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Good morning dear reader,
One of the consequences of the big finance boom of 2021 was that we finally understood the natural boundaries of the internet market in India. As longtime readers know, I wrote about two of those:
First, there are the California users in India, which number around 10 million, and they are the primary drivers of our internet economy. at that time, I wrote about the number of active online buyers in India is the population of Swedenand why all consumer internet companies are fighting for these users.
Secondly, there are about 10,000 software engineersWho is the It represents breadth and depth of India’s top quality engineering talent. Remember, this was when companies were throwing away everything from International World Cup tickets to BMW bikes to get these engineers, only to promptly let several of them go after one year.
Boundaries become clear when there is excess. This is what happened in 2021. Everyone got a lot of money and suddenly went looking for online buyers (to buy their products) and developers (to make theirs). As a result, we learned that both of these suppliers are a lot shallower than we assumed.
But limits also become known when the opposite happens, that is, when there is an extreme shortage.
Over the past two years, almost every technology sector globally has seen an increase in demand, driving up production driven by cheap capital.
With one notable exception.
Due to component shortages, particularly at the entry level, product launches were delayed, which led to low inventory which ultimately led to lower smartphone sales. This led to global supply chain disruption, followed by geopolitical tensions involving China, Taiwan and the United States.
As a result, we now know another limit.
there he is.
For nearly half a decade, India has added mobile data users at a tearaway rate – these are the users who have formed the engine of the country’s digital economy. This growth was the main reason for investing massive resources to create the infrastructure for services such as payments, travel and trade.
Since early 2021, though, the number of users in India accessing broadband internet using their mobile phones has decreased. As of October 2022, the most recent month for which data is available, that number was 789 million users — the same number as in August of the previous year.
This figure is consequential, as it reveals deeper and more consequential boundaries.
Let’s dig deeper.
Smartphones may be the answer, but what is the question?
At the outset, first let me say that there are few things more complicated than attributing internet connectivity in India. You’d think it was straightforward, but it isn’t. Internet access spans a spectrum, and depends on three broad capabilities: device, network connections, and access speed.
You can own a feature phone that offers 4G connectivity or a smartphone with 3G coverage. Then perpendicular to all this, Telecom Regulatory Authority of India (TRAI) counts mobile users with a broadband connection, which it defines as a speed of 512kbps (and recently recommended changing it to 2Mbps). It receives this figure from various operators across the country and publishes a monthly report, from which the above graph is obtained. Add to that the fact that a single user can have more than one connection, and things get messy pretty quickly.
Because the definition is so flexible, it has been used to make some pretty bold claims.
For example, about a decade ago, before Jio even existed and before cellphones became ubiquitous, Pankaj Pachauri, who at the time was a communications advisor in the office of the Prime Minister of India, used TRAI data to claim there were 485 million broadband internet users. in India.
This, of course, was an absurd estimate. But my point is that official data can be used to make misleading claims like this.
Fortunately, our understanding has evolved dramatically over the past ten years. And despite our quibbles about the exact definition, it is generally accepted that the number of users in India with access to the Internet is somewhere around 800 million.
But for now, that number is static.
Vanita Kohli Khandekar, Columnist and Writer for business standard, was the first to report this development. She attributed this to the high cost of entry-level smartphones in India, which, according to her analysis, was the only reason why the growth of the internet in India had stalled.
There are other signs that this is true. Smartphone sales in India are down, especially at the entry level. When things aren’t going well economically, people tend to hold onto older phones for a while longer. Also, just like cars, the flea market tends to get pretty hot. Cashify, a used phone startup, reported 50% revenue growth in 2022 compared to the previous year.
Smartphones explain a lot. It seems reasonable.
But they don’t explain everything.
Along with mobile broadband users, each month, TRAI also reports on the number of wireless subscribers in the country – mainly mobile users. smart phones. Feature phones. Everything. In its latest report, as of October last year, TRAI put that number at 1,144 million users. In September, it was more or less the same. Go back to January. It’s still the same. If you go back a full year, to January 2021, that number was slightly higher, at 1,159 million users. But basically, this was flat. This seems to be the normal limit.
So, I went to the TRAI website and went back month after month, trying to see how long this trend had been going on. After some analysis, I finally got my answer. January 2017 – 1.151 million users.
For half a decade, India has seen almost no growth in the number of mobile phone users.
So while mobile internet users in India have stopped growing over the past year or so, there is a deeper trend – mobile users in India have stopped growing since then, much earlier. Trai says about 88% of those connections are active. This leaves around 400-500 million Indians who cannot even afford a standard phone for less than $10. Of course, this probably includes children and the elderly, but even taking this into account, it is clear that this is a natural limit that India will not cross for a very long time.
If true, it means that more growth of India’s mobile internet users will have to come from within these nearly 1 billion mobile users. The pie has been stalling for the past 5 years and won’t grow anymore. All we can do is try to figure out what it takes to convert a higher percentage of these mobile users into mobile internet users.
So what does that require? Is it just smart phones?
In the GSMA’s annual Mobile Internet Connectivity Report, they identify two ways people can stay offline. Either they live in an area not covered by mobile broadband (coverage gap), or they live in an area that is covered but not using mobile internet (usage gap).
Here’s how all the regions in the world stack up. The GSMA does not provide a breakdown by country, but it is fair to assume that India is the major contributor to South Asia.
Basically, in percentage terms, aside from Sub-Saharan Africa, South Asia is the region with the least connected users and the largest coverage gap.
This indicates that there is an opportunity to transfer users to the mobile Internet.
But are smartphones the answer?
Well, here is the graph we are looking for.
This is completely revealing. For starters, I was quite surprised to note that South Asia has a high percentage of 4G/5G smartphones (likely Jio driven). In fact, in percentage terms, it is more favorable than Europe and not far from developed markets such as East Asia.
To be fair, it also shows that 27% of those users use basic or feature phones. That’s a high percentage, and it represents an opportunity, but it’s not significantly higher than in other areas, for example.
All of this points to the fact that although smartphones will make a difference, there are quite a number of users who already own a 4G smartphone but still not connected.
For the most obvious reason – they can’t afford it.
A large number of Indians already own smartphones, likely given to them with a subsidy (again, Jio), but with rising tariff rates and other economic pressures, they don’t. use capabilities of their smartphones. This is why making more smartphones is only part of the answer. If India needs more mobile data users, it needs to raise income levels. Cheaper smartphones will help, but only up to a point.
Again, this is validated by other signals. There are approximately 630 million smartphone users in India. How many of these users are online doing basic activities like social media and messaging?
Well, according to comScorethat number is approximately 485 million users.
This is exactly the number that Pankaj Pachauri claimed ten years ago as the number of Internet subscribers in India. So at least One According to official estimation, Internet users in India have been steady for more than a decade.
Which makes it a hell of a limit.
It is considered,
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