The 3rd generation

Today at Proto4, I was drawn into a discussion with Varun (as I usually do) about the advent of 3G in India and its impact on VAS providers and mobile software developers. During the last 2 days at Proto and Medianama I have repeatedly heard people saying the same thing. How 3G is going to force Telecos to be more receptive towards VAS providers. About how 70-30 revenue sharing model would become obsolete and how VAS providers would finally get their dues. Mostly the argument goes as follows:

The telecos invest huge sums of money in 3G infra. They want to get a quick ROI and hence look toward VAS providers and mobile application developers to increase data usage. Since the competition shifts to data and VAS now, the cut throat competition makes VAS operators important players and who in turn can ask for a better pricing model.

The argument sounds very logical and really makes sense. Also, it is incorrect. I do not think mobile market is opening up to VAS providers any time sooner. And I have my reasons. Yes, its true that telecos are investing heavily in 3G and would definitely look at 3rd party providers to leverage enough data usage to get an ROI. Except that the 3rd party players are too many. And if you make one successful mobile app today. In India, expect clones to be launched as soon as you can say "Ta-Da". There are 5 major telcos and a LOT of VAS providers / developers / entrepreneurs / Web 2.0 enthusiasts. Supply would always outstrip demand. .

In fact, I have a strong inclination that Indian mobile space is going to get more closed before it opens up more. There is a dearth of 3G devices in India and the mobile operators would like to get more and more users on board. Which means they would have to subsidize devices like their American counterpart. Now, at this point, the telecos have invested in the infrastructure and the handsets. I think it would only be fair to expect that they would want to control how user uses the bandwidth that they want him to use. The signs are ominous.

However, I cannot help but agree that the bandwidth costs are bound to come down with 3G. In a price sensitive market like India you cannot sell expensive and expect returns. So, to get mobile users to get on mobile web, the telecos would decrease cost and the scenario would be similar to the call charges with everyone trying to get a bigger piece of the pie without looking at short terms returns.

So, in short, in my opinion, if you are a VAS player, do not expect the things to be merry once 3G comes in. Its dark days ahead buddy, and it would only help to be prepared. But the night is the darkest just before the dawn, so things would change and the industry would mature. Till then, go look up perseverance.