Telecom market has to look at value addition seriously, the technology challenges are minimal whereas the legal implications become onerous.

In reality many services are simple:

• A wireless operator can use a combination of technologies to expand services.
  
• An ISP can essentially provide conference facilities to all its broadband users.
  
• A village within a cellular tower can become a WIFI point.
  
• An individual mobile user in a village can start a small mobile enterprise to serve to the village folks in meeting their in-
• coming or out-going call needs.
  
• An Internet café can become a conference point for both Voice and Video.
  
• These are some of the many instances in the mobile world which can be simply replicated to the growing needs of network and coverage. The existing strict guidelines may not allow for such massive changes in operations with our licenses today.

Simplification of existing guidelines and developing better revenue management will be prudent. In both spectrum auctions and revenue sharing, it is essential to make the market a level playing field for all aspirants, big and small while the ultimate benefit of progressive revisions to the telecom operating guidelines will be to both the GOI and the consumer.

The first place to start is the already propagated for auctions for scarce spectrum, and it has the highest value revenue for GOI and DOT, and also attracting serious bidders who have deep pockets for paying for both the spectrum and infrastructure. It is absolutely necessary to get serious about..........
contd......page2

Come, share & express your self at telecom station....
Write to us at info@telecomindiaonline.com