The internet and mobility buzz are back! There's a buzz among entrepreneurs as venture capital companies are putting money into companies focused on the regional Asian market. Online advertising (display, search and classifieds) is growing. Users are starting to spend on transactions - going beyond ticketing. What needs to be done to ensure that the boom isn't just a transient bubble?
There are, in reality, two Internets - segmented by the access device and the type of connectivity. Sample in Indonesia, PC-based wireline Internet has about 20-30 million users (ref. data from APJII - Indonesia Internet Association), with a majority of the users using cybercafes. With only 4-6 million computers in Indonesian homes, this Internet is still a long way from becoming a utility in people's lives. The mobile-centric wireless Internet can potentially reach a significant portion of around 150 million cellphone users in Indonesia. However, the reality is that other than voice, there are only two services which touch a large fraction of this user base - SMS and ringback tones (sample of Value Added Services). The mobile-as-Indonesian's-computer paradigm still has a long way to go. Looking at it another way, for the real boom, the wireline Internet needs more devices (home computers) and the mobile Internet needs more services. What will it take to make both happen?
Somehow, to solve the device problem, one needs to rethink computing in a world where broadband exists - and thus make computers affordable and manageable. For this, the answers lie in borrowing two ideas from the mobile industry - create a device that costs very minimal and combine it with a reasonable monthly service charge, and make the device simple to use without requiring its owner to become a technology expert!
The solution to these twin challenges lies in thinking 'thin' computers for Indonesian homes - connected over DSL or cable to servers over high-speed networks. All the computational processing is done at the server-end, and the network computers become simple 'on-off' devices - without compromising on the performance that current desktop computers offer. To make the mobile Internet a reality in Indonesia, two changes need to happen, and they have to be driven by the mobile operators since they are the 'gatekeepers.' First, an open publishing platform is needed to allow anyone to create a mobile website that is accessible by everyone - just like on the PC Internet. Next question - HOW?
Second, mobile operators need to change their billing philosophy for value-added services. The bulk of the revenue that users pay must be given to the content providers. Mobile operators should, instead, charge for packet data flow through their 'pipes.' At a broader level, just like NTT Docomo did with its i-mode service in Japan in 1999, Indonesian mobile operators need to encourage the creation of a value-generating ecosystem. Taken together, these innovations can help build Indonesia's digital infrastructure, create a framework for other emerging markets to emulate and provide a large domestic market for companies to finally think Indonesia First... well, as one of the biggest market potential in Southeast Asia.
Because of the low home computer base in Indonesia, people largely use cybercafes to access the internet, paying between Rp.1,500 - Rp.10,000 per hour. Broadband access in Indonesia has been slow to grow - in part because most new investments have focused on the mobile infrastructure. But the bigger issue has been that the new home computer market is only a couple of million. That severely limits the target market for broadband providers. (Yes, there are about 5-10 million computers still not connected by broadband. If these people have not gotten broadband access to the Internet now, then I can only surmise that either access is not available or they have no reason to get one). Of course, broadband in Indonesia is not really broadband YET. Although the advertised bandwidth may be 256 or even 512 Kbps, actual speeds are often a fraction of that. Furthermore, since access plans often have very low data transfer limits, broadband in reality is at best an (almost) always-on narrowband connection.
Internet has myriad services. New sites keep popping up daily. It is almost trivial for anyone to create an Internet presence. So, even as services mushroom, the growth of the Internet in Indonesia is hobbled by the lack of connected access devices. The starting prices of computers have come down and income levels for the middle-class have gone up. Yet, people have not adopted computers like they have done with mobiles. I think there are two reasons for this beyond the affordability dimension. First, they lack desirability; they are not "must-have" devices. And second, they are perceived to be complicated to operate.
One could argue that the new generation of mobiles are in fact multimedia computers. While that's partly true, the experience of the big keyboard and display of a computer cannot be replicated with today's mobile devices. One can imagine "teleputers" - mobile phones which have the ability to connect to external keyboards and to large external displays. But that's not available today and perhaps lie some years into the future...or may be tomorrow? Again, next question - what's needed for the PC-based Internet to take off in Indonesia is a solution that combines the affordability and the manageability of mobile devices? With such a solution, it will be possible to take computing to another 100 million Indonesian homes in the next five years.
There are around 80 million mobile users in Indonesia, but only just over 1% of them use their mobiles for Internet access. Of course, not all mobiles have the ability to access the Net, but from a technology standpoint, I would estimate that at least more than 50% of the phones in Indonesia on GSM and CDMA would be able to access the Internet. And yet, few of us do. We seem quite happy just using the mobile for phone calls and SMSes. Some of us use the operator portals to get ringtones, wallpapers and games. But that's about it. Where is the campaign? Again chicken and egg situation that I will discuss in other topic.
There are a number of reasons. First, while CDMA phones have a convenient "easy button" (press the button) to access a portal, the GSM phones need some extra configuration to get connected over GPRS. Second, mobile operators want to keep the users who do get connected within their walled gardens. So, they become the gatekeepers for the services. So much so, it is almost impossible for any independent service provider to create a portal that can be accessed by all users who have active data connections. Third, short-sighted pricing plans for data ensure that the ones who do want open access will have to pay a high price for it. In addition, no one in Indonesia is really promoting the mobile Internet. Mobile operators are busy focused on new customer acquisition - after all, every new $3 ARPU (average revenue per user - per month) customer adds anywhere between $300-600 to their market cap! The handset makers like Nokia, SonyEricsson and other fancy mobile devices focus mostly on features that are native on the handset - like a great music experience. The mobile value-added service players have still not gone out and determinedly create independent off-deck brands which attract users - presumably, because they know few can access them as of now.
Put it all together and we have a mobile Internet that has neither users nor services. Can the mobile become like a magic lamp - fulfilling all our wishes? What are these wishes? Sample, when again latest Nokia N95i ad asks if "is this is what computers have become", why don't we feel like going out and buying one? Is there really an opportunity for mobile data services beyond the downloadable ringtones, wallpapers and games?
For the mobile Internet to happen, mobile operators need to believe that Data, not Voice, will change the direction of the ARPU trajectory - assuming of course that ARPU matters. In Indonesia, currently, everyone is happy focusing only on the minutes of usage...even for FREE! A time will come - in the not too distant future - when voice will go to zero-margin - and then to zero (although some operators already playing that campaign). It is for that world that mobile operators need to learn from the PC Internet - that creating an open platform can foster innovation in a way no closed environment can. Indonesian mobile operators need to think of themselves as running two businesses. One targeted at top and middle Indonesian, and the other at bottom of the pyramid Indonesian. While the latter has huge growth potential (an untapped market of 270-300 million Indonesianns in the next 2 years), the former is stagnant, addressing a saturated market with flat ARPUs and little growth. All of the mobile operators' strengths are in building out the user base in Indonesia.
They have done this very well in the past few years and continue to do so. They also have plenty of work left in this regard - hundreds of millions of Indonesians left out of the telecom revolution are finally going to get connected. Creating the infrastructure to get these millions on the network is a huge challenge. In doing so, they need to rethink their role for the existing user base. This user base has been 'mobile' for a few years now and are hungry for new services. Indonesia has a world-class wireless data infrastructure but it is barely talked about. By closing their walled gardens, the mobile operators are making a big mistake. This user base can pay a lot more - after all, there were many who paid Rp.1,500-1,800 per minute for phone calls (GSM). Somehow, they have money to spend. But the services available to them are limited - even though for many, the mobile is the primary or even the only interactive device in their lives.
Mobile operators need to do two things to make the mobile Internet a reality in Indonesia for the first user base. First, they need to open up their data networks so consumers can go to any website they desire. Second, they should encourage the creation of a cornucopia of services by creating a business model which has more favorable revenue share terms for the service providers. Mobile operators can still make a lot of money - and I would argue, that this will be a magnitude higher than what they do today - by billing consumers for data traffic on open access. In other words, instead of thinking of themselves as "media" and worrying that they will just become "bitpipes" - mobile operators need to think of themselves as "services pipes". If they do this, consumers will see them as the genie that made the mobile into a magic lamp.
There is a lot at stake for Indonesia to grow more. The Internet is core and necessary digital infrastructure if we are to continue to develop. Home computers and mobiles are the two necessary devices which will become the windows to the world of services. Even though we are not there yet, forward-thinking organisations and entrepreneurs can take us there.
Next question - regulatory issues? Anybody want to continue this?
No comments:
Post a Comment