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After mobile, RIL looks to disrupt fixed line broadband

Called Jio GigaFiber, the fixed line broadband for homes and enterprise service will be available across 1,100 cities and registration for it will start from August 15

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Mukesh Ambani
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The telecom industry is set to witness another round of disruption to be unleashed by Reliance Jio. This time the target areas are fixed line broadband and feature as well as low-end smartphone users.

Called Jio GigaFiber, the fixed line broadband for homes and enterprise service will be available across 1,100 cities and registration for it will start from August 15, Reliance Industries chairman Mukesh Ambani said at the company's annual general meeting. The trials of the service are going on.

Though, Indian mobile users are around 1 billion, half of the market -- around 500 million people -- is still on feature phones (which offer basic voice and SMS services).

To tap this market, Reliance Jio announced an exchange offer under which users can change their existing feature phone for a new JioPhone for just Rs 501. The effective entry cost of JioPhone is reduced from Rs 1,500 to as low as Rs 501, he said.

Also, JioPhone 2, the new version of JioPhone with applications such as YouTube, Facebook and WhatsApp, will be available at an introductory price of Rs 2,999 from August 15.

Research firm Credit Suisse in a note said a slower than expected traction since its launch (the first Jio Phone) in last AGM could have prompted a drop in upfront price to Rs 500 (from Rs 1,500 refundable after three years). "For the incumbents, this means the average revenue per user pressure could continue for longer than the couple of quarters."

Jio now has 215 million subscribers and is on track to cover 99% of the country, Ambani said. Even after our existing user base, the capacity utilisation of the Jio network is less than 20%. "In last one year, Jio customer base has doubled to 215 million and 25 million JioPhone sold. The target is to achieve 100 million JioPhone users in shortest span of time."

Reliance Jio has enabled data usage growth from 125 crore gigabytes per month to more than 240 crore GBs per month, making India the world's largest mobile data network.

Mahesh Uppal, a telecom analyst said more disruption is imminent and it will affect additional sectors, such as broadcasting, cable, retail, etc. However, it will take longer than it took to disrupt telecom. "The biggest impact will come from large scale access to fibre. If a significant part of that happens in a short time, say six months, Reliance's competitors have a lot to fear and lose."

Addressing the shareholders, Ambani said, "We still lag behind significantly in fixed-line broadband. India is ranked quite low at 134th in the global ranking for fixed broadband, poor fixed-line infrastructure has been a key reason for this."

He said about 80% of data consumption happens indoors through fixed line in homes, in offices and other premises and optical fibre based fixed-line broadband is the future.

Research firm Jefferies in a note said fixed-line broadband is an under-penetrated market in India with only 18 million connections. There has been low demand from consumers due to pricing and execution challenges in laying the wire (cable/fibre) to the home apart of lack of focus from incumbents has been the reasons for stagnant growth in this segment. "The key for JioFiber will be the pricing as it has been a key hindrance in consumer demand. The other key challenge in expanding the market will be rollout. Most of the broadband connections are currently focused on metro cities."

The FTTH (fibre to the home) service will enable the fibre to reach directly homes/enterprises. Till now, optical fibre reached the premises of the buildings while last mile connectivity is done through copper cable which makes network speeds slow at times. FTTH is more efficient and will offer higher speeds.

The Jio GigaFiber will also offer smart home solutions where devices such as security cameras, home appliances, lights, switches can be securely controlled by using a smartphone from anywhere. This will redefine 24X7 emergency help for all homes, Ambani said.

"Jio is determined to move India to among the top five in fixed-line broadband. We have already invested over Rs 2,50,000 crore for creating state-of-the-art digital infrastructure to provide mobile and broadband connectivity across the country, with the largest fibre footprint. We will now extend this fibre connectivity to homes, merchants, small and medium enterprises and large enterprises simultaneously across 1,100 cities to offer the most advanced fiber-based broadband connectivity solutions," Ambani said.

Cellular Operators Association of India (COAI) director general Rajan Mathews said the newly launched JioPhone has been attractively priced and is expected to see increased uptake and we expect feature phone users to transition to smart phones."We also expect JioGigaFiber to be a game changer and revolutionise the ICT sector and drive the Digital India vision. The increased focus on a network and technology will provide the necessary impetus to the industry and also the revenues of the industry that are being challenged at present."

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