FICCI-KPMG-Report-13-FRAMES

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168 The power of a billion: Realizing the Indian dream Primary drivers for convergence in India Penetration of broadband Increase in broadband speeds for both wired and wireless services is one of the key enablers to drive convergence. The National Telecom Policy 2012 has increased the minimum broadband speed from 256 Kbps to 512 Kbps with a further increase to 2 Mbps by 2015. But this mandate still pales in comparison to developed countries. An increase in internet speeds is enabling growth in content consumption across all media. As internet download speed increases further, it would be possible to consume live TV and movies through mobile networks. Evolution of platform convergence Device capabilities High end devices capable of streaming high quality video and music online are increasingly available to consumers at an affordable cost. A combination of increase in smart phone penetration and mobile internet will drive user behavior towards consuming more content wirelessly. Today consumers can view different types of content such as movies, music, news, classifieds etc on a single device through a single network. Digitization technologies Advanced music and video compression techniques result in smaller file sizes and easy sharing over the Internet despite lower bandwidth. The film industry, for example, has utilized mobile apps that are available as individual movie apps as well as movie aggregator applications. Aggregator apps such as Nautanki.tv provide on demand online movie streaming over multiple devices. Nautanki.tv serves 10 million 5 minute videos per day to a base of 3.5 million unique IPs across 68 countries. 3 © 2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Favorable regulations and policy New and updated government regulations and policies over the past few years have enabled convergence of technologies and services. Two prominent indicators are: • The Cable TV Act which was modified in 2008 permitting telecom service providers to provide IPTV services • The National Telecom Policy (NTP) 2012 also recognizes the importance of convergence and has been framed to enable seamless delivery of converged services. Convergence will provide challenges and pose questions to the existing ways of doing business while throwing up new opportunities for delivering content and engaging customers. 03. http://nautanki.tv/advertiser/
The power of a billion: Realizing the Indian dream 169 Connecting (with) the consumer In the backdrop of convergence there is a raging debate between industry players, analysts and observers on the impact of a converged world on telecom, media and other industry sectors. The key questions is, “who owns the consumer; one camp supports the provider of access and technology while the other camp supports the provider of content”. Both camps have their reasons, but only time will tell when and where a shift in the balance of power will occur. One camp is of the opinion that telcos may be relegated to providing connectivity alone. It believes that telcos are asset heavy infrastructure providers with a long capex cycle that focus on technology as a differentiator to improve customer experience. Media companies on the other hand have a focus on type and quality of content as a differentiator to compete. Media companies will proudly declare their audience viewership statistics while telco’s outdo each other on broadband connectivity and coverage statistics. This camp believes that consumers are more inclined to pay for customized content and not so much for higher speed alone. While the amount of bytes flowing through the world has increased multi-fold over the past decade, the revenues of telco’s have not kept abreast. For example, a movie might be 1GB in size, and cost INR 50 to download, but the consumer values the contents of the movie and not its size. Furthermore, over-the-top technology and mobile applications utilize the telco’s data connection to stream content and services directly to their consumers. They don’t need any tie-up or revenue sharing arrangement with the telco. While telcos struggle to change their perception from being pipeline providers, the Apple iTunes Store has increased its revenues manifold. In summary while telcos spend the bulk of the money to lay the infrastructure, upgrade technology and provide better access to consumers, content aggregators and owners reap the benefits of that investment. The other camp believes that telcos in several geographies have moved beyond being providers of a bandwidth to the consumer. They have a large established subscriber base and have tied up with content aggregators, thus shifting the balance of power to themselves. For example, Indian telecom operators retain 60-70 percent of VAS revenues, while content aggregators and owners are left to split the rest 4 . By providing the last mile of connectivity, they bring content to the consumer through back-end tie ups. Consumers have one point of payment, service fulfillment, and a variety of M&E services channeled through the telco. By maintaining a stranglehold on the consumer and controlling the payment gateway, they keep the bulk of revenues. With the possibility of 4G services being launched widely in India in the medium term, telcos could be the one-stop shop for fulfilling the Information, Communication and Entertainment (ICE) needs of a consumer. Furthermore, advertisers contribute significantly to the total media industry revenues. If 4G players are able to offer a value proposition to segment these consumers, create a compelling value proposition at an affordable price point, and split the advertising revenue pie, they may infringe into the space enjoyed exclusively by media companies today. 04. http://www.livemint.com/Industry/Ftm64F0VLsMXWTcnfDDnGI/Mobile-VAS-companies-turn-toglobal-markets-for-survival.html 05. https://fiber.google.com/about/, KPMG in India analysis Future possibilities – Google disrupts the status quo In this section 5 we look at an innovative and disruptive business model from Google that has the potential to alter the consumption and distribution of media services in the US. In the middle of last year Google announced a simple value proposition to US consumers based in Kansas city. Preregister for USD 10 and sign-up to get fiber to the home at an astounding 1Gbps speed (about 100 times faster than prevailing Internet speeds) that can fulfill your information, communication and entertainment needs. If enough people in your neighborhood sign-up, Google will install fiber and offer you services at a fixed monthly fee. In the first week of launch, the early adopters signed up and the offer went viral. Peer pressure began to build as neighbors who were interested, campaigned to others in their locality to try the offer. The value proposition of having a high speed home that is Wi-Fi enabled, has crystal clear full channel HDTV, 1TB storage on Google drive (cloud), network boxes, Nexus 7 tablet and remote, TV box, storage box for content, no data caps and other optional add-ons from one of the most trusted brands in technology at USD 120/month was too hard to ignore. More customers signed-up. With daily statistics by neighborhood being displayed, pockets of the city gradually turned from red to yellow to green. Within a few months most of the localities where the offer was made had signed-up. Given the high success and scale, Google has offered to wire up public schools, libraries and other common areas of interest at no additional cost. The expected impact on existing telcos, cable companies, advertising and distribution models, movie theaters, etc who have operated in these localities for decades is disruptive to say the least. The domino effect of this effort is now beginning to show. Tech startups have flocked to Kansas City given the high speeds now available, creating a culture and industry that did not exist. True to Google’s mission of “organizing the world’s information and making it universally accessible and useful”, the Google Fiber project is a beneficiary of Convergence that could transform the M&E industry. While other broadband players in Kansas City are now forced to rollout out next generation networks to retain subscribers, Google might well move on to other cities forcing the competition along with it. © 2013 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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Music The success of the iTunes mod
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FICCI-KPMG-Report-13-FRAMES

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