One of the brightest spots in India's tech startup scene are enterprises focusing on SMS based services. With India's low (and slow growing) Internet penetration, SMS is about the only way that any tech startup can really acquire and serve large groups of customers. SMS GupShup, JustDial and countless social enterprises have realized that SMS is the only ubiquitous platform available to the Indian masses. As a country bent on promoting entrepreneurship, you would think that India would want to foster growth in this area. Yet new regulations are about to severely limit access to the SMS platform.
Late last year the Telecom Regulatory Authority of India (TRAI) started the process of passing new restrictions on the use of automated SMS generation from computerized gateways. The purpose of the regulation is to severely curtail the amount of SMS marketing spam that everyone in India deals with. Marketers are required to register with TRAI and are not allowed to reach out to any member on the National Do Not Call list (NDNC or DND). Violation results in a Rs. 25,000 ($500) penalty per occurrence. In principle, this sounds great and legislation restricting spam is sorely needed. However, TRAI's implementation plan is terrible- specifically their method for providing user solicited exemptions to the above rule.
Here’s how it works from the users side: A user joining the DND list is automatically placed on a full block list. This means that they will not receive any SMS from any businesses except Banks, Airlines, Railways and other large corporations who have had the power to make themselves exempt from the rules. Now say a DND customer actually wants to receive messages from JustDial, an incredibly useful directory service. They can opt in to receiving text messages from certain categories of companies. The categories are:
- Banking/ Insurance/ Financial products/ credit cards,
- Real Estate,
- Education,
- Health,
- Consumer goods & automobiles,
- Communication/ Broadcasting/ Entertainment/ IT
- Tourism & Leisure
The main thing to note here is category #6. JustDial and most other tech startups fall in this category where they are joined by the majority of mobile spam marketers. So any user wanting to take advantage of an innovative service also opens the floodgates to the spam that the TRAI legislation was seeking to block in the first place. Currently there is no way for the user to allow a single company exemption. I guess the user and JustDial are just out of luck.
So where does this leave SMS based tech startups? Overnight they could lose access to the 30-40%+ of customers who are signed up to the old (ineffective) DND list[1]. These customers will automatically be shifted to the full DND list when the legislation is enacted. Teaching new and old customers how to sign up to the category exemptions will be painful and time consuming. Finally, the current setup will force customers to weigh the value of the desired service with the annoyance of opening themselves up to the spam that is guaranteed to follow category #6 above. It is already hard enough to acquire new customers, but now convincing them that your service is worth putting up with spam from others is a pretty hard sell.
Without providing an easy mechanism for single company exemption, this legislation will kill many infant startups that no longer have a medium to communicate with their customers. Large companies of course will have the resources and legal powers to find a way to get single company exemptions, but this leaves the rest of us in a very unfair position. TRAI needs to take a serious look at how this is going to impact innovation in India and possibly copy more successful DND mechanisms from abroad.
To leave off on a good note, TRAI has still not enacted the legislation. They have been trying once a month since December but have failed each time (now slated for a March 21st launch). Sadly, this is not due to pushback against the new regulations but because TRAI is unable to get their systems up and running. Thank god for government inefficiencies.
Note: JustDial is a big enough company that they will probably find some way of being granted an exception…the rest of us are just going to have to get super creative.
[1] The 30% number comes from looking at our own customer database at inCrowd and noting how many of our loyal users are currently signed up for the old DND list
This was posted 6 days ago but was just brought to my attention (credit Niraj): KPCB Deck on Mobile Internet Trends
This is a great quick read.
Some of these upward trends and their comparison to past generation technologies (ipod vs iphone vs ipad) are fascinating. Also, the 3x footfall due to Shopkick promotions is huge validation for using applications to drive traffic to terrestrial businesses.
Great article by the Economist on how mobile based value added services are being used by base of the pyramid customers.
Not Just Talk
I am really excited to see how this all plays out in India given the proliferation of cheap smart phones. As smarter phones and better connectivity make their way through developing countries, the ability for the handset to become a democratizing agent is huge.
Credit to Anand S. for the article link.
Really interesting Groupon offer today if you look at your side deals:
$10 for $20 Worth of Toys and Games, Books and More at Barnes & Noble
The deal is a crazy good one and I wonder how the economics will work out for Barnes & Noble.
For Groupon, this is a huge win. After being live for less then 12 hours, the deal has already sold 12,000 times. Just like the GAP Groupon, this deal is going to drive a huge amount of new customers to the site and introduce them to the Groupon model.