Reliance Jio phobia crashes data tariff by over 50%

Do you remember the time when mobile charges were too steep for you to make a shift from your landline? And then, one day mobile tariffs plunged so low that it became a commodity you couldn't do without.
Well, something similar is happening in the broadband or Internet space. Tariffs of data packs being offered by various telecom service providers have already tumbled over 50% since the beginning of this year.

This is being spurred by the Mukesh Ambani-owned Reliance Jio Infocomm Ltd (RJIL), which is currently testing its fourth generation (4G), long-term evolution (LTE) data and voice services. It began testing its network in December last year.

Armed with an extensive broadband network and financial muscle, Ambani's 4G LTE ambition is not something incumbent telecom companies such as Bharti Airtel, Vodafone, Idea Cellular, Bharat Sanchar Nigam Limited (BSNL) and others can take lightly.

All eyes have now turned to Wednesday's 42nd annual general meeting (AGM) of RJIL's parent Reliance Industry Limited (RIL), when some announcements on the commercial roll-out road map of its 4G LTE services is expected.

In anticipation of this, the largest telecom player, Bharti Airtel, on Monday slashed it 4G data pack tariff by over 30% (see chart). This is barely a month after it had offered more data at the same price, and effectively dropping its data rates by over 60%. All others, BSNL, had followed suit by lowering prices by giving more data while keeping prices stable.

Any announcement in the AGM will further intensify tariff war. Many are expecting Relaince Jio to undercut its bigger rivals to more than just gain a foothold in one of the largest mobile markets in the world. Its user base has reportedly already reached over 3 million in the beta phase. It has projected 100 million subscribers in the first year of its operation.

An industry insider, who did not want to be named, said the battle on the tariff front in the sector was on expected line as each one would try to grab as big a market as possible. "It is all on expected lines. When a new entrant comes, he can get into the market only by price cuts. More so, when he is dealing with established players. So, he has to offer better quality at lower price in a market like India which is so price-sensitive," he said.

However, the market observer felt tariffs had already dipped to unsustainable levels and could affect the health of the industry. He estimates the industry to spend over Rs 5 lakh crore in the next five years to tap the potential of broadband services in the country.

"I don't think it (current tariff levels) is sustainable. We know prices are running low. So, the market has got to consolidate and stabilise for a healthy growth. Otherwise, it is going to be difficult for everybody. The returns (on the current tariff levels) are not good enough for the industry, and bearing in mind the huge investment of Rs5 lakh crore to be made in the next five years – whether it is fixed or mobile or satellite technology – you need a healthy industry to support that. So, price wars are not going to help (anyone)," he said.

Meanwhile, Reliance Jio's free three-month preview offer on its handset Lyf and other cell phone brands in various market has been eliciting good response.

However, due to its face off with legacy players over access to their points of interconnection (PoIs), where one telco's caller's call connects to the receiver's network, the quality of its voice over LTE (VoLTE) is lower than desirable.

"Service (of Reliance Jio) is not stable. For long, there was no connectivity with Airtel. Also heard it was the same with Vodafone. Only last week, Airtel's issue got sorted out. Sometimes, their (Jio's) own apps don't open. Their on-demand app is not opening since the past one month," said a Kolkata-based subscriber Sumit Moitra, who has availed of Jio's 90-day preview offer.

He further informed: "You get connectivity only in Hotel Oberoi in Kolkata, which is partly owned by Reliance. In hotels like Taj and others, there is no connectivity. (I) don't think they (Reliance Jio) are ready".

Though, Moitra is quite satisfied with its data throughput; "no buffering in videos. (They have) Done good on content front (too). Mag app has tonnes of magazines and hundreds of movies in on-demand app".

Ashish Sharma, partner at PwC India, said it was natural for any newly launched network to experience "teething problems".

"I think their data throughput is excellent. Users have experienced some teething problems, like in any newly launched network. That always takes time but that's never stopped people from launching their service," he said.

And once Jio takes care of its quality issue, it could very soon spark off a bloody Mahabharata in the telecom space and bring about a digital revolution that will reshape India.

"If Jio makes the announcement in the AGM, I'm sure they will have enough success in the market to be make their (broadband) services affordable (to all)," said Sharma.