For almost a year, everyone has (hopefully) been practising fairly strict social distancing with the coming of the COVID-19 pandemic, and the path to sustaining social interactions has been heavily dependent on virtual platforms. Although the world has begun to return to some sense of normality, life still remains dependent on video conferencing tools, especially for online education and work from home setups.
This article examines how the explosion of the video calling market has resulted in the consolidation of an oligopolistic market structure, giving rise to unfavourable pricing schemes for consumers. Consumers - both small businesses and individuals using these platforms for personal reasons - are left to choose between options that present a sharp trade-off with one another and have limited freedom due to the development of various niche markets within the larger one.
The Springboard Year
Even before it became a pandemic, the coronavirus had already become prevalent in certain parts of the world, compelling a shift to online video conferencing platforms. In February 2020, Zoom’s active user base was estimated to have increased by 2.22 million users, compared to a total increase of 1.99 million users in 2019. This was at a time when India had single-digit COVID cases. Since then, households, schools and businesses across the nation have been extensively using various video conferencing software for their day-to-day communication, most prominently Zoom and Google Meet. Although Skype has been an ever-persistent presence in office environments, it has not been able to effectively cross over into personal spaces.
Initially, the debate had been centred around these two platforms. However, once Zoom was picked up for security issues in April 2020, Microsoft Teams emerged as a strong contender, especially in group settings like schools. Despite their popularity, video-calling has not been restricted to these three players, as many companies had begun building their own niche. For instance, WhatsApp increased its video call participant limit from 4 to 8 people, possibly to compete with the Google Hangouts limit of 6. This decision primarily targeted informal situations, where video calling was merely a touch away, whereas the more feature-rich platforms such as Google Meet and Zoom required more effort to set up. Eventually, Google removed the Hangouts video call feature altogether.
The market did not cease to become more competitive, however, as many start-ups had begun developing their own video conferencing software. While some corporate options like Starleaf and Cisco Webex have not tried to attract the attention of general users, other open-source or freemium options have recently become popular. In fact, as the tensions between India and China rose during the summer of 2020, the demand for Indian alternatives for video calling software led to the unveiling of JioMeet, which was essentially a copy of Zoom meant to replace Zoom itself. Although it didn’t gain much steam, consumers knew they had a variety of choices for video-calling. However, it is important to examine whether consumers truly have the freedom to choose between these options without sacrificing some of the utility they gain from each one of them.
That One Darned Feature
It boils down to what someone considers when making a choice about the software they want to use, and how the pricing strategies of these companies limit them in doing so. Every individual has unique preferences that influence their choices, but their wallets are only so deep and there is only so much they are willing to pay for their video conferencing needs. For instance, some customers may not trust certain video calling software due to their security concerns. They might not want a third person snooping into their private conversations. Their beliefs may or may not be valid, but it surely limits the range of software that customers can choose from to only those options that are well known. Similarly, until Google released similar features, Zoom’s options to increase lighting and change video background was a big plus, but with a free account, it also meant having to re-join the same meeting over and over, which was a hassle to regular users. Moreover, the preferences of other attendees of these video conference calls also matters when picking the appropriate software.
Keeping this in mind, the case of a small start-up is worth thinking about. In a sense, Google’s GSuite and Microsoft’s 365 Business plans are almost identical office productivity packages that have similar pricing slabs. Both start at ₹125/month for basic facilities, jump to over ₹650 at the next tier, and close to ₹1500 for the third. It is important to note that these plans apply to all the users in the organization, so a team of 10 members will mean ten times an increase in the cost. Where’s the catch? Every small business under a severe budget crunch has to make the choice between Gmail and Exchange, Meet and Teams, OneDrive and Google Drive, and other small differences in offered features that effectively tie their hands. If the start-up wishes to record meetings on GSuite, it must either spend 5 times the base amount or switch to Microsoft, at the cost of some of the most user-friendly applications of Google. To avoid overspending on these features, the organization needs an additional subscription to a dedicated video calling app like Zoom. However, spending on a dedicated service for video calls does not eliminate the necessity for the productivity service. Moreover, there are no standalone subscriptions available for any of the individual features or applications offered by the two companies, which ultimately means that the start-up has only 3 options after all.
Alternatives? These start-ups cannot afford to take the plunge with other options due to the risk of a security breach that they are not equipped to handle. Neither do they get to choose among all the ‘options’ that seem available, and nor can they afford the personnel to help them figure it out. In essence, small businesses are stuck with an endless list of trade-offs that leave their operations during this pandemic in a logistical conundrum. Effectively, this market operates like a tacitly colluding oligopoly that can neither be easily breached by competitors nor navigated conveniently by consumers. Overall, this market appears to be the ideal case study that a batch of economics students would like to tackle in the confines of a class to better understand scarcity and effective allocation while also being a situation that no one wants to deal with in reality.
(Written by Siddarth Venkatesh and Edited by Sagara Ann Johny)
Comentários