Date:10/07/2008 URL: http://www.thehindubusinessline.com/2008/07/10/stories/2008071052360400.htm

Back VAS providers want ‘fair’ revenue sharing

Our Bureau

New Delhi, July 9 Mobile value-added service providers including Google, Times Internet and Netcore have sought the telecom regulator’s intervention in determining the revenue sharing formula with cellular operators. The VAS providers have claimed that existing commercial terms are heavily in favour of the mobile operator.

VAS, which includes facilities such as ringtones, wall paper downloads, information services, music downloads, account for nearly 25 per cent of mobile operator’s revenues. This is expected to go higher as third generation mobile services are launched and as consumers move beyond the voice service.

According to one industry estimate mobile operators keep as much as 60-70 per cent of the revenue generated from such services. VAS providers have now told the TRAI that there should be a benchmark to determine the revenue share.

Benchmark sought

In response to a consultation paper on the issue, Google said, “Google believes that it is of the utmost importance for the government to state in unequivocal terms - in the form of a directive or guideline… its preference for more equitable revenue-sharing agreements that align properly with true value added to the consumer. More specifically, TRAI might consider articulating a revenue-share band or a minimum floor price based on service type. Such thresholds, benchmarks, and point of reference - while perhaps not mandatory - can add enormous value as revenue-share agreements are finalised.”

In its response, Times Internet said, “There is a need to regulate the revenue sharing model, because telecom operators have monopolised control over access to networks. As they have control over VAS distribution, pricing and billing processes, the revenue share arrangements are in their favour. In some cases the Mobile Network Operators pay VAS players as little as 8 per cent -10 per cent as revenue share.”

COAI stand

However, cellular operators do not want any regulation on the issue. “We believe that it would be extremely undesirable for the Authority to regulate revenue sharing between the various stakeholders involved in the Value-Added Service chain. This should be left to the commercial negotiations and mutual agreement between the various stakeholders involved as is the current practice. The current system is working well and as the Authority itself has noted the revenue share varies across different types of products and services and in some cases as much as 75 per cent of the revenue is given to the VAS providers,” the Cellular Operators Association of India said.