Mobile Value-Added Services – A Boon or a Curse

Mobile value-added-services (VAS), which currently constitutes of approximately 10 – 15 percent of cellular operator revenues, is an emerging application in the fast growing wireless business. It has attracted a wide category of entities right from wireless operators to handset manufacturers to content developers like 3D Solid Compression (3DSoC), an academic spin-off from Stanford University and Indian Institute of Science (IISc). According to a report by PricewaterhouseCoopers (PWC), the Indian mobile VAS market is all set to grow to USD 2 billion in 2008. Further, the report estimated the worldwide spending on MVAS, including mobile music, mobile payment and mobile advertising to reach USD 55.6 billion by 2011.

Currently, about 44 percent of VAS revenue in India is driven by short messaging service (SMS) applications primarily driven by the youth. This youth segment is expected to continue to drive the market, particularly in the entertainment MVAS. During the voting period from November 2004 to March 2005 for Indian Idol – a singing talent reality show, more than 55 million votes via SMS were received. Considering the cost per SMS is Rs.3, this reality show alone fetched Rs.16.5 crore. The telecom company associated with this show earned Rs.11.5 crore, while Sony, the channel on which the show was aired, garnered in about Rs.5 crore. Further, the increasing number of individuals on the move has catapulted the requirement of information on the move as well.  This requirement is gaining popularity since the upgradation of technology coupled with latest color display handsets and add-on mobile services like ringtones, wallpapers, ringback tones, live scores and astrology are expected to lure the Indian consumer.

Although MVAS is becoming an indispensable part of the lives of city dwellers, in the recent past, these services have also proved to be a menace by eating into the Indian consumer’s money, privacy and time. In January 2005, a public interest litigation (PIL) was filed in the Supreme Court against the Union of India by a Delhi-based lawyer, Harsh Pathak regarding unsolicited calls made to him and his family by cellular phone, banking and a host of other companies using telemarketing as a strategy for business promotion. In response to the PIL, the Court is reported to have issued notices to the Government and mobile operators such as MTNL, Hutch, Reliance Infocomm, Idea Cellular, and Bharti Airtel for steps to be taken to prevent the mobile database from being used by marketing agencies for unsolicited marketing messages also called spam.

The high volumes of spam in the VAS market currently is evident by a recent stunning fact that some Airtel service providers also use the service logo space for advertisement of their value-added-services. Another operator, Vodafone (previously Hutch) who carried out similar unsolicited acts (activating caller tunes without the customer’s explicit consent) had been ordered by TRAI (Telecom Regulatory Authority of India) to refund billed charges to customers within 15 days in March 2008. On the other hand, some private telecom companies, in a bid to assuage the high nuisance value problem, have begun offering an unsubscription option to their subscribers; mobile phone users can choose not to receive promotional SMSs and phone calls by signing themselves up on a ‘Do Not Disturb’ registry – ultimately turning this option into a VAS as well.

If service providers have to sustain their current status quo as distributors of mobile value-added-services and untap the market potential of this segment, especially through next generation network (NGN) and 3G, a coordinated effort has to be made to promote transparency amongst customers and harmonise the licensing/regulatory framework.