Thursday, 19 February 2015

'If An SP Is Making Money, We Have A Chance To Be A Part Of The Value Chain'


                  Sanjay Kaul, Managing Director, Service Provider, Cisco India & SAARC, has been working in the ICT industry for 22 years. During this period, he has worked internationally across Europe, Africa and Asia Pacific. He has worked with BT, TeliaSonera and Ericsson Group prior to joining Cisco. He has also authored a book titled 'Business Models for Sustainable Telecoms Growth in Developing Economies'. In an interview with Voice&Data, Kaul speaks about his journey, technologies and shares his insights into the telecoms and pay-TV industries. Voice&Data: Tell us something about your journey. Sanjay Kaul: I have been a telecom professional for 22 years and have worked across many facets of the ICT industry, ranging from a telecom operator, telecoms management consultant, telecoms equipment vendor and now a part of a leading ICT solutions provider. I have worked for BT, TeliaSonera, KPN and Ericsson prior to joining Cisco. In my management consulting roles with BT Consulting and TeliaSonera, I advised telcos including ISPs, policy-makers and GAMEYS on various strategic, technology and operational issues. I received my technical and business education from NIT Durgapur, India, and Harvard Business School, USA. I have been an active contributor to industry forums such as ITU, Commonwealth Heads of Governments Forums, Wireless Communications, CFMRR, ConnectWorld, Global Telecom Summit, Africa Investment Forum, CIO Global Forum, Telecom Management Forum and Convergence India. I have also served as representative board member on the GSMA WAC board from 2011-12, representing the Ericsson Group. Voice&Data: High spectrum prices are a key concern these days. How do you think they influence a service provider's opex and capex? Sanjay Kaul: Spectrum is one of the key capex items for operators. The cost of spectrum is prohibitive given the average ARPU levels that service providers in India are able to achieve. If we look at the global picture- for example countries like USA, Germany and Japan - on an average these countries are generating ARPUs in the range of US$40 or more and cost of spectrum is much lower. This is the reason why I think the cost of spectrum is prohibitive for service providers to run profitable data businesses and to offer the customer experience that Indian consumers deserve. We are part of the industry value chain; if an operator is able to make money the entire value chain will have a chance to make money. As a result, we are focused on making service providers successful. Voice&Data: With the advent of the data revolution, how is the technology uptake changing these days? Sanjay Kaul: If you look at the last decade, once the voice business was established, operators found a formula to run their businesses very strategically. They have been innovative with managed capacity/ consumption-based business models, which led to decent EBITDA levels among Tier 1 service providers, even with basic voice services. But what's happening now is that the business is changing to a data business, so the current business models must be reassessed. If you look at the last three years, collectively communications service providers have put in over $20 billion in capex but none of them has yet generated any profits. I believe operators need to transform their network architectures, evolve their legacy networks- which are basically voice networks - into data networks. To generate positive EBITDA levels with existing data tariffs.They need to use technologies like software defined networking (SDN), network function virtualization (NFV), self-organizing network (SON), orchestration and cloud-based solutions to lower overall service costs. The good news is that the industry doesn't have a market problem; what we have is a challenging business model. User behavior is changing fast and changing for good. The penetration of smartphones is steadily rising. The growth in smartphone shipments is witnessing a phenomenal increase. Price levels are dropping rapidly, mainly driven by local brands. My independent view is that when the smartphone price goes down to somewhere around $35, that would be the clear inflexion point. Beyond that there will be a hockey stick growth which will need to be smartly managed, using evolved data architectures which have embedded key technology advances like NFV, SDN, orchestration, cloud enablement and SON. Voice&Data: There's a lot of noise around OTT players. What's your take on the same? Sanjay Kaul: OTT, in my view, is a friend and not a foe. What operators need to do is to forge the partnership that creates a 'value add'. Social networks are helping to create user behavior and consumption patterns and that is great for data business. For instance, WhatsApp, and the consumption of video on Facebook and similar apps are really creating a lot of data and video traffic respectively. The question remains as to how we monetize it. We can do this partly by creating the motivation for OTT players to share pieces of the action with service providers and partly by service providers offering compelling value propositions to OTT players. The ingredients of that value proposition are customer knowledge, security, reliability and experience. In summary with smartphone prices coming down, user behavior moving in the right direction and data - specifically video - growing at unprecedented rates, the fundamentals have been created to develop a profitable data business for service providers. Voice&Data: Who are the telcos you are working with and what type of solutions are you offering to them? Sanjay Kaul: We are working with almost all the top telecom operators in India and SAARC countries. We are helping them to transform their legacy/ hybrid networks into end-to-end IP networks. We are introducing technologies like network function virtualization, self-optimization, service orchestration and cloud services to help reduce overall cost of service delivery. We have cases where we have seen a saving of up to 30%. We also have solutions that help service providers to monetize the mobile data. For example, when you move data out of the office you connect office business processes to your phone. In the office, you are covered with all kind of firewalls, security etc. We provide solutions that secure data while on the move. We bring solutions to CIOs of service providers to make the processes efficient and help introduce solutions based on cloud and virtualization, meaning instead of paying upfront you pay as you grow. In a nutshell, there are number of innovative revenue and business models we offer, which can help operators take bold steps to modernize their networks and IT architectures, and, as a result, deliver back efficiency to the business. Voice&Data: What are your key differentiators? Sanjay Kaul: The key differentiators are the mix of our technology breadth and superiority, innovation in business models, and lastly, breadth and depth of our engineering talent right here in India. We are putting a massive investment in R&D and skills build up and also investing heavily in acquiring assets that are ground breaking, recent ones being NDS for video, Meraki for enterprise Wi-Fi, Webex and Jabber for collaboration and Tail-f for service orchestration. We have created a fund of US$ 40 million to be invested in India to capture local innovation, which will help us further to create India-specific solutions. As you know we are supported by Cisco Capital, which is a company within the group which comes with innovative financing solutions. We have helped the cable industry hugely in achieving the phase-I and phase-2 of digitalization and are now putting in solutions for phases-3 and 4. Voice&Data: How is the cable digitalization process going? Sanjay Kaul: Phase-1 and phase-2 have happened. As per the fresh mandate issued by the government, the phase-3 deadline will expire in December 2015 and then phase-4 goes into December 2016, which means in the next two years we have to digitize about 70 million homes. We have global experience in delivering innovative solutions - set-top boxes, advanced middleware, multiscreen and access technologies like Wi-Fi and GPON. Then we have Docsis 3.0, which we already launched with DEN, Hathway, Siticable and other cable operators. With the Docsis 3.0 solution, cable TV MSOs can offer up to 100 megabits per second, as a cost effective alternative to DSL and mobile broadband. Voice& Data: How is Cisco changing cable/ DTH viewing experience? Sanjay Kaul: Cisco came from analog via digital to HD and now we are moving into 4K. 4K takes the TV-viewing experience on large screens to the next level beyond HD. We are at the forefront of this revolution. You will experience the excellence of 4K during the Cricket World Cup, when a number of DTH operators will feature this using Cisco technology. Voice&Data: What are the current challenges from the cable operators' standpoint? Sanjay Kaul: Cable operators are challenged financially. The biggest challenge is the ARPU levels, followed by funding. We are coming up with technology solutions that can help them grow the ARPU levels and we are also bringing in innovative financial solutions that can ease the capital-intensive rollouts. We have achieved 51% market share in the cable space in the first two phases of digitalization. We are hoping to continue that dominance in phases-3 and 4 by introducing advanced technologies, enhanced value propositions and innovative business models. Voice&Data: What type of trends and technologies we are likely to see in the coming days? Sanjay Kaul: The major technology trends are Mobile, Social, Data Analytics, Cloud, Network Function Virtualization, and, last but not least, Internet of Things. Telco networks are evolving to all IP networks; applications and networks are going virtual. Voice&Data: How are you going to cash in on the government's various initiatives like the 'Make in India' campaign etc? Sanjay Kaul: Firstly, we believe that the government and industry should work together to remove roadblocks and provide enablers so that India can become a leader in manufacturing. Companies that manufacture on a global scale will always seek to manufacture for the right reasons. Cisco believes that India's world-class engineering talent, along with consistent tax policies and market access, can help the country accelerate its journey towards becoming a manufacturing hub. 'Make in India' will thrive on all these initiatives. Secondly, we believe that Cisco is in a unique position given its technology assets, presence in enterprise business, ecosystem of partners, and, lastly, strength in IP and digitalization. Lastly, we are proactively working with all stakeholders - government, and the private sector, including the service providers on Digital India Initiative and Smart Cities program. In short, our enterprise inheritance and breadth of technology assets puts us in a sweet spot to capitalize on various government initiatives by being an enabler and value-adding partner.

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