Video on 4G networks: How to retain customers

FIFA 2014 fans with phones
Subin Subaiah, CEO of Spuul Global, says the potential for video content viewing — on 3G and 4G telecom networks — is burgeoning.

Various factors such as smartphone penetration, launch of 4G services and diverse content are the key factors that will drive the online video on demand industry in 2016-2017. India, as per Cisco’s VNI report is poised to have 650 million smartphones by 2019. That’s 650 million personal televisions in user pockets. In comparison, there are only 168 million TV households in India – a majority of which are single TV households.

The kind of scale that we are looking at over the next few years makes the mind boggle. The only stumbling block, towards the rapid ascent of the Video-On-Demand (VOD) space in India, remains the infrastructure for high-speed low cost wireless Internet.

For Digital India to take shape, high speed data connectivity is one of the key foundations. According to a recent report from the IAMAI and IMRB International, India is expected to reach 371 million by June 2016. Out of this figure, 60 percent are consuming internet on their handsets, tablets, etc. Very soon, as much as 70 billion minutes of video content will be viewed across India per month.

However, it isn’t all smooth sailing for VOD industry. The first challenge facing VOD service in India today is the cost of data. Streaming video, consumes larger quantities of data as compared to messaging services like WhatsApp. A 3 hour movie, at a decent rendition would be 250MB at the very least. 1 GB of 3G data costs approximately Rs 150 across telecoms today, so streaming an entire movie would cost Rs 40 approximately. In a country where the ARPU per telecom subscriber is on average about Rs 200, Rs 40 is a fairly significant amount.

High data costs have meant that VOD service providers have had to innovate to deal with this issue.

The launch of 4G services, especially by the likes of Reliance Jio Infocomm should reduce data costs for mobile Internet users. Reliance Communications, when it launched in the early 2000’s with its Monsoon Dhamaka offer, came with hugely subsidized phones and voice rates. We expect something similar with the launch of Jio, placing pressure on industry incumbents to follow suit and resulting in a lowering of data prices across the board.

The second challenge that VOD services in India face is erratic network speeds. Streaming video requires high fidelity networks with consistent speeds of at least 2-3 MBPS to deliver a buffer free experience. An interesting thing to note is that more than a year after its launch, 3G adoption in India remains subdued due to various issues like poor network quality as operators are cash-strapped to spend on 3G expansion and low penetration of 3G enabled handsets, etc.

For 4G to succeed in India, operators will have to overcome the challenges of high transfer rates over longer distances and efficient bandwidth so their consumers can seamlessly watch any content at any time. The initial signs are promising. When Bharti Airtel launched 4G services in Delhi, users consistently saw speeds of 30MBPS and above. Undoubtedly, these speeds will reduce as more users switch to 4G services – but it should still be enough to deliver a buffer free experience. Most of the telecom players have announced the launch of 4G, however the adoption has been slow. Currently, only 10-12 percent of smartphones being used by mobile users are 4G-enabled.

The VOD space in India is on the cusp of the kind of growth. 4G is the key piece in this puzzle, and one that has VOD services, telecom network operators and content providers are excited about the transformation it could bring.

What 4G will make possible is to give consumers more bandwidth, better connectivity and, hence, better streaming of heavy files, such as video. It will provide uninterrupted streaming.

A report by IDC says customers across the city tiers are getting future ready, by choosing more 4G than 3G devices, with more than 65 percent of the smartphones being 4G compatible across all city tiers. Also, with telecom operators gradually increasing the 4G footprint and promoting 4G services, this is expected to see exponential growth in coming months.

“In Tier 2 and Tier 3 cities, China based vendors are eating into the 4G device share of global brands, with almost 40 percent of the demand being generated by them,” said Varun Singh, market analyst, Channels, IDC India.

Clearly, 4G will lead to better bandwidth and greater affordability. It will also lead to proliferation of multi-screens or better connected devices like smartphones, tablets and smart TVs. However for 4G adoption to explode, device makers will need to bring in low priced smartphones and this will provide a further boost the video consumption.

Subin Subaiah, CEO of Spuul Global