Free calls: The next Telecom Revolution

Welcome to the brave new world of telephone advertising. It could simultaneously cut the fiscal deficit, accelerate rural development and economic growth, kill small newspapers and magazines, and provide free telephone calls.

The idea has been pioneered in the US by a company called Broad-Point Communications. It offers free trunk calls to subscribers who agree to listen to advertisements before making their calls. Advertising support has already made it commercially profitable to offer free radio and TV channels, free websites on the Internet and free journals. Free telephone calls are the next step.

You can subscribe to Broad- point’s free service without hassle on the Internet. You are asked to list your personal particulars, such as income, education, profession, shopping habits, purchasing plans, religion and ethnic group. You are given a Personal Identity Number (PIN).

When you want a free call, you call a toll-free number (for which Broad point itself bears the costs), and then enter your PIN on the telephone buttons. You will hear a series of ads. For every advertisement (each is 10 to 15 seconds long) you listen to, you get two minutes of free trunk call time. Listen to ten ads and you get no less than 20 minutes free of charge.

Last year, Broad Point conducted trials in Pittsburgh, picking up 10,000 customers. Two weeks ago it extended its service to the whole US, and claims to have got an additional 40,000 customers already.

Its market survey claims that 60 per cent of customers are likely to use Freeway for half their trunk calls. Two-thirds of them are adults in the 25-24 age group, 40 per cent have household incomes above $60,000, 57 per cent have college degrees, and there is hardly any gender gap (47 per cent of subscribers are women).

So, Broad point’s clients represent a premium section of society prized by advertisers. Moreover, Broad Point has software that allows advertisers to target uses by profession, age income, community or any of the other characteristics listed at subscription. Only targeted users will hear the ads not the others.

The software makes possible extraordinary fine-tuning in targeting. Ads can be delivered to callers in response to triggers like fluctuations in the stock market or interest rates, changes in the weather, religious holidays and so on.

This makes it possible for advertisers to avoid the huge waste involved in conventional advertising.

The audience for conventional advertising in journals or TV includes millions who are not interested in the advertised product . But the Broad Point’s software makes it possible to target the audience with greatly increased precision.

The experiment has just begun, and telecom majors are waiting and watching before jumping in. Maybe several modifications will be required in telephone advertising, maybe its potential will turn out to be limited. But Isuspect it is an idea whose time has come.

The implications for India look enormous. Toll-free numbers are just being introduced in India, and make telephone advertising feasible. Being dominant, MTNL and DoT could probably incorporate ads into their normal system (meaning caller must listen toads before any call, with no cut in charges). Competition from new providers will soon force some reduction and ultimate abolition of charges. To begin with, additional government income may be modest, but Mr Yeshwant Sinha needs every possible rupee to cut the fiscal deficit.

New private sector telephone companies are today deep in the red, struggling to survive. But if they can attract significant advertising, their profit profiles will improve. If the public sector uses advertising in its standard calling system, with no rebates, that will open a window of opportunity for the … private sector to step in. That could encourage more investment in telecom, and bring forward the day every village has a telephone.

Compared with the US, India is still a tiny market for advertising, and also for trunk calls. But it is a’ substantial market for local calls Unlike Americans, Indians will gladly listen to ads for reductions of even 25 paise per local call. And as economic development picks up, both local and trunk calls wffl skyrocket. So the short-term potential is significant, the long-term potential enormous.

However, the diversion of ads from other media to telephones will hit smaller journals and TV channels. Free local calls will attract ads for mass-consumption products like detergents, soft drinks, soaps and toothpaste (which today go mainly to Doordarshan and Zee TV). Free trunk calls will attract ads for premium goods targeted at the affluent (which today go mainly to glossy magazines, financial dailies and Star TV).

The print media may face a serious threat as advertisements migrate to telephones. Only the top newspapers and magazines can even think of matching the reach of either TV or telephones. Smaller ones will at risk.

The biggest gainer will be the telephone user. Free telephony could greatly expand the rural demand for calls, and induce telephone companies to reach every village.

The rural market is growing fast, and is of great interest to advertisers. Providing telephone access (and through it Internet access) to every village could greatly speed up rural development in a virtuous circle. Cheap calls could attract more subscribers, which attracts more advertising, which encourages more rural telecom, which accelerates economic growth, which means even more telephone subscribers and advertisements.

This will not happen overnight it will take time. But let none underestimate its potential.

What do you think?