If you have just recently loaded this article on your browser and are not connected to Wifi, then chances are 9 out of 10 that you're using a mobile data connection in case you're reading this on a mobile device.
Mobile data is now an important part of our lives and one can't imagine a world without it.
In this article I will be discussing the uptake of mobile data in India and what can be done to further boost it.
1. Internet penetration in India -
A mobile data connection has at its very core an internet connection. To understand the article, it is first necessary to understand the penetration of internet in India. According to Wikipedia, internet penetration in India is around 20% and India ranks 144 which is below average to say the least. To put this in perspective it means that 4 out of every 5 persons in India are not connected to internet in any manner.
It also means that many people miss out on the multitude of benefits provided by the internet.
2. Wired broadband won't suit India for data uptake in the short term -
Wired Broadband in India as of now is more expensive than wireless broadband. A user has to spend a minimum of $9-$10 every month in order to have the most basic wired broadband connection. In contrast wireless broadband plans start as low as $3 and go all the way upto $25 depending on the speed and data allocated.
3. What's stopping India from uptake of data -
3.a Devices aren't the real issue -
Many people feel that the reason for low internet penetration in India is because of devices. I feel devices aren't the real issue. I agree that as of now smartphone penetration in India is very low and according to wikipedia it stands at just 17%. Smartphones will be the most widely used computing platform in India and as time passes by penetration is bound to increase. Smartphone prices are dropping drastically in all emerging countries and within 2-3 years its not difficult to imagine a decently specced smartphone having the same price of a Nokia feature phone today.
From the images above its clear that both Samsung Galaxy S2 and Redmi 2 have more or less the same specs. The Galaxy S2 at its time of launch 4 years back in 2011 costed $800 unlocked whereas Redmi 2 costs $100. Of course probably the display of S2 is better claibrated, processor of S2 might be a little more powerful and camera of S2 might be better. But more or less the specs are similar and so is the overall performance. What's more fascinating is the price drop from $800 to $100. This is a staggering 87.5% drop in price in just a matter of 4 years which equates to a 20% price drop every year. Unless and until drastic changes are made to Android such that it becomes a resource hogger, specs of smartphones like S2 and Redmi 2 along with proper optimisation should provide a decent user experience for a first time smartphone buyer.
The reason why I made the comparison above is to show the rapid rate of decline in smartphone prices. At this rate its not hard to imagine a smartphone like Redmi 2 costing less than $40 in 3-4 years. Couple the $30-40 price tag with the generally improving standards of living and its not hard to imagine every user being able to afford a smartphone by the next 2-3 years. To be honest, there are already manufacturers churning out $40-50 smartphones in India but these smartphones come with below reasonable specs that lead to a bad user experience in terms of performance. But within 2-3 years there will be smartphones costing just $30-40 which provide a proper Android experience in terms of performance.
Having a device to access the internet wouldn't really be a problem in India or any other emerging country in a few years.
3.b Tarrifs and difficulty in comprehension are the main issue -
3.b.1 Issue of tariffs -
Unlinke device costs which are in a rapid decline as I highlighted above, data costs are going the opposite. Data costs in India have been rapidly increasing over the years and will continue to increase thanks to the change in dynamics of Indian telecom market. For the sake of comparison I am going to compare the 2G data rates of Airtel (India's largest mobile operator) between 2010 and 2015
Look at this
article from 2010 on Telecom Talk (India's Fierce Wireless). An extract from the article reads
"Bharti Airtel, India’s largest GSM mobile service operator announced the launch of Pan-India applicable
2GB GPRS pack at Rs.98 per month"
During 2010, 98 Rs. ($1.63) could fetch a user around 2GB of 2G data or Edge.
Have a look at Airtel's 2015 data rates -
A 2GB data pack now costs around 200 Rs. ($3.33). This is a 100% price hike over a period of 5 years.
For the foreseeable future data prices in India are going to keep increasing for the following reasons -
1.Spectrum becomes more expensive -
Spectrum is the life and blood of a telecom operator. Without spectrum telecom companies simply cannot operate. Earlier in India spectrum was given out at a fixed fee. Following the mega 2G spectrum scam, the government decided to auction spectrum and all forms of natural resources for commercial use. Most operators in India that had acquired spectrum at the rate of peanuts in 1995 have the same spectrum expiring now and need to renew it. However unlike 1995 where operators paid a fixed price for spectrum, they are forced to bid for the same now. This has led operators to spend billions in "renewing" spectrum. Apart form spending billions for that, telecom operators have also spent money on acquiring new spectrum for services such as 3G and 4G. All these billions spent on spectrum will be recovered from the end user in the form of higher data tariffs.
2. Expansion of 3G and 4G -
Operators in India are regularly increasing their spend on capex to expand their 3G and 4G coverage over India. This increased capex again hits back to the user in the form of increased data tariffs.
3. Razor thin margings -
Unlike some telecom markets such as Mexico, operators in India have razor thin margins which when coupled with the huge debt Indian operators currently have make tariff hikes inevitable.
4. Impact of OTT -
OTT players such as Whatsapp after the launch of Whatsapp voice calling would further reduce the revenue of operators obtained from voice calls.
All the four points I mentioned above demonstrate that in the coming years mobile data tariffs in India would only go up. Maybe temporarily tariffs might fall because of the entry of a new competitor but overall it will increase in future.
It is these high data prices that will act as the real barrier in uptake of data services in India.
3.b.2 Issue of comprehension -
For most people reading this article, using a smartphone is something natural and not much of an issue. However the same is not true for emerging countries.
Literacy in India has grown to 74.04% (2011 figure) from 12% at the end of British rule in 1947. Although this was a greater than sixfold improvement, the level is well below the world average literacy rate of 84%, and of all nations, India currently has the largest illiterate population. Despite government programmes, India's literacy rate increased only "sluggishly," and a 1990 study estimated that it would take until 2060 for India to achieve universal literacy at then-current rate of progress. The 2011 census, however, indicated a 2001–2011 decadal literacy growth of 9.2%, which is slower than the growth seen during the previous decade.
One must note that literacy is the ability of a human to read and write a particular launguage. Almost 25% of Indians or one in every four people can't even read or write a particular language. If a human can't even read or write a particular language thoroughly then using a smartphone becomes all the more difficult. This illiteracy then makes using the internet even more difficult since a lot of web content is text in some language and if a user isn't able to comprehend the text, how will he or she interact with it ?.
To have a better idea of what I mean I HIGHLY rceommend reading this article on Tech Crunch ->(http://techcrunch.com/2014/11/29/peering-into-the-minds-of-the-4-3-billion-unconnected/).
This article explains in a beautiful manner the challenges faced by the offline population to come online.
4. So how does one improve data uptake in India -
100% data uptake in India isn't possible. As I mentioned there are legacy problems such as literacy to deal with before aiming for 100% data upatke. However at the same time 20% is too low and can be substantially increased. There is a significant amount of Indian population that are literate enough to use the internet however don't use it because of mostly one reason and that's the tariff of mobile data.
In today's age, mobile data is mostly seen as a luxury in India and rightly so because mostly people use mobile data for entertainment related purposes. Most operators in India show data as a form of entertainment in their marketing materials. For example Vodafone's ad as to how one can share selfies faster on Vodafone or Airtel's ad as to how Youtube videos stream faster on Airtel. However these kind of stuff will only appease people who have enough disposable income to afford them and not every Indian has this.
India's per capita income (nominal) was $1570 in 2013, ranked at 120th out of 164 countries by the World Bank.
Also the number of middle class people in India who can actually afford data is low. Using World Bank's definition of middle income families to be those with per capita income between $10 to $50 per day, the National Council of Applied Economic Research of India completed a survey and concluded there were 153 million people who belonged to middle income group. This is just 15-25% of India.
Other facts about India
1.Only 46.9% of the 246.6 million households have lavatories
2.At least 30% of the total population of India goes to sleep with an empty stomach.
In a country where one in every two households don't have access to toilets and where one in every three people go to sleep without food, having access to mobile data certainly isn't the top priority.
So when will people access data ?
Real uptake of data in India will only start when data acts as something which can help the person improve his/her living. It will only happen when the $3-$4 spent on a data pack every month will help the person earn $10 more in return
Ola as an example -
Ola is basically the Uber of India. The ride sharing app which has been expanding like fire all over India. Now just like Uber even Ola drivers need to use the Ola app in order to find new customers and for proper billing. For the Ola app to work, it needs a data connection and this is where data succeeds. In case of the ola driver, data acts as a source of income rather than a source of entertainment. It's is at this point where the rather price sensitive Indian subscribes to a data pack because it helps him improve his financial strength.
In a general scenario a cab driver in India would generally be roaming on the streets looking for a probable customer and pick him up. In such a scenario, the cab driver really doesn't need a data connection since all he is doing is manually hunting for customers but in case of Ola, the cab driver needs to connect with Ola to know what customer he needs to pick up and this connection is made by the data pack.
An Ola cab driver I spoke with, told me that in his past he used to work with a travel company and used to drive a cab. He used to own a smartphone when he was with the travel company but never used data since the travel company would simply call him up and tell him about the potential customer but in case of Ola a data connection was mandatory in order for him to know his customers.
Another instance where Ola helped create a data user was when I recommended how cheap Ola was to a friend of mine. That friend who had never used a data pack, started subscribing to a data pack just so he could make use of the Ola and travel at cheaper rates.
More SaaS apps like Ola will drive up internet penetration in India.
Many women in India work as domestic servants in homes performing activities such as cleaning utensils, toilets, wiping the floor, cooking food etc. Now if a particular app can match these domestic servants with households that require such a service then this will in turn drive up data uptake.
For example the domestice servant in my neighbour's house refuses to work on Saturdays and Sundays. Now if there was an app which could show domestice servants ready to work in real time, it could be highly beneficial. For example a women working as a clerk in a hospital from Monday to Friday could use her free time on Saturday and Sunday to work as a domestic servant and earn more money while at the same time my neighbour could get someone to work on Saturdays and Sundays. In both the scenario my neighbour and the women ready to work would need a data pack in order to find each other.
Conclusion
While data can gradually penetrate India over a period of time, the short term growth is most likely to come from SaaS services such as Ola which help a person financially. Although the post is centered around India, the same can be said for other emerging countries such as Pakistan and Bangladesh.
Update -
For Part 3 of the article series, please
click here.
