State of Telecom Industry in Pakistan

Guest Post By Umar Farooq

This post is referring to the service you use on your mobile device, which is powered by your location at the moment in time. It could have GPS working behind it or could be the network operators Base Stations ( Antenna Towers ) where your location is being calculated.

In the recent past, operators have a hard time deciding whether to offer Location Based Services or not. Arguments in favor of the debate include,

1) Large Subscriber bases
2) Increasing mobile penetration
3) Availability of more advertisement real estate

and against the debate,

1) Substantial infrastructure cost
2) Market readiness
3) Driving safety

There are more arguments on both sides but these could be taken as primary ones at the moment. Looking a the arguments in favor, the only point which will effect the service for the end-user is the where it will enable operators to use it as an advertisement real-estate. Subscribers will be bothered every-time they pass by a pizza outlet, which has placed its advertisement with the respective operator. An SMS on your handset every time you pass near a boutique, can become quite irritating.

Arguments against the service keep in view that market may have become quite large but it is not ready to take on complex services at this moment. It will be sometime before market matures itself to the point of absorbing this service.And then the disturbance it will cause while you are driving, could be significant enough to mark an increase in road accidents.

While keeping all of this in view, it would be worthy to find out what the readers of this blog feel about this service, if introduced into the market.

Please feel free to post your comments about the possible pros and cons of this service.

Umar Farooq is currently working as Director at a telecommunication services and consulting company. He has worked with Ericsson in the past, with its Systems Integration unit. Umar is a graduate of Ghulam Ishaq Khan Insitute.

Here’s another sign that ICT industry in Pakistan is maturing. The first Mobile Commerce conference is being held in Karachi on April 2 2008. The event has a star-studded guest list which includes PTA Chief, mobile companies Mobilink, Warid and Telenor (CEOs will attend), mobile commerce companies such as Amaana, Inov8, senior management from banks (both commercial and State Bank) and a few foreign company executives. Full details are available in this pdf brochure. You can also take a quick look at the image to see participating companies.

The sessions are well planned and include topics such as environment for mobile commerce, role of telcos, micro-finance, security and risk management, new trends and challenges. I expect it to be a very interesting and useful event.

I am looking for feedback about this conference and would appreciate if anyone can share observations and thoughts.

The anticipated mobile payment solution powered by inov8has been launched by Mobilink (see my related post at ATP which mentioned inov8). The oddly named “Genie” is being promoted on their website for indigo and jazz customers. It is being marketed as convenient and secure so as to build trust, which is a huge factor for mass adoption in Pakistani market. It is only a matter of time before all mobile operators will start offering some flavor of mobile payment service. The importance of this transition was also noted by Rob Katz in this blog post at Nextbillion.net where he notes that in Pakistan ”the telecoms are beginning to look at new value-added services, such as micropayments, international remittances, and other transactions.”

The application has to be downloaded to the phone and standard data charges apply. There’s a nominal fee associated with utility bill payments. Since this service by Mobilink is new, it will be a while before detailed review can be made. Green & White covered it where Osama shared this thoughts about this new offering:

From a business point-of-view, Mobilink has played a smart move here - as the telecom industry gradually kills off voice and starts to find more innovative and culturally relevant value-added-services for consumers, having control over a payment system backbone will be a significant advantage. Next they would have to invest in a R & D platform for Value-added-services and unleash it on our growing community of entrepreneurs and a spike in innovative third-party applications (similar to what has happened recently with Facebook) is likely to result.

For further background information you can see my past posts about mobile commerce.

Guest Post By Rakesh Gopchandani - originally published at his blog - Paths.

The International Telecom conference at ITCN-ASIA 2007 was held on Aug 9-11 at Karachi Expo center. Over the years, ITCN (Ecommerce Gateway Pakistan) has become known for industry gatherings in which high profile technological announcements are made. Last year at the ITCN conference, Telenor announced its EDGE service. This year at ITCN, it was Wateen which announced WiMax’s commercial deployment.

The first session was mostly filled with keynote addresses from big-hats of Nortel, Wateen, PTCL and Motorola along with a little opening ceremony by the City Nazim right in the middle of the session. The speakers were talking about how big the Telecommunication infrastructure has grown in the country and how desperately we need the killer applications to ride on this new wave of data-com infrastructure. When inquired on what that killer application might be, the speakers pointed towards Video-on-demand and Internet-applications as the biggest contender. I particularly liked the session on Hyper-connectivity and the place for 4G wireless networks in it by Nortel, their managing director explained how future devices that can be connected and need to be connected will be connected. Also, the exchange of sentences between the two Qureshis from Wateen and PTCL (now to-be fierce competitors for their common market in OFAN and Broadband links) was interesting.

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This post in the mobile commerce series provides information about a new study which outlines how the banking and regulatory framework needs to adapt to encourage financial transactions by mobile phones and transform access to financial services in developing countries. This is from a new policy report ‘The Transformational Potential of M-Transactions’ , published by Vodafone in partnership with Nokia and Nokia Siemens Network. The report details new independent research by leading economists from Frontier Economics and Groupe d’Economie Mondiale as well as consultants to the World Bank. The full report, (2.1 MB pdf) can be accessed from a link on this page.

The report shows how these services provide the first real opportunity for many poorer people to get on to a formal “banking ladder” with benefits including reduced threat of crime, time saving and secure savings opportunities.

However, existing banking regulation are inappropriate for the growth of m-transaction schemes. Vodafone, Nokia and Nokia Siemens Networks are calling for regulators to ensure they do not restrict commercial experimentation or limit the schemes to sub-economical scale. Key suggested changes to banking rules and regulation include:

• Review of deposit taking - define and control new ways of making deposits
• Access to the clearing system - to ensure that existing systems can handle the transactions smoothly
• Adaptation of ‘know your customer’ and anti-money laundering - creating safeguards and audit trails
• Interoperability of m-transactions schemes - to ensure fair competition

The report includes work from various investigators and researchers. Since the carriers have a vested interest in pushing for this, I would take the recommendations of this report with a pinch of salt. However some of the conclusions reached here are in line with other studies and from experience of other m-commerce trials and deployments. Standardisation and new rules are needed to help this transition to mobile phone based commerce.

Vodafone Foundation provides a good summary of the findings from this series of studies about mobile banking.

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Some consider financial transactions as the most likely killer application of 3G mobile services, just as text messages were for 2G. Interestingly many companies are taking the approach of using text messaging to offer mobile payment services - description of mobile payments Pakistan and India below fit this description. On the other hand the high-tech hardware-based approach from Korea is to use special chips (USIM) into handsets which allows data communication for payment with other devices.

As you can see the industry is in a test-and-see phase. There will be competing standards and incompatible solutions till there’s a winner. I will revisit this topic after some time to re-evaluate the progress of these services and direction of the industry. Here’s a review of various mobile payment or m-commerce services from around the world.

In Pakistan a new SMS based payment solution from UBL called Orion was recently introduced. Each transaction is protected by a secret PIN which offers basic security. This is a good start as UBL has kept things simple enough that common users will not be overwhelmed. See the fee schedule here. Usually such solutions come from mobile phone or value-added-services companies but in this case UBL has taken the lead. It will be interesting to see the uptake of this and how user issues are resolved. There are other startups as mentioned here at G&W but their solutions are not widely deployed yet.

A similar solution has been launched in India where PayMate has launched India’s first purchase-by-text system, which allows purchases from SMS enabled mobile phone at accredited merchants. An authorisation of payment via PIN is needed. This is available to those who have account with Citibank and Corporation Bank in India.

EU A new online and cell phone service called Voice Pay, uses biometric voice analysis to authenticate users. The company says its technology is so reliable that it will guarantee all payments. Details are Here. Sounds like a complicated procedure to me!

 US Verizon that tied up with Obopay to offer wireless payment to subscribers through mobile phones. This service acts as a virtual MasterCard account. The only condition: the mobile phone should support the BREW standard so that it can download and install a mobile client that keeps track of a bank account. Product search and comparison facilities have also sprung up to aid the mobile shopper.

Philippines One of the largest and arguably most successful m-Commerce applications are to be found in the Philippines with over 3.5 million m-Commerce users on the two major networks: GLOBE Telecom and SMART Communications. In a study of m-commerce market in developing countries such as Philippines, it was identified that the key success factors for that market included the ability to load prepaid airtime credits as well as the ability to transfer both cash and airtime credits between customers. Read the full report here.

Korea Lets wrap up with an article from Korea Herald which gives a good summary of the mobile payment developments there.

The upcoming 3G era will promise safer and more convenient wireless payment because the USIM chips in 3G technology allow constant monitoring of credit card information. The 3G wireless payment is based on partnerships between mobile operators and card companies.

KTF is working on a solution to enable Paying by mobile phone, anywhere in the world. It plans to introduce a trial mobile payment service in October 07. SK Telecom is preparing a similar service, but its debut will likely come later. KTF joined a global mobile payment project in conjunction with 13 other mobile operators during the 3GSM World Congress.

The GSM Association decided to adopt the KTF-proposed Pay-Buy Mobile initiative in February. An additional 10 operators, including the world’s largest handset maker Nokia, joined the Pay-Buy Mobile initiative in April this year. There is, however, remaining work to be done to facilitate a free and truly global wireless payment, as authentication processes vary according to country, operator and financial institute.  

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Korea is at the forefront of mobile technology adoption and the industry pays special attention to the trends there. One example: Korean mobile carrier SK telecom is introducing google search (with advertisements) on its wireless web portal. I came across a multi-part series of interesting posts written by Kim Min-seok about future trends of mobile technologies and markets at Korea Herald, here and here. In this post I’ll present some excerpts from the sixth and seventh articles which analyze the “broad changes that Web 2.0 is bringing about in the business world.” I’d recommend reading the full articles but for those in a hurry, here are the key thoughts:

1.Mobile phone makers would like to integrate content into their own platforms instead of allowing others to control content.
2. Customers will select a service provider that has a platform which is convenient to use and enables access to diverse content and channels.
3. Hyper-customization will decide the winner.

Here are excerpts from the article (emphasis is mine):

The current consensus is that mobile terminal makers stand to gain the most from the fact that customers must first connect their devices when using content and services.

Up to now, the core elements of success of the mobile phone have been the hardware characteristics of the equipment itself, such as price, function, quality and outside design. But in Mobile 2.0, it is a means of accessing the mobile Web, not just a means of talking by telephone. This implies that design of the mobile platform embedded in the terminal is going to be important - it must enable user interfaces, UCC production and full browsing.

Due to the sharing of open operating systems and equipment middleware platforms in order to reduce costs, the possibility of functional differentiation will decrease in terms of quality and general functions. Therefore, if convenience is maximized by innovating the small screen and input device, which are regarded as the maximum constraints, terminal makers will exert a tremendous influence on the mobile service market.

Mobile phone makers, led by global No. 1 player Nokia, are trying to integrate content into their own platforms. Their strategy is to move into the content portion of the mobile value chain with convergence of digital equipment. Nokia is utilizing its powerful brand and domination to become a mobile media platform operator that provides related media content including advertisements, images and games.

In order to strengthen the competitiveness of its platform, Nokia has introduced mobile advertising platforms such as Nokia Ad Service and Nokia Advertising Connector, and developed a game platform, N-Gage.

Apple offered a service that can be used in linkage with iPhone after purchasing all the content such as TV programs and movies from iTunes using Mac. That is, media content including music, broadcasting and movies and terminal lines such as mobile phone, PC and TV are provided simultaneously. This allows us to get a glimpse into Apple’s strategy that customers can enjoy everything within the platform called Apple by providing them with total service ranging from software to hardware.

In the Mobile 2.0 age, the platform that gives value to the customer when he purchases a terminal will become one of the core purchase elements. In Korea and Japan, mobile operators such as LG Telecom and DoCoMo are considered one purchase category, and terminal makers such as LG Electronics and Sony Ericsson as another purchase category. In Europe, where the GSM system is used, terminals and mobile operators are also different purchase categories.

But in the future when terminal makers, internet portals and mobile operators all provide mobile services, the criteria for purchase will become different. The platform will become an important element, overtaking the design of the terminal or the charging system of the mobile operator. Mobile platform services offered by internet portals such as Google and Yahoo! will also compete with mobile operators and terminal makers.

Customers will select a service provider that has a platform which is convenient to use and enables access to diverse content. So they will evaluate the platforms of mobile operators, terminal makers and internet portals before they choose one they like. This is because the “prosumer” (producer-like consumer) can use open sources to create new services by combining the existing technologies. The most convenient platform, and one with the most differentiation, will therefore be the most popular.

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This is second in a series about mobile commerce. The first post was a case study about mobile wallets in Japan. In this post I review the efforts by US banks and financial institutions such as credit card companies to push mobile commerce as another channel for their clients.  This post is based on a study and report by Information Week. As you go through this, compare this with the experiment in Japan, especially how applications are loaded on the phone … it will be interesting to revisit this after a few months.

Citibank has unveiled Citi Mobile, the first downloadable mobile banking application from a major financial services provider. After enrolling online and downloading the app to a cell phone or smartphone, customers can view balances, pay bills, transfer money, locate ATMs, and click to call customer service.

Citi Mobile can be downloaded to 100 cell phone and smartphone models. It’s initially available in California, but Citibank says it will be out in other states by midyear. The app has been more than a year in development, and Citibank execs think U.S. cell phone users are ready to do more than talk and text on their phones. “They can manage their accounts while sitting at a red light in their car,” says Steven Kietz, Citi’s business manager for enhancement services and e-commerce.

Citi Mobile has the graphics

Information Week is not so sure. As they say: There will be a growing market for mobile banking when there’s a need for immediacy, like emergency fund transfers and balance checks, predicts James Van Dyke, president of payment consulting firm Javelin Strategy and Research. But his take on a mass market for mobile bill paying: “It’s ridiculous.” The banks beg to differ, though. Wachovia, which has a mobile offering, says mobile bill paying is one of the top customer requests.

Since the Citi Mobile app resides on the phone, it’s faster and offers a graphics-intensive interface that’s closer to online banking than text-heavy Web-based apps. Customers select the Citi icon on their phones to access accounts instead of navigating through multiple Web pages on a tiny screen. They’ll also receive new features automatically whenever Citibank makes an upgrade available.

Bank of America took a different approach, launching its WAP-enabled Web-based mobile banking service in February. Most mobile browsers can access the service, which lets Bank of America customers check account balances, pay bills, and transfer funds. “We chose to go with a WAP application, so that everyone can access it,” says Sanjay Gupta, an e-commerce executive for Bank of America. The downside: WAP displays information mostly in text form without rich graphics.

More from the report:

Wachovia also went with a Web-based app, launching its Wachovia Mobile service in December. It works only with Web browsers that come on smartphones running Microsoft’s Windows Mobile 5.0, Research In Motion’s BlackBerry, and the Palm OS. More than 50,000 people access Wachovia Mobile each week, says Ilieva Ageenko, the bank’s director of emerging applications.

But Wachovia has another option in the works. It has teamed with AT&T, which will offer later this year mobile devices preloaded with a mobile application for accessing Wachovia’s and other bank’s services. Preloading the app makes it easier to use on the phone. By getting together with AT&T, Wachovia has “enough footing to reach out to this huge base of customers,” says Ageenko.

But preloaded apps have their downside since the number of customers a bank can reach is limited to the number of phones its app is loaded on. But even with downloaded and Web-based apps, banks may have to work hard to convince customers to sign on. “Instead of banks giving away toasters, maybe they’ll give away phones,” says Richard Crone, of Crone Consulting. Also, putting an app on a mobile device could increase calls to the support center as people struggle to get an app to work on a particular device, thus increasing a bank’s costs, he says.

Besides usability and access issues, security looms as a potential problem. Mobile applications preloaded on cell phones mean personal information will be stored on phones, posing a huge risk. The good news is that the banks are putting a lot of effort into securing their mobile offerings. With Citibank’s Citi Mobile service, the phones don’t store any personal information and transactions are secured with 128-bit encryption, the same technology that’s used at Citibank.com.

Customers accessing Bank of America’s online banking service from their cell phones are protected by the bank’s SiteKey security technology. Data also remains encrypted when it’s sent between the phone and the bank. Once AT&T rolls out mobile devices with Firethorn’s preloaded banking application, it will have the ability to remotely wipe devices clean of personal data if they’re lost or stolen.

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A few years ago Mobile Commerce was touted as the killer application of mobile technology. With the overall lukewarm interest in 3G, mobile commerce has also been slow to take off. In the next few posts I’ll share stories from around the world about mobile commerce applications. Industry analysts often point to Japan and Korea for signs of early mobile technology adoption so let’s start from a case study from Japan. The recent effort to introduce the so-called ”mobile wallets” in Japan has been interesting. Here I’ll share a news report from CARD TECHNOLOGY which ran a story with a sub-title “Japan’s Mobile Wallets Fail To Inspire - Yet”.

As the report argues, Japan’s mobile telcos and payment card players haven’t yet convinced subscribers to think of their handsets as mobile wallets. As you read the story note how the usability of the whole process has created hurdles for the users and technology adoption. Also note how preloading applications on the phone helped in increased usage.

Here are excerpts from the news report:

Carried by 19 million commuters in what is reputed as the world’s busiest mass transit system, East Japan Railway’s Suica contactless card is used more than 200 million times per month. So it seemed like a natural for Suica to move to the contactless mobile wallet phones telco NTT DoCoMo has been selling for more than two years, later joined by Japan’s other mobile network operators. With Mobile Suica, commuters could download train tickets and recharge their Suica e-cash purse over the air to their phones, which they could tap to pass through transit gates or make purchases at more than 10,000 merchant locations in Tokyo.

But 13 months after its much-anticipated launch in January 2006, only 350,000 customers had signed up for the mobile service. That’s only about a third of what the commuter rail operator had expected. It declines to release transaction numbers.

The registration process has been difficult for many prospective users, Akio Shiibashi, director of the Suica Systems Department at JR East, tells Card Technology. “Membership is a little complicated, so we need to make it simpler,” he says. “The digital ticketing function has not materialized.”

Nor was 2006 a breakthrough year for any of Japan’s other contactless payment schemes that have launched service on wallet phones, known as “Osaifu-Keitai” in Japan. While a reported 2.6 million subscribers had signed up to tap their wallet phones to make credit payments in convenience stores, supermarkets, restaurants and vending machines as of January, it’s obvious the number of transactions are less than what backers had hoped for. The 2.6 million doesn’t include users of e-cash on the wallet phones.

Interestingly even in Japan consumer awareness remains an issue and there aren’t enough places for consumers to tap.

“The most important thing is the number of acceptance points,” says consultant Masayuki Yamamoto, a former executive with Visa International in Japan. “The number of merchants is not very great. (And) because the startup is slow, people are not aware they can use mobile payment.”

Wallet-phone backers say it’s only a matter of time before their investment pays off. But the teething pains in Japan-the most advanced mobile payment and ticketing market in the world-have implications for mobile operators, banks, transit operators and others in Europe and North America, which are planning to launch services in coming years using phones supporting similar contactless technology, NFC.

Among the issues facing the mobile-commerce players in Japan of interest to the outside world is how to solve difficulties in personalizing phones over the air with applications. After all, this is a major advantage contactless phones hold over cards. Transit operators could reduce the number of their ticketing agents by allowing customers to download monthly passes or e-cash for single rides. Banks could avoid card-issuing costs. And the handset could serve as the multiapplication platform cards never managed to become.

Preloaded Applications

This study shows that makes a big difference if the application comes preloaded on the handset and is ready for the end-user. Excerpts from the above story:

For most of the registered users of contactless mobile payment in Japan, applications are preloaded on the handsets. Every new wallet phone the telco sells comes with iD pre-installed, ready to be registered by the subscriber-a much easier process than downloading the application itself. Japan’s largest credit card company, JCB, says its registered users jumped by three times after DoCoMo chief rival, telco KDDI, began preloading JCB’s QUICPay service onto its phones in February.

“It’s kind of difficult for average users to download the Java application,” says Shusaku Maruko, general manager in the planning department for FeliCa Networks, the DoCoMo-Sony joint venture handling the secure downloads.

Japan’s mobile-payment players face other challenges that those in the NFC world are unlikely to see. Foremost among them is the fact there is no standard application for contactless payment in Japan, in part because contactless phones and cards use a nonstandard technology called FeliCa, from Sony. It means when consumers find a contactless point-of-sale terminal, it may not accept the brand of contactless credit or e-cash they are carrying.

There are 5 contactless schemes rolling out in Japan. Efforts to make the point-of-sale terminals and readers interoperable rely not on international standards bodies, but bilateral agreements between the schemes. And progress has been slow. There are perhaps 100,000 terminals and readers deployed by the various contactless schemes at merchant locations in Japan, not counting multiple brands accepted at the same shop or restaurant. But that is still a small number in Japan’s vast retail market, says Yamamoto.

A Turning Point?

Still, wallet-phone backers are confident. DoCoMo’s Hiromiki Moriyama, a director in the telco’s multimedia services department, tells Card Technology 100 Yen shops (Japan’s counterpart to the U.S. dollar store) are among the latest retailers to accept iD. About 90 stores owned by the Aeon Group, one of Japan’s largest retailers, have already installed iD terminals. And Aeon also is among the first merchants to deploy readers supporting more than one brand of contactless payment.

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