Net neutrality: Numbers expose telecom sector's half-truths

Mobile applications are no villains. Neither is the extensive use of data by consumers. Even as telecom operators fear that over-the-top players (OTT players) who provide voice over the Internet (VoIP), like Skype or WhatsApp, will take away their bread-and-butter business of traditional calling; it is yet to reflect in the numbers.

The country’s largest telecom operator, Bharti Airtel, reported a four percent reduction in voice usage per customer, compared to last year. For Idea, average usage per customer remained stable. If telecom operators or others expect that instant messaging which provide voice services will replace their calling business, then it has made no dramatic dent.  

However, if a four percent fall in voice usage is still a matter of concern, it need not necessarily be because their customers are replacing call minutes with voice-based instant applications. Data using customers message a lot more than those who do not use data. Increased and seamless communication reduces the need for calling by a customer itself. It is a trend already established in economies like the US and Japan. Subscribers there, use data to communicate rather than calling. In fact, it is considered polite to text before they call. Small reductions in voice usage could be this trend which is picking up.  

What they have to worry about is the declining trend of voice average revenue per user or ARPU. The voice ARPUs of Airtel fell by seven percent, while that of Idea fell by around 7.4%. This is more of indication of how these operators have priced their voice offerings. It shows that market is not conducive yet, to increase voice calling rates. It is wise to keep the rates going, as it is their way to keep their voice offerings attractive even as competition from data-powered calling or possible launch of new operators like Reliance Jio might strike.

Low calling rates in India is a USP which will keep the business going. The call rates are at an average of around 40 paise to 60 paise per calling, makes it an attractive proposition for subscribers to use them. Around 80% of users still prefer traditional calling on mobiles, especially for local and national calling. VoIP like Skype and Viber has eaten up only into international calling where rates are substantially higher. Globally, applications like Skype have already eaten up into telecom business. Its traffic was almost 40% the size of the entire conventional international telecom market. In 2013, it carried an estimated 214 billion minutes of international ‘on-net’ calls. But, international calling contributes to less than 10 percent of total minutes of the network for Indian telcom operators, easing any large worries.

The situation of course is not as bad as it was for telcos when there were 14 operators in the market, or during a ravaging tariff war which scraped away their margins. A Supreme Court order which cancelled 122 licences in 2012, took away ‘new’ operators who offered bargains, returning the power back to the big three---Airtel, Vodafone and Idea.

Data revenues too are increasing, giving hope to new business streams. Though it is far too less as a part of total revenues, it is growing at a much faster pace than fall in voice business. Data contribution to total revenues of Airtel went up to 17.6% from 11% a year back. For Idea, it increased to 16.9% up from 10%. The data ARPU is also picking up fast as it grew 30.6% and 32% for Airtel. The data used per customer is also steadily picking which shows that subscribers are discovering more applications and utilities on the mobile over data.

The statement, ‘Data giveth, data taketh away’ is true. But, it is yet to come true.