Thursday, August 29, 2013

NFC Technology – A long, dusty road to travel
What is NFC?
NFC (Near Field Communication) is a wireless data transfer technology between two devices that are in a proximity of around 4 cm. NFC is a subset of RFID technology and is based on principles of electro-magnetic field that interact with each other at close distances. NFC was developed by NXP (Phillips) along with Sony. Any activity that calls for proximity of a card/tag and its reader can be made simpler with NFC. Examples include credit card payments, access card authorization & attendance tracking, smart tag reader etc.
NFC is implemented in applications like Google Wallet and ISIS, which are mobile wallet systems. It can also be used for keyless entry systems in offices, metro stations and even cars. Restaurant bills and movie tickets can be paid for at ease with just a tap. This method of communication is popularly called the “tap-and-pay”.
The intuitive interface, versatility, standardization, interoperability and inherent security make the NFC a promising technology.
NFC and telcos:
Telcos get value from two factors: First and foremost, providing a service that meets a customer need and provider value. Secondly, ways to monetize the experience—not by scraping money from the merchants, but by adding value to the ecosystems through relevant loyalty programs, enhanced offers and rewards. Telcos have the potential—not the guarantee, but to influence the buyer at a new and previously unattainable portion of the retail chain, which is when they've got their money in their hand and they're about to commit. A telecom carrier could interrupt a retail transaction with a notification informing the subscriber that a discount retailer sells the same product at a lower price. That discount retailer would, of course, pay the carrier for these interruptions.
The sunny, bright side:
The future of mobile payments is going to be heavily influenced by the near field communications (NFC) technology. Recently retailers have upgraded their POS terminals to support chip-based cards; a logical extension will be the introduction of NFC-based contactless payments support.
Mobile wallet services will be lucrative for telcos that generate new revenue streams by using their positions as intermediaries in retail transactions as a selling point with merchants and advertisers.
The gloomy, dark side:
Criminals are likely to abuse the tap-and-pay NFC technology used in mobile payment programs, or digital wallets. Because of its extreme ease of use, internal data can be leaked easily just by placing phones close to each other. A virus infected device can steal information from every other device that it comes in contact with. These security risks can be mitigated in the enterprise by a combination of tools, policies and training. These polices should be able to give the IT teams access to devices while minimizing liability, prioritizing data security and at the same time recognizing the needs and rights of employees.
Gartner forecasts that NFC will account for only about two percent of total transaction value in 2013 and five percent of the total transaction value in 2017, although growth is expected to increase somewhat from 2016 when the penetration of NFC mobile phones and contactless readers increases. Worldwide, people are not purchasing as much because the buying experience on mobile devices has yet to be optimized, according to Gartner. People are spending less via mobile devices than via online e-commerce services and at retail outlets.
The GSM Association, which also noted it was publishing new specifications for NFC handsets and SIMs, continues to be concerned about big smartphone platform players, such as Google, Blackberry and Microsoft, along with some large handset makers. It fears that these so-called over-the-top players, as well as some device makers, will use embedded secure chips in their NFC phones to store revenue-producing applications–applications that the telcos would like to see running on their services.
The only way for telcos to ward off threats from reduced revenues due to reduced m-commerce applications is to make joint ventures with the mobile wallet developers. These help the telcos to minimize competition from the likes of Google and other new m-commerce players.

Sandhya Vijayan


Class of 2015

Thursday, August 22, 2013

100% FDI in Telecom Is it a change for the Better?

During the last decade, foreign investment has rapidly increased in developing countries like India and enhanced the economic growth. To maintain balance between economic gains from foreign investment and national telecommunications sovereignty is a challenging task. Liberal foreign investment on telecommunications will promote more economic gains including new and improved telecommunication products and services with lower prices and additional investment in other industrial sectors. 


Reasons for Increasing FDI in Telecom

Indian Telecom industry is suffering from a debt burden. Banks have already lent so much that they cannot stomach lending more. Indian telecoms today owe around INR 185,000 Cr to Indian and foreign banks. The burden is despite the fact that India has one of the largest telecom subscriber bases – around 897 million. Raising the FDI cap is expected to turn around things for the industry. With FDI gates opened, the telecom sector can garner the much-needed additional funds in coming months. The fresh inflow of money and reduced burden on local entrepreneurs will help the industry provide better quality services as well as adoption of the latest technologies. The industry is likely to have further consolidation with foreign players, who may eye the smaller players in the country.
India has already entered the last leg of a three-staged launch into telecom orbit. After the investor sentiments in India’s burgeoning telecom sector had hit all time low on account of cancellation of 122 odd 2G licenses and regulatory uncertainties. Things have never really looked up in the earlier two legs—of 49 percent and 74 percent FDI caps respectively. Experts predict that there won’t be any major changes to India’s telecom sector on account of change in Foreign Direct Investment into telecoms service from the current level of 74% to 100%. 


The return on 3G investments has obviously been too small to be worthy of being an offsetting factor. It was only after the failed 2G auctions that the government realized the magnitude of industry’s problems. That however, has not helped the industry recover from debts, which has also kept the stock prices as well as overall valuations of major India-based telcos under much pressure. It is unlikely to see a significant lift-up, given that the new FDI norms could increase the near-term competitiveness in the industry without a level playing field being in place.
It won’t therefore be unreasonable to say that a full FDI in telecom may not be enough to improve the overall health of the sector at this juncture.

Major reasons for Foreign Investors not to invest in India :

Regressive Government Policies

The infamous Vodafone tax case is a perfect example depicting the flaw in government policies. The policies being changed as and when needed is the signal that went out to foreign investors. The government needs to bring more clarity in its policies in context to regulation, licensing and taxation. 


Corruption

The 2G scam is an example for corruption in Telecom sector in India. Licenses were distributed on first cum first serve basis, but more pertinently, shifted the dates of application, allowed the entry of many foreign players. That had brought in fresh investment in the telecom sector in India, but also led to hyper-competition, with prices falling drastically, and some telcos offering free minutes just to get consumers on board. The falling prices were beneficial from a common man’s perspective but the signal that went out to the foreign investors whatever the Government of India decides, it might not hold up in court. Many foreign investors burnt their hands in this process, and decided to withdraw their business from India. Spectrum allocations have to be made in more transparent manner.


Aggressive Regulatory Policy

The Government bodies and regulators have been hyperactive recently regarding 3G roaming pacts, Vodafone 2G licenses in India.
However, the government’s consent on 100 percent FDI in the Telecom sector has definitely raised hopes in terms of growth and jobs. But the total effect of this policy change is yet to emerge. To retain talent is the main concern as per Dr. Sandeep Gandhi, chief human resource officer, Aircel. One needs to have patience and passion for technology and innovation to have a long-term career in this sector as suggested by him.
Well considered steps taken today will have a long term effect on the Indian telecom sector. So even if 100 % FDI is approved immediate miracles may not be expected. 


Aditya Yerunkar

Class of 2015 

Saturday, August 10, 2013

OTT and Telcos : A Road Ahead


How many of us send sms today? It seems to be a yesteryear mode of communication between people through mobile phone, gradually and slowly they have been almost completely replaced by applications like whats app, facebook, nimbuzz , hike, skype  etc. and causing revenue loss to telcos of about $32 billion in 2013 which is estimated by analyst group Ovum to go up to $82 billion in 2020. By using these applications people can send messages to each other at virtually no cost using data connection hence completely bypassing the billing system of telecom players and leading to hefty revenue loss to telcos but providing tremendous value to the end users. These applications are provided by OTT(Over The Top) players whose 62% board  members profile are focused on sales, marketing and strategy while just 12% on financial matters while in telcos, 58% board members have legal, financial  or technical background. Hence OTT’s are better innovators and aggressive in terms of marketing strategies and sales and thus have better customer engagement.
Now what are the possible options for telcos to salvage this revenue loss? One being that they can block these OTT players to use their data network , but this step would bring customer criticism as OTT’s are providing high benefits to end users and telcos would lose these customers to the telcos who haven’t blocked OTT’s leading to more revenue loss. More feasible options for telcos would be to look for alternative ways to increase revenue like by hiking data roaming charges or increasing charges of  data usage plans as OTT applications require data network to transmit messages .Another alternative can be to look for having partnerships with OTT players  for providing unlimited access to their data network in return of some fees .According to allot’s mobile trends report 26% operators already have this revenue sharing model in place. If we consider India companies like RCom, Aircel, Airtel, Tata Docomo have already collaborated with players like Whats app, nimbuzz and facebook. Many more operators are to follow the same suit while many telcos are mulling whether they should collaborate or compete with the OTT players as they believe these partnerships wont last long due to difference in opinions between telcos and OTT’s .Those who have decided to compete like Airtel who has recently launched HIKE for Indian customers has imitated service model adopted by OTT’s and has shown promise by increasing their subscribers base to 5 million in just 4 months after its launch making it one of the fastest growing apps globally.
Looking at the success of some players like Airtel who have decided to compete by imitating service model others is also to adopt this model while many global players have decided to launch services on Rich Communicate Suite including Vodafone in Germany and Spain and TM mobile in Germany. RCS focuses on extending the communication options in mobile network beyond voice services and sms/mms services. They promise to provide peer-peer communication across parties .This is a move away from client-server paradigm used by OTT’s. This frees up both the users and developers alike in building future communication services, not being tied to single platform. The unique offering of RCS service model is that it provides guaranteed quality of service since it is offered over the managed IP network of the operators and hence is carrier grade. The model is however in early stages and would take time to develop in India.
Overall, OTT’s have thrown some serious challenges to telcos who are looking to get out of this trouble posed by OTT’s by imitating their models or by looking to provide better services in comparison to them. But looking at the past trends and because of the fact that OTT’s are better innovators they seem more likely in outwitting telcos who  seem to be short of ideas .Hence, best step which telcos can take is to have better partnership models with OTT’s who have a long road ahead of them.

Anuj Jain


Class of 2015