Lifetime customer value, not transaction value. Market-derived pricing, not cost-plus pricing. Marketers in several industries cite these as touchstones in long-range businesses.
The telecom industry in particular is a business with huge investments and tiny marginal costs. Together with the logic of 'network effects,' this puts a huge premium on scale.
In India, all this has given us a spaghetti tangle of regulations, new technologies and a confusing welter of customer schemes.
So when the marketing message begins to attain some coherence, exemplified by the 'One India' idea of turning distance between two phones irrelevant within the country, it is time to ask: end game?
Though it originated as a government idea, Reliance Infocomm has rushed to appropriate the 'One India' tag with a 'rupee a call' offer that harks back to the late Dhirubhai Ambani's idea of a phone call at the price of a postcard.
Reliance subscribers can make calls at Re 1/min
The race to the bottom on tariffs began with Tata Teleservices offering 'lifelong' deals for Rs 995 and no rentals ever after, which (when the market responded enthusiastically) were quickly copied by the GSM players Airtel, Hutch and Idea.
It all seems rather too sweet. Is there fine print? 'Conditions apply,' as always, and so long as they retain the right to vary charges on the other things you pay for (airtime, for example), they have not signed away their revenue model.
They may, however, get to sign you on as a brand loyalist, and if the regulator were to throw doors open to the full dynamics of competition by letting the customer switch services without having to change the phone number, they would stand a better chance of retaining you.
Now, lifetime validity plan from Airtel
Even as operators go into a fresh frenzy to woo the customer, the profit model is creaking again. Are players willing to sacrifice margins for the next few years to the cause of base enlargement and a potentially bigger prize ahead?
If the benefits of economic growth were to be somewhat more evenly shared across the country, this would be a viable 'hot-on-China's-trail' strategy. The quickening pace of new sign-ups, at about 3 million per month currently, encourages such ambitions.
Mobile users never had it so good
But operating costs are still an issue, since break-even levels on the average revenue per user will have a minimum floor.
The telecom regulator does not have much leeway to reduce the chunk that goes from the industry's books to the government's coffers (in licence fees and taxes, this must now be over Rs 20,000 crore (Rs 200 billion), or over 0.5 per cent of GDP - from a business that did not exist 10 years ago). Telecom operators will therefore have to find ways to drop capital costs further, or subsidise their long-range game.
They must think in terms of innovation for revenues. Apart from the usual value-added services, they may soon have new opportunities, as both technologies and regulations converge to turn the mobile phone into an all-in-one device for all manner of services, including Internet Protocol Television.
Perhaps even bank credit and 'e-cash.' That policy must stay in synchrony with technology, goes without saying. After all, Voice over Internet Protocol services such as Skype have already turned geography irrelevant globally, at least in terms of cost. Skype-to-Skype conversations are taking place all over the world at virtually no charge. And that has a value all of its own.
Telecom is about to enter a new age.
