When Disruptive Meets Innovation

The words of “disruptive” and “innovation” have different individual meanings. The “disruptive” is associated to negative meanings meanwhile the “innovation” is normally associated to more positive meanings. When they are mixed together, still having a paradoxical meaning as a so-called “Disruptive Innovation”.

Taken the definition from Wikipedia, the Disruptive Innovation is a technological innovation, product, or service that eventually overturns the existing dominant technology or status quo product in the market.

In terms of its target market, there are two kinds of Disruptive Innovation; they are aiming to 1). Lower-End Market and 2). New-Market. The Lower-End Disruptive Innovation is aimed at mainstream customers who were ignored by established companies. While a New-Market Disruptive Innovation is often aimed at non-consumption.

The disruptive technology is expected to dominate existing market by: 1). Filling a role that the older technology could not fill, or 2). Successively moving up-market through performance improvements until finally displacing the market incumbents.

Some market analysts believe that the challenge in grabbing wider (lower-end) market or new market can be reached through this Disruptive Innovation. In the developed country like Indonesia, the wider market comes from the middle-lower market segment as illustrated as the bigger middle-bottom pie of pyramidal shape. In this case the positive meanings of this Disruptive Innovation shall be enjoyed by customer/public. Meanwhile paradoxically it shall have more negative meanings for market incumbents.

As of lower investment and fast deployment for network infrastructure expansion, Telkom was introducing Telkom Flexi as fixed-wireless access (FWA) using CDMA-based technology platform. This strategy is believed as one option to catch-up the lagging of Indonesian telecommunication density amongst ASEAN countries. And this technology then was followed by Indosat StarOne which in-parallel is also become the second-positioned market incumbent of cellular. And when Mobile-8 Fren and Bakrie Telecom Esia came in-to the telecommunication market, this was the beginning of market disruption which changes the competitive landscape of both cellular/full- mobility and fixed-wireless providers.

If the market overturns of disruptive innovation strategy can not be achieved by new comers, eventually it could sacrifice the market with the intense unfair marketing campaigns/promises or delivering low quality of products and services. This phenomenon might be the major key driven of the growing demand of low-cost products and services. Unfortunately low quality products and services may only works for voice-based communication as haircut strategy to initiate the market share, but for further data/video streaming applications that need higher QoS (Quality of Service) it seems can no longer be maintained.

Next Generation Network (NGN) – Grabbing the Wider Market

One of the Japanese telecommunication giant makers claims that NGN concept is a win-win solution in-order to match the interests amongst public, telecommunication players and the government. Technologically it will have innovative solutions for existing Fixed Line and Wireless (GSM/CDMA/3G) migration which able to deliver Triple Plays as well as Fixed Mobile Convergence Solutions.

Some European world-wide telecommunication makers are also believing that the next billions broadband telecommunication market shall be occupied by those who are in the lower income as illustrated in the pyramidal shape.

NGN is an IP (Internet Protocol)-based of multi-service platform capable of any traffic type and services which able to support telephony, mobile, internet and broadcasting services. At the end this NGN solution shall change the competitive landscape in telecommunication industry.

In social aspects, according to ITU-T (International Telecommunication Union Standardization), NGN shall promote fair competition, equality of opportunity to the citizen, diversities; its capability to meet various regulatory requirements, recognizing the necessity of worldwide cooperation with particular attention to less developed countries. It is also expected to reduce or lower the capital expenditure (CAPEX) and operational expenditure (OPEX).

Indonesia consists of scattered islands which and need lower cost of rural telecommunication solution to overcome the reach of affordable connectivity of less income population. Commercially this NGN platform is feasible and even may bring more profit for telecommunication industry because it enables the possible migration and interoperatibility amongst their existing networks.

WiMAX – Indonesia Market Perspective

WiMAX (Worldwide Interoperatibility for Microwave Access) is a new telecommunication technology standard that currently being put into debate amongst public, industry players and regulator. Some rumors said that once this technology will be deployed, it will effect to 3G (Third Generation) incumbent player’s investment and business since this technology is being told as equal to 3.5G. However the WiMAX technology can not be compared to 3/3.5G standard but Wi-Fi (Wireless Fidelity) standard.

Compared to WiMAX, Wi-Fi hotspot is having limited signal of coverage area with maximum 4-6 miles in radius, depends upon the antenna type used. This Wi-Fi hotspot can be easily found as value added services given by some modern lifestyle areas such as restaurants, cafes, education, malls, etc in-order to strengthen its customer loyalty and increasing profit.

What actually WiMAX is?

WiMAX is a technology standard that enables the interoperatibility amongst devices included in the category IEEE (Institute of Electrical and Electronics Engineers) 802.16. The word of “WiMAX” is created in-order it is easier to be understood by public in replacing more technical IEEE 802.16 term. WiMAX as the standard for broadband wireless access may have larger coverage and as an alternative solution for broadband connectivity of cable and DSL (Direct Subscriber Line).

The interoperatibility of WiMAX. How?

WiMAX is working like normal microwave radio propagation with claimed coverage area up to 3,000 square miles (approximately 7,700 square kilometers). Besides radio microwave access, WiMAX tower station can make direct connection to internet through high bandwidth telephone cable network. Another advantage of WiMAX is that its Non-Line-Of-Sight capability which enables it to have interoperatibility with Wi-Fi networks at lower frequency of 2 - 11 GHz. This short wave transmission is having good capability to overcome physical obstacles, such as building walls or other obstacle things that may block radio wave propagation.

Another rumor is regarding the ambiguity of unproven reliability of Wi-MAX as still there is few success stories in the market and immature technology development, meanwhile the spectrum allocation regulation is yet to be finalized by the Indonesia government. Therefore the government had two times held public consultations in-order to make more fair and clear direction on the band migration and determination for new broadband wireless connectivity spectrum allocation.

The current investment cost of WiMAX is being perceived by market as still “higher”. LTE (Long Term Evolution) is being told as the new equal 4G technology that might shift the role of this WiMAX technology. Anyway through WiMAX we may soon entering the revolutionary internet wireless broadband connectivity via our mobile phone, whereby Indonesia is one of the biggest potential market countries on the planet of earth. Affordable WiMAX mobile handset manufacturer shall be the one who will enjoy this mass market opportunity. So get ready everybody!

Broadband Wireless Technology via Long Term Evolution (LTE)

LTE is a newly introduced technology of cellular network which enables to flow the data up to 100 Mbps for downlink and 50 Mbps for uplink. The basic technology of LTE is not using WCDMA (Wide-band CDMA) that being used by GSM Provider to deploy its 3G networks, but using OFDMA (Orthogonal Frequency Division Multiple Access). This OFDMA is currently known widely in the WiMAX and DVB-T. However in terms of frequency, LTE is a successor of HSPA (High Speed Packet Access), therefore it uses same UMTS/CDMA frequency and requires bandwidth up to 20MHz.

There are several advantages offered by LTE:

1. Spectrum efficiency offered by OFDMA and efficient battery consumption offered by SCFDMA (Single Carrier FDMA) used by LTE uplink makes this technology is being preferred.

2. MIMO (Multiple Input/Multiple Output) system of LTE can offer higher data throughput rather than conventional system as there are 2 antennas located at base station side and equipment side.

3. The development of LTE is referring to EUTRA (Evolved UMTS Terrestrial Radio Access) which unify important radio network functions and has direct connectivity to access gateway through S1 interface.

4. LTE provides broadband wireless connectivity enabling some broadband applications, such as: internet download, real-time on-line games, and video-on-demand.

The Beauty and The Beast

My country of Indonesia is one of the biggest countries in the world. According to the latest statistics this country is having some 234 millions of population with 1,919,400 square kilometers area and 17,504 islands. What a great potential market for telecommunication business in-order to connect our people with multifaceted social backgrounds, cultures, races, and religions. This great potential market has been believed as one of the key-driven forces on the world telecommunication product innovation and corporate change strategy of big telecommunication equipment makers such as Alcatel-Lucent, Ericsson, Motorola, NEC, Nokia-Siemens, Nortel, etc.

However the telecommunication density is still low compared to other ASEAN countries. In 2007 the total wireless subscribers may reach up to 80 millions subscribers compared to fixed line subscribers only able to reach up to 8.7 millions subscribers. Hit by regional economic crisis in 1998, the development of fixed line especially for rural area become stagnant caused by limited investment whereby the tariff is expensive so as the poor village and rural people subsidizing the rich people in big cities.

New CDMA technology of fixed-wireless has been developed by Telkom to anticipate the lagging development in fixed lines and marketed under the brand name of Telkom Flexi. This technology is followed by Mobile-8 marketed under the brand name of Fren, Bakrie Telecom marketed under the brand name of Esia and Indosat marketed under the brand name of StarOne. In 2006 Telkom Flexi was leading the market of 52% market shares, followed by Fren of 25% market shares, Esia of 19% market shares and StarOne of 4% market shares. Bakrie Telecom as new player is targeted to penetrate middle-lower market segment by offering low-cost tariff and higher market segment with innovative solution of wireless internet connectivity, marketed under the brand name of Wimode.

As the Indonesian cellular market characteristic is so demanding in-terms of price sensitive, the introduction of low tariff communication triggered the price war since the last two years which cause the incumbent players including GSM providers seem cannot maintain its ARPU (Average Revenue Per User) level. New technology application development of 3G in Indonesia is expected to reach higher market segment but it seems not yet successfully attracts the market. It is expected that video streaming application that can be provided by 3G technology to be a “killer application” but the market apparently is more likely utilize this technology as internet broadband wireless connectivity.

The intense chaotic price war race amongst GSM full mobility, CDMA fixed-wireless and 3G players force all incumbent and new providers to change its cost structures strategy, starting from the haircut on its telecommunication infrastructure costs (telecommunication tower and its facilities), find other alternative low-cost telecommunication makers and outsourced telecommunication infrastructure providers. So the problem is begun. Nobody cares about the meaning of Quality Product or Service to win the market shares.

Attractive low-price theme advertisements try to persuade market and confuse their loyalty to move to another provider. No wonder that a people can own two or three mobile phones/subscribers. What a beautiful market for mobile phone handset makers and providers! This great potential market looks like an attractive beautiful girl, but the fierce competition drives the tame players become wilder like the beast..