The TRAIs has issued a consultation paper on Mobile VAS, which you may download here. The value chain appears to be overly simplified as follows:
Definition of MVAS and the complexity of the value chain: This is key, since the definition of VAS will determine which entities are regulated, and which are not. I think the regulator will have to expand the definition beyond the licensed services – “Public Mobile Trunking Service, Voice Mail Service, Closed users group domestic 64 kbps data network via INSAT satellites system, Videotex service, GMPCS, Internet, Audiotex and Unified messaging service.” Does this mean that content aggregators like Indiatimes 5888, Hungama, and companies that provide mobile marketing, content repurposing, game porting services, game development, application development services will not be a part of MVAS? Will short code owners like Yahoo (NSDQ: YHOO) and Sybase365 need an MVAS license as well? What about media companies like NDTV, MSM, STAR etc who have their own short code? Where do network serivce providers like Nokia (NYSE: NOK) Siemens Network and Ercisson fit in? What about OnMobile, BTSL, ValueFirst, MyToday?
Technically, there isn’t even an MVNO operational in India, so I don’t think the same rules can apply to a gaming company like Jump Games, and an MVNO which is leasing bandwidth from the operator. The MVAS space is very complex with many companies involved in more than one segment of the value chain. Below is a slightly broader outline of the mobile content value chain, and one can still get more granular.
Industry issues, Nokia’s Ovi, and a possible solution in the extended text.
Changing role of the Handset manufacturer: Where does Ovi go?: One thing that the paper doesn’t take into account is the changing role of the mobile handset manufacturer – Nokia with Ovi and Motorola (NYSE: MOT) with MotoMusic are both emerging as content aggregators as well, and effectively taking on multiple roles in the value chain.
Industry Issues: The report raises some key issues related to the VAS industry, which we’ve covered before:
In the report, the authority raises some key issues:
— There is no co-ordinated effort to make the industry grow
— It (the industry) lacks transparency, as consumers are not aware of the nuances of services
— There needs to be a licensing/regulatory framework for growth of the VAS business – content development, technology development, content aggregation
— There is a need to facilitate provision of VAS by content aggregators/value added service providers
It appears that the CII raised the following issues with the TRAI on behalf of Content Providers, Copyright Owners and Aggregators:
— Inequitable revenue share
— MIS Reconciliation and payment (auditing issues)
— Need for bundling content and access
Possible Solution: I think the way to go is to define two types of MVAS entities – the networked and the non-networked. Short Code and Long Code service providers, MVNOs and entities that directly utilize spectrum (via the operator, or leased) will probably be licensed. There are fewer and relatively larger players in this domain. This also means that Nokia and Motorola will have to take a license for content services, as will media companies. One issue that emerges is the imminent concentration of power with these licensed players, like with mobile operators themselves. The networked-MVAS players will become the new gateways to the network, and take on an aggregator role. The operators might oppose this, since they tend to play one MVAS company against the other, and larger number of players benefits them.
Sure, things will improve if transparency was brought into pricing, and content downloads were audited. But the industry is at far too nascent a stage – the contribution of VAS to telco revenue is not as significant as estimated since most (80-85 percent) of the 10-14 percent contribution is P2P SMS. Regulation will create barriers to entry, and lead to the concentration of power in the hands of few. There are, of course, my conclusions. What do you think?
P.s.: some revenue share details from the report-
— For “Airtime revenue” operators retain 80 percent share
— For MCommerce services, operators take only 25 percent.
— For Music Messaging Service, operators share 50-50