Value-added services (VAS) over the mobile are important for both the operators and content providers. The former believe that this provides a way out of the predicament of decreasing average revenues per customer (ARPU). The latter see this as a potentially powerful distribution medium, in light of the increasing likelihood that the mobile will become the primary method of accessing the Internet for a majority of the population.

Content being provided on mobiles range from the simple ringtone to Bollywood movies and social networking on mobiles. While entertainment service would be popular with the consumers, there remains a scope for utility based services like location information, mobile commerce (M-Commerce) for mobile transactions etc. However, the business models vary greatly. Indian operators take roughly 70 per cent of the revenues of VAS leaving 30 per cent to be split among aggregators and content providers, while the ratio is reversed in Thailand.

As per the information available with the TRAI the revenue from provisioning of value added services by Cellular Mobile Telephone Service Providers is Rs.3676 crores (INR 36.76 billion) for the year 2005-06 and Rs.5904 crores (INR 59.04 billion) for the year 2006-07. The percentage increase in the revenue from year 2005-06 to 2006-07 is above 60%. With such growth potential the mobile value added services revenue is expected to reach above Rs.25000 crores (INR 250 billion) by the year 2009-10. Further, the growth potential will also be compounded after the introduction of 3G service. As per the analysis by M/s. zinnov, Cellular Operator Association of India (COAI) has projected that VAS will contribute upto 20% of total telecom revenue by 2009-10. Further the analysis indicates revenue projection of order of US Dollar 10 billion by 2010.

Given this scenario it is important that the regulatory framework has to be conducive to allow for the growth of the sector. The relevant questions that the TRAI has posed for deciding on the regulatory framework are as follows:

Whether there is a need to bring uniformity or clarity in the licensing conditions of mobile telecom operators/access service providers with regard to provision of value added services?

Whether companies providing Mobile Value Added Services who mainly act as content providers or content aggregators and operate value added services technology platform called Value Added Service Providers (VASPs) need to be brought under the licensing regime or not?

If licensing system is to be resorted to for licensing of mobile value added service (VAS) under the Indian Telegraph Act, 1885, what should be the scope of licence and other terms and conditions for such licensing?

What should be the regulatory framework for content regulation?

Is there a need to regulate revenue sharing model or should it be left to commercial negotiations?

As for the last question though I am inclined for some intitial regulation of the revenue sharing model with a committment to forebear once the market takes over, but the philosophy of less regulation should dictate. The fact that the opeartors in India see the revenue generated from the VAS services as a way to support low ARPU in voice is resulting in the operators exercising their market power by squeezing the content provider. Moreover, Indian VAS providers feel telecom operators in  new markets  of Africa are more reasonable when it comes to revenue-sharing, which is also one reason why VAS operators are readily tapping new markets. However, given the potential of these services the market will make sure that the current unequal bargaining position bewteen the operators and standalone content providers will give way to a more equal positioning of the two.

Last 5 posts by payal

• Licence Raj Raja goes! - November 16th, 2010
• Nobel Prize and New Institutional Economics - October 16th, 2009
• Electricity tariff regulations: some simple facts - September 16th, 2009
• Research feeding into policy - August 27th, 2009
• Land Acquisition, some ruminations - August 16th, 2009

Tags: VAS

This entry was posted on Tuesday, December 23rd, 2008 at 4:18 pm and is filed under Information, Communications and Technology, Policy, Regulation and Competition. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.