Mukesh Ambani-led Reliance Jio forayed into the Indian telecom segment, receiving an overwhelming response from the customers, backed by its disruptive pricing strategy. The flames of the curious ones have been fanned, for they seek to know that how Reliance manages to provide 4G at an affordable rate and how it still it isn’t a loss to the company.
I have been following Reliance Jio’s developments for quite a while now, and I’ve some lengthy albeit interesting findings.
Why Mukesh Ambani wanted to enter Telecom Sector?
Let’s explore a personal aspect here. In June 2005, when the Ambani brothers had a fallout, Mukesh Ambani lost “Reliance Infocomm” to Anil Ambani. Furthermore, a clause was agreed upon that Mukesh Ambani could not venture into telecom again, which was eventually dropped in 2010.
Obviously, there’s much more than personal rivalry. Mukesh Ambani knew that the current telecom operators were not playing fair, charging high prices for data, just because they can. He knew that the major telecom companies (Read: Airtel, Vodafone, Idea) virtually formed a cartel; Just to maintain high data prices and restrict competition. So utilising his prior knowledge of starting Reliance communications, he decides to break this cartel and enter into this lucrative market. Dominating a price-aware market with such affordable rates makes sure that you get a huge control of the Internet in the world’s largest democracy.
How Does Reliance Provide Unlimited Free Voice Calls?
First, Reliance has an all-IP network, and no fallback 2G/3G network of its own. So voice calls go over the Internet, which is termed as VoLTE. Compared to other networks, including but not limited to Airtel, the network switches back to 2G/3G whenever a call is received or made. It’s almost akin to making a WhatsApp call. I mean, how ludicrous it would sound if WhatsApp starts charging for making phone calls?
Can you see how there’s no point in charging for voice anymore for VoLTE enabled networks like Jio? Therein lies the secret of how Jio manages to provide free voice calls.
How About Unlimited SMS?
Seriously, How many of you do rely on text messaging as primary means of communication? With Jio offering crazy-fast Internet, I cannot see a reason why anyone would text message over a WhatsApp/Hike message, save for a one-time thing like availing SMS based banking. But still, Jio is offering unlimited SMS but with a catch: it’s not actually unlimited, but capped to 100 SMS/day. However, that’s much more than the majority of users are likely to hit in a day.So why advertise about unlimited SMS when it has become obsolete? Because, that makes for an attractive offer, on paper.
It’s like saying we know you rarely send an SMS, so we provide 100 free SMS/Day disguised as free unlimited SMS because you’ll never know as you rarely send an SMS!
How About Unlimited Data at Night?
Jio has built its infrastructure from scratch and decided to venture only into 4G technologies, without the need to support older 2G/3G technologies. Jio has already laid a massive 2.5 lakhs KMs of fibre backbone throughout India, with offering bandwidth up to 20X more than Airtel.
Pair this extremely large fibre network with a new-born network that doesn’t have lakhs of users clogging the network resources, what do you get? Massive amounts of bandwidths for everyone!
Once you have built an entire network infrastructure, it virtually doesn’t cost anything for the network provider to give you internet data.
So why do other ISPs not provide unlimited data? Simply put, they lack the bandwidth to handle enormous amounts of data. Whilst, Jio has a vast fibre foundation which is claimed to be even 5G/6G ready.
Exploring Jio’s Tariffs
In India, the monthly average revenue per user (ARPU) the current network providers get is around Rs 150 per month. That is the money they get on average from each user. If you spend over Rs250 per month, you are considered a high-value customer.
Which plan would you choose? If you are a voice-only kind of person, then you would be okay with the Rs 149 per 28 days plan, as you will get free unlimited voice calls. But, even though you are not explicitly paying for voice, you are already paying over Rs 150 per month, thus their ARPU will by default be as good as the current players.
If you are someone who uses over ₹150 worth of voice calls every month then it is an awesome plan for you. But, my point is that other telecom companies make about ₹150 per month on average from each user by charging for voice, SMS, data and roaming. Jio will be making the same/more amount of money on average from each user even after providing SMS, roaming and voice calls for free, by just pricing things differently.
Now, if you are a moderate data user, which plan would you choose? Did you see that there is no plan in-between the ₹149 and₹499 plans? This is basically a psychological trick to get you into the ₹499 plan. Many people will compare it with the smaller plan and see that you are getting Unlimited 4G night data and choose at least the ₹499 plan.
Now, again see that if you want to really use more than 4GB of 4G, then you have to spend double and move to the ₹999 plan. Did you notice that there is nothing in-between?
Also, notice that all these plans are for 28 days which can easily be perceived as ‘a month’ by most people. If we divide the number of days in a year with 28, we realise that we are paying for 13 ‘billable months’ in a year. (365/28=13.03)
The real money is in Jio Apps
Many people may consider their apps to be bloatware and don’t even install it. I also thought of it as a bloatware when I first heard of it. But, when I tested them out, I saw real potential in them.
- JioPlay : This has the potential to become a TV channel company. My prediction is that Jio will soon release something like Google Chromecast to provide this service directly to TVs. The ability to watch Live TV channels on smartphones is also a cool idea, especially in India. This may become the most used app in rural areas too.
- JioOnDemand : This has the potential to become the Netflix of India. Imagine if those who currently pirate movies had the option to get those movies in HD quality legally for nearly free. It can benefit both the users and the producers.
- JioBeats : Legal music. It has the potential to become Spotify of India.
- JioMags : Most popular magazines in eBook format. My cousin who reads tech magazines on a regular basis loved it.
Do you get the point?
They can make any type of app in the future and dominate that category with minimal efforts.
They are currently giving these apps for free till 2018. But, that is done so that they can get maximum users to get addicted to these apps. Then they can start subscription charges for these apps. Instead of paying for your TV service or Movie-DVD or Magazines, Jio wants you to pay them.
Apart from that, these apps are locked to Jio network. So, a person using any other internet service won’t be able to use it. Thus, this will force other people into joining Jio. Currently, only Airtel is capable of properly competing with Jio in the 4G market, but they too may not be able to release such apps on time.
Will Jio reduce my bills?
Mostly, Yes. If you are someone who uses more than ₹150 worth of voice calls every month, then you should see a huge reduction in bills. If you are someone who uses a lot of 3G/4G data, then you should see over 50% reduction in your bills, provided that you do not increase your data usage. Also, you will get superior 4G network coverage with better speeds. Also, 3 hours night unlimited, Wifi hotspot access, free voice calls, free SMS, no roaming charges, free access to live-tv are an awesome bonus.
But you will likely spend the same or more.
If you are someone who uses 5GB of data every month, and you were currently spending ₹1000 per month with the current providers, you will be happy that you can get the same amount of data for ₹500.
But, you are likely to spend the same amount of money over the time and consume 10GB of data for ₹1000, instead. This is because 4G speeds are awesome and now there are much more ways to spend the data. And, since you have the budget for it, you are likely to spend more.
So, even though you are getting much more value than the current operator, Jio can still make the same/better revenue. This may not be applicable to everyone, but may happen to most people.
Is this good?
Yes, we need companies like Reliance to make such bold moves and invest in India. This is good for everyone. It is a win-win situation. It will increase the progress rate in India and will improve our quality of life. You, as a customer will get 2X to 3X more value for your money, yet Jio will make as much profit as existing telecoms by pricing things differently. When their apps, devices, and fibre services are added up, they are here to win multiple business verticals. And, at the current stage, they are almost unstoppable.
A very special thanks to Kshitij Salgunan whose original article inspired this post and some of the points have been reproduced with his permission. Follow him on Twitter @KshitijSalgunan