Reliance Industries' move to invest in Network 18 may spark a new battle in the telecom space – the fight for content ownership. As telecom operators rapidly move from a voice-centric 2G business to data heavy 3G and 4G, control over providing content on their broadband networks is becoming crucial.
Reliance Industries has already sounded the bugle for this battle with a couple of quick acquisitions over the last two months, including a 38.5 per cent stake in Extramarks Education in November. Analysts say that more such deals are in the offing as operators plan aggressive roll out of 3G and 4G networks this year.
Mr Sidharth Vishwanath, Partner, PricewaterhouseCoopers, says “Having a 3G or 4G network is not enough. Operators will have to create stickiness for their services. Providing relevant content to users will be a key factor in this regard.”
3 key areas
Bharti Enterprises, the parent company of Airtel, has floated a new joint venture with Japanese internet firm SoftBank Corp for offering mobile Internet services in India. Bharti Softbank will emphasise on three key areas: social media, gaming and e-commerce.
“India, which has emerged as the second largest mobile market in the world, stands at the cusp of another revolution – mobile internet,” says Mr Kavin Mittal, Head of Strategy and New Product Development, Bharti.
WALLED GARDEN
But will this operator-driven strategy work? While operators in India have traditionally controlled what flows in through their networks by following a walled garden approach, the emergence of application stores on mobile phone platforms such as Apple and Android have created an alternate route for users to access content.
“The walled garden approach is old and will not work. RIL's approach seems a bit surprising because consumers today have a choice of accessing content from various sources,” says Mr Alok Shende, Principal Analyst, Ascentius Consulting.
But PwC's Mr Vishwanath says that operators can still create a small walled garden for offering niche content to paying customers. “For example, operators can partner movie distributors to stream a new movie on their broadband network ahead of the launch for a premium. Such content can create differentiation in the market,” he says.
Global Game
Globally too the fight for content is being played out with major Internet players such as Google, Yahoo!, AOL acquiring content providers in a bid to ramp up their offering. AOL, for instance, acquired Huffington Post in February as part of its strategy of creating a premier content network with international reach. Another example is of Japanese telecom major NTT DoCoMo which has had huge success in 3G services by offering interesting content to users.
The Japanese mobile operator forecasts that its mobile data revenue will reach $32 billion by fiscal 2015, a 48 per cent increase from current levels.
In India, it is early days and operators currently get only about 15 per cent of their revenues from data services most of which is from 2G platform like SMS.
Operators are hoping that this increases to at least 30 per cent over the next few years by offering exclusive content to differentiate from each other.
The success of this strategy is crucial as they have invested billions of dollars in acquiring spectrum and want to get faster returns by offering much more than just vanilla Internet access.