The announcement by Bharti Airtel last April of the Airtel Zero platform ignited a huge debate around the concept of Net Neutrality and how it should be applied in India.
But some key questions remain unanswered: a) will zero-rating be sanctioned by government and industry regulator and b) what are the commercial opportunities for content providers, developers and marketers.
Will zero rating get the green light?
Airtel Zero proposes an open, non-discriminatory platform to provide content providers and app developers the option to pay for mobile data bandwidth consumed by their users, thereby making it free of data charges for end-users. This would mean a person with zero prepaid data credit on their Airtel SIM card could still access data services deployed through Airtel Zero. Airtel likens the approach to the established concept of toll free phone calls.
More than 75 percent of Indians do not use or have access to the Internet, but almost every Indian has a mobile phone. In a previous blog post I highlighted two primary barriers holding back Internet adoption: consumer affordability as well as the lack of network infrastructure and capacity. The Indian Prime Minister Mr. Narendra Modi wants every Indian to get online and already is familiar with Internet.org, introduced by Facebook and its partners, which provides diminished but free Internet services for the more than 100 million mobile subscribers of Reliance Communications.
The new realisation of mobile operators in emerging markets, with their strategic priority on growing data revenues, is that mobile consumers want to use data services more (in fact a lot more) but most can’t afford to pay for it, so why not enable content providers, developers and marketers who are desperate to engage with mobile consumers fund the cost of access. This is a 180 degree turn on traditional access pricing models, but it makes complete sense. For content providers zero-rating platforms represent a marketing investment to generate user growth and hopefully profitable commercial value.
At the same time as the Modi government in India has been busy promoting the benefits of the Digital India initiative for all its citizens, they’ve been under pressure from the minority of Indians who consume most of the nation’s bandwidth to pass legislation that would deny free Internet access to the poor, in the name of Net Neutrality. This recent New York Time article by Manu Joseph Protecting the Internet, but Depriving India’s Poor highlights the issue.
The Telecom Regulatory Authority of India (Trai) has been working through a process to finalise its recommendations on Net Neutrality to the Department of Telecommunications (DoT) and indications are it will recommend Zero Rating be allowed, as long as platforms offer the same terms and conditions for entry to all content providers and websites, and network traffic is not prioritised. A recent piece by Mahesh Uppal gives good insight to Trai’s net neutrality challenge and the benefits of expanding access to millions as well as promoting efficient use of scarce spectrum.
What does Zero-rating mean for user engagement?
There is no doubt that removing the cost and affordability barrier to getting more mobile consumers connected dramatically increases internet adoption and engagement.
The biNu mobile internet platform was designed ground-up to optimise mobile data bandwidth efficiency to provide super-fast user response times, even on low-cost underpowered 2G mobile devices.
The biNu mobile app for Android smartphones and Java feature phones currently provides a curated portal like experience to millions of active users globally with a range of Internet based content spanning multiple languages covering news, sports, social networking, search & translate, music, video, books, education, weather etc. The vast majority of biNu users are in emerging and developing countries across Asia, Africa and Latin America.
Nine months ago biNu was zero-rated by the major mobile operator in Zimbabwe which resulted in strong viral user growth and 5 to 10 times higher user engagement compared with biNu users in India and other countries where they have to pay for their data consumption. Another interesting change was the proportion of smartphone users compared to feature phone users went from 20% to over 90%, with most people using low-cost Android devices.
Making zero-rating work commercially
The advent of zero rating platforms will cause content providers to have a much sharper focus on mobile bandwidth efficiency to make paying for data consumption commercially viable and sustainable. For the vast majority of app providers it will be a marketing investment and long term unsustainable growth loss leader.
biNu’s usage statistics in Zimbabwe from August 2015 are (average per user, per month):
- 35 logins (1.2 per day)
- 851 page view navigations (28.4 per day)
- 346 minutes connect time (11.5 mins per day).
And incredibly, biNu’s mobile bandwidth efficiency means that on average each biNu user in Zimbabwe consumes only 4.3 MB of mobile data, per month, which is trivial when prepaid data packs are measured in 100s of MB or multiples of GB.
According to Airtel India’s current mobile recharge rates the retail price for 3 GB of prepaid mobile data is Rs. 659, which equates to US$3.34 per GB, or 0.33c per MB. Wholesale data pricing would likely be lower, but let’s use the published retail pricing for now.
Applying this cost of mobile data and assuming mobile consumers in India would have the same level of engagement as users in Zimbabwe if biNu were zero-rated, the data cost per user per month in India would be 1.4c (US$0.014), and the data cost per 1000 user page view navigations would be 1.6c (US$0.016).
Given current mobile advertising CPM rates in India range from 10c at the very low-end to over $1 per 1000 ad impressions, there is significant scope to leverage biNu’s bandwidth efficiency on zero-rating platforms to connect hundreds of millions of Indian mobile users to valued and useful, private and public internet services on the back of a commercially viable and sustainable technology platform.
Let’s see what it would like applying the same level of user engagement currently seen in Zimbabwe with Airtel India’s retail data costs measured against potential advertising value based on current market rates for mobile advertising to a model that scales monthly active users:
By adding localised and focussed content offerings to the mix there’s scope to dramatically scale the level of user engagement, for example by 5X to around 6 logins, 140 page views and one hour connect time per user, per day:
As long as incremental adoption and engagement is profitable, the sky’s the limit in terms of what could be achieved in a market of 1.3 billion people with 941 million mobile connections but of which only 11% have mobile broadband capability today.
So by way of example, deploying biNu delivered content (super-fast even on 2G connections) on a zero-rated platform in India to build a highly engaged smartphone and feature phone audience of 100 million active users would cost US$7m per month for mobile data but could generate between $40m to $100m per month in advertising revenue.
Wi-Fi Hotspot Networks
With growing network and spectrum congestion mobile operators are looking to offload mobile network data traffic to Wi-Fi hotspot networks, both their own and third party networks. The same rationale outlined above would apply to zero-rating access through Wi-Fi networks, with probably even greater bandwidth cost efficiencies as well as opportunity to up-sell paid data access to enhanced services such as video.