INNOVATIONS IN TELECOM INDUSTRY

[Mr. M. GOVINDARAJAN]

Joseph Schumpeter defines the term ‘Innovation’ as the process and outcome of creating something new which is also having value.  It  involves the whole process from opportunity identification, ideation or invention to development, prototyping, production marketing and sales, while entrepreneurship only needs to involve commercialization. Traditionally the focus has been on new products or processes. Recently new business models have come into focus.   Now-a-days the innovation is said to involve the capacity to quickly adapt by adopting new innovations  such as 0products, processes, strategies, organization, etc.

Innovation is a process of taking new ideas to the market.  Invention, as a process, starts with invention of new idea or element.  Then it undergoes developments and used for commercial purposes. Innovation may be incremental, modular, architectural and radical.

Schumpeter argued that innovation comes about through new combinations made by an entrepreneur, resulting in

• a new product,
• a new process,
• opening of new market,
• new way of organizing the business
• new sources of supply

Drivers for innovation

Innovation is inevitable in all times in all areas.  The drivers for innovation, according to Schumpeter,  are as follows:

• Financial pressures to reduce costs, increase efficiency, do more with less, etc;
• Increased competition;
• Shorter product life cycles;
• Value migration;
• Stricter regulation;
• Industry and community needs for sustainable development;
• Increased demend for accountability;
• Demographic, social and maket changes;
• Rising customer expectations regarding service and quality;
• Changing economy;
• Greater availability of potentially useful technologies coupled with a need to exceed the competition in these technologies

Innovative technologies

According to Rogers there are five main attributes of innovative technologies relative Advantage, Compatibility, Complexity, Trialability, and Observability.   Rogers call these attributes as ACCTO criteria.

• Relative advantage may be economic or non-economic. It is the degree to which an innovation is seen as superior to prior innovations fulfilling the same needs. It is positively related to acceptance. The higher the relative advantage, the higher the adoption level, and vice versa.
•   is the degree to which an innovation appears consistent with existing values, past experiences, habits and needs to the potential adopter; a low level of compatibility will slow acceptance.
•  is the degree to which an innovation appears difficult to understand and use; the more complex an innovation, the slower its acceptance. 
• Trial ability is the perceived degree to which an innovation may be tried on a limited basis, and is positively related to acceptance. Trial ability can accelerate acceptance because small-scale testing reduces risk.
•  is the perceived degree to which results of innovating are visible to others and is positively related to acceptance.

Decade of innovation           

The Government declared 2010-2020 as the decade of innovation.  The purpose of such declaration is for inclusive growth in all areas.  Under the guidance of Shri Sam Pitroda, National Innovation Council, State Innovation Councils and Sectoral Invention Councils have been formed.  The Department of Telecom constituted Telecom Sector Innovation Council to deliberate   various   aspects of innovation in telecom industry and to submit a report.  The Telecom Sector Innovation Council also submitted a report.

Innovation in Telecom industry

Indian telecom sector is more than 160 years old. Telecommunications was first introduced in India in 1851 when the first operational telegraph lines were laid by the government near Kolkata (then Calcutta), although telephone services were formally introduced

in India much later in 1881.Since the dawn of history, communication has been grown up and developed. First was physical communication, when early man settled along rivers for greater access to one another. Next smoke signals and drums were used to pass messages and stay in touch. Then came written mail, the Morse code, the telegraphs, the telex and telephone enabling man to communicate faster and farther afield. Today, we have the radio, television, the fax, e-mail and internet. What distinguishes today’s development in communication from those in the past is the invention themselves. It is that the invention will themselves accelerate the pace of innovation. This will require us to always and quickly adapt the new ways of doing things.

The changing dynamics of the industry throw up a number of challenges. Changing customer preferences and increased use of services from over the top players to connect has impacted revenues from traditional sources such as voice. Additionally, the tremendous growth in data traffic which has not resulted in proportionate increase in revenues while adding the costs of upgrading networks to meet the demand for bandwidth.  As Telecom companies grapple to address these challenges, they need to look at four areas – operational efficiencies, network optimization, revenue streams and customer experience.

Telecommunication industry has been the flagship of the business model innovation in India.   Business model innovation is the transformation of an organization through the use of strategic partnerships and/or the realignment of an existing business model to reposition the business or extend its reach into new markets. The Telecommunication products in India, since the liberalization of economic policy, have changed dramatically resulting in significant, sustained and rapid innovation.  The Telecom operators in India have adopted different models.  Even a single operator adopts different models at different places considering the requirements of the consumers.   The tariffs are the lowest in the world. The multiplier effect of the vastly expanded and improved telecommunication services has been visible and has contributed handsomely to the GDP growth of the country.

National Telecom Policy – 2012

The National Telecom Policy, 2012 has the following objectives in respect of innovation-

• To promote innovation, indigenous R&D and manufacturing to serve domestic and global markets, by increasing skills and competencies;
• To put in place an appropriate regulatory framework for delivery of VAS at affordable price so as to fuel growth in entrepreneurship, innovation and provision of region specific content in regional languages.
• To strengthen and develop National Telecom Institute for Policy Research, Innovation and Training (NTIPRIT) as an institute of international repute, for capacity building and enabling research in India centric technologies and policies in telecom domain;
• To establish a dedicated centre of innovation to engage in R & D, specialized training, development of various applications in the field of IPv6. This will also be responsible for support to various policies and standards development processes in close coordination with different international bodies.

Major innovations in Telecom

The three major technological innovations that have been taken place in communication are-

• Innovations in digitalization, computerization, and miniaturization
• Innovations in the Internet, Mobile communications, Packet based Next Generation Networks (NGN) leading to convergence of services
• Innovations related to ICT as a generic technology to redesign and rationalize production, administration and transaction processes and to create new processes and products to create the information society.

Future Market size of Telecom

The future of the market size of telecom in India is expected as detailed below-

• The Indian telecommunication services market will likely grow by 10.3 per cent year-on-year to reach US$ 103.9 billion by 2020;
• the total mobile services market revenue in India is expected to touch US$ 37 billion in 2017;
• Smartphone subscription in India is expected to increase four-fold to 810 million users by 2021, while the total smart phone traffic is expected to grow 15-fold to 4.5 exabytes (EB) per month by 2021;
• According to a study by GSMA, smart phones are expected to account for two out of every three mobile connections globally by 2020 making India the fourth largest smart phone market;
• The broadband services user-base in India is expected to grow to 250 million connections by 2017, according to GSMA;
• The Indian telecom sector is expected to generate four million direct and indirect jobs over the next five years according to estimates by Randstad India.

As such innovation in Telecom industry is highly essential and the telecom companies are paving the ways for innovative products, innovative business models etc.,

Telecom Sector Innovation Council                                                              

The Government of India has declared 2010-2020 as the decade of innovation.  Innovation is regarded as great contributor to country’s wealth as the natural resources.  The Government has set up National Innovation Council.  Sectoral Innovation Councils have also been mandated for the said purpose.  The Telecom industry is witnessing a tremendous growth which further requires higher penetration in the rural areas in mobile phone connections as well as broadband connections.   This is the challenge to the industry for which innovations are highly required in products, services and solutions.  The Department of Telecom constituted Telecom Sector Innovation Council.  For this purpose the industry is divided into the following domains-

• Telecom Service Providers
• Telecom equipment/components’ manufacturers
• Universities conducting researching in the cutting edge telecom technologies (Academia)
• Telecom/IT R&D organizations
• Software services/VAS developers
• Government policies

TSIC suggested the focus areas in this domain-

• Connectivity to remote rural areas
• Value added services
• Securing the networks;
• Green Technology and Innovative solutions;
• Tele-education, health care, mobile banking and financial inclusion;
• Quality of service;
• CRM systems;
• Telecom business domain;
• Broadband network’s expansion;
• IPTV & triple play services.

Disruptive innovation in Telecom

A disruptive innovation is an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leading firms, products and alliances. The term was defined and phenomenon analyzed by Clayton M. Christensen beginning in 1995.  Not all innovations are disruptive, even if they are revolutionary.

The typical innovation coming from such companies is focused on advancements of current technology and ways to extract more value from current or similar large markets.  They focus on execution of their current strategy.   Innovation is all around sustaining what they have already captured and extending it.  Disruptive innovation not only requires looking at the new technology curve but also at markets that are typically ignored by the large companies and analysts.  When the innovation cannot really sustain the disruption will surely arrive.

Some disruptive innovations in Telecom       

 Here some disruptive innovations in Telecom, which change the Industry is discussed.

• Internet – The emergence of internet in the early 2000 challenged the Telecom sector, which held an unopposed position in the communication sector having features of voice mail, text messages etc.,;
• VoIP – it is IP based application which provides convenient communication between users.   It is used for real time transfer of voice communications.
• it is a quick, easy and cheap way for subscribers to make VoIP calls bundled with P2P technology.  The features of Skype are Skype Video/audio chat, Skype out, Skype in, Skype Voicemail, Skype SMS etc., The tariff is cheaper than traditional tariff and other VoIP platforms and Skype to Skype is totally free.  It is a simple and effective promotion strategy that built up mass users.

Sri Zubair Lubby, in www.capgemini.com indicated that top 5 disruptions that will drive the most change in telecommunications by 2020 are:

• Integration with content service providers: Being connected continues to become cheaper. Connectivity is capturing a smaller proportion of the information value chain while content, service, and product deliverers capture more. By 2020, it is likely that one or more major telecom companies will be acquired by a content company.
• Internet of the Things: The next major trend that will impact is the explosion of connected devices. This will add billions of new connected data sources globally by 2020. The upswing of all of these devices will be an astronomical growth in data volumes; we will quickly push through Exabyte volumes and enter the world of zettabytes per year.
• Mobility: Growth of mobile connectivity is far outpacing fixed line connectivity. This makes sense, as most growth is occurring in the developing world and amongst poorer populations. For these people, mobile are cheaper, convenient, and more useful, even when landline connectivity is an option.
• Market Saturation: Elder population as they retire will enter retirement communities and assisted living facilities which are fully digitized in order to be as efficient as possible. Older population will be forced into using these technologies by the world around them and will likely consume vastly more bandwidth than they, or their carriers, ever imagined. As this occurs, the last remaining percentages of market penetration will be achieved, and the market will be thoroughly saturated
• Security: As custodians of the networks, carriers play a pivotal role in fighting the new threats that are emerging. Customers will begin to expect, then demand, more proactive protection from the entire internet value chain, and carriers will be expected to support these expectations with a range of technical and operational innovations. The desire for greater security may be a boon for carriers, if they embrace the need.

Recent disruptive business model

Reliance Jio announced a new business innovative offer to the consumers.  The operator from  5^th September 2016 onwards will launch a new plan the highlights of which are as follows-

• Post paid mode available on tariff plans above ₹ 499/-;
• All subscribers will get free voice and data till 31.12.2016;
• Roaming charges waived on all plans;
• Free access to apps worth ₹ 15,000/- till December 2017;
• Extra 25% discount for students.

The tariff plans are as indicated in the table below-

MRP (Rs.)	19	129	299	999	4999
Local and STD calls	Free	Free	Free	Free	Free
4G data	100 MB	750 MB	2GB	10GB	75GB
Night surfing (2A.M., to 5 A.M.)	Free	Free	Free	Free	Free
Free SMS	100 per day	100 per month	100 per day	100 per day	100 per day
Validity	1 day	28 days	21 days	1 month	1 month

Source: Business Line

Analysts said that this could be one of the most defining moments in India’s telecom sector.  The biggest impact will be on data tariffs, which are expected to come down from the current average of ₹ 250/- to ₹ 50/- per MB.  The consumption patterns will not only change but also move to altogether new levels.  This will definitely disrupt consumer behavior and give the masses a true feel of Digital India.    This will give pressure to other operators that will lead further consolidation in the Industry.

Global Innovation Index

The Global Innovation Index has been created and reported every year by the Paris based business school Instead, Comell University and WIPO, a United Nations agency.  The Global Innovative index is positioned as resource for policy makers, to identify areas of possible improvement in innovation.  It is based on 82 variables across seven areas, grouped into two divisions – inputs and outputs for innovation.

Global innovation index of India for 2015 is 81out of 141 countries.  Reversing a trend of declining rankings every year, India rose by 15 positions to become 66^th most innovative nation in the world (out of 128 countries) in the year 2016.  Innovation output sub index 59.  Innovation input sub index is 72 and Innovation efficiency ratio is 63.

Conclusion

Every telecom provider, in this competitive regime, needs to create a culture that may encourage and reward innovation, starting at the very top. It is also required  to identify and design differentiated business models which  are based on its core competencies and enriched by insights from other regions and industries. It needs to integrate its technological and business infrastructure to create next-generation networks and operations that may provide the flexibility it will require to close the collaboration gap.  The industry will be truly in a position to realize the many exciting new opportunities for profit growth from innovative next-generation services and business models only when it has done these things.

Reference

1. www.eu.wikipedia.com

2. www.dot.gov.in

3. www.capgemini.com

4. www.cypher.law.harvard.edu/

5. Report on Telecom Sector Roadmap for Innovation 2010-2020.

6. Business Line