Indian Mobile Land Grab

An invite to a Mobile Value Added Services (VAS) conference in India showed up in my mailbox today. While VAS are very interesting and have a lot of upside (you can see more details about VAS in India in this report), the following passage jumped out at me (emphasis mine).

Indian telecom companies further created a record of 15 million customers in January 2009, indicating that the world’s fastest growing telecom market remains untouched by the economic slowdown. This is a global record for any telecom market. The number of phone connections in — mobile and landline — has crossed 400 million as of early 2009. Mobile phone users now account for close to 91% of the country’s telephone base with 362.3 million connections, With ever rising cellular subscribers, voice is increasingly becoming a commodity. Service Provider’s are experiencing low ARPU’s and high subscriber churn rate. Over the last 6 years, the Indian telecom industry has realized the importance of Mobile Value Added Services. Propelled by the need to bring in service differentiation, operators are bringing new value added services in order to satisfy the growing demand of Indian consumers.

Two things. First, the relatively unkown but very relevant Norvig’s Law.

The Any technology that surpasses 50% penetration will never double again (in any number of months)

Watching the number of companies trying to rush in reminds me a little of the telecom boom in 1999. Yes, the internet was growing at some large rate (less than 10x, more than 2x), but the key lesson is that if 10 companies rush into a market that is growing 10x, what is the percentage share they are going to get? So you have this huge overhang of funded business that doesn’t get the uplift you build it for. There is going to be a harsh awakening there very shortly.

The second part that I find amusing is “voice is increasingly becoming a commodity.” Yes it is, and it is also the primary driver of usage of the network. For some reason, even though it has been thoroughly debunked, people still hold to the belief that ‘Content is King.’ It is most assuredly not.  At best, VAS services are going to be a revenue enhancer, not the primary driver. The primary driver of people getting a mobile is not going to be VAS services, it is going to be the necessity for communication.

Watching the mobile industry in India and the people funding them repeat the same mistakes of 1999 over again is aggravating. Are the lessons of history forgotten so soon?

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