One small move may, in certain cases be a cause of revolution. Same can be considered for the introduction of Reliance Jio (hereinafter referred as Jio). On September the 5th, Mukesh Ambani of the Reliance Industries Limited announced start of a new 4G based voice and internet data services through 4G telecommunication technologies. Jio in around 80 days of its inception has attracted more than 5 crore subscribers. This would certainly go as a record breaker in telecom industry.
Jio has clarified that it’s main area of focus and hence source of revenue would be data services rather than voice ones. Jio presently is the only operator which has fully concentrated in data sector and even the voice calls are carried over VoLTE (Voice over Long Term Evolution). VoLTE uses data transfer over IP which is generally faster than the regular method, this seems more important to note as most of the other telecom operators still use and have heavily spend on the earlier 2G and 3G technologies.
The coming of Jio into picture was not as welcomed by the other telecom operators as it was done by the customers. Since the starting of services Jio has been in constant tussle, be it the matter of MNP, the initial test stage, call drops or anticompetitive nature. The telecom operators are blaming each other and the customer is still in confusion over the issue.
The 4G Spectrum Allotment
The years 2015 and 2016 can be considered as starting points in discussions related to 4G network in common parlance, but the allotment of the spectrums started way back in 2010 itself. However questions are raised over the allotment of the spectrums which enable Jio to carry out its business.
Reliance acquired the 2,300 Mhz bands through Infotel Broadband Services Private Limited (IBS). It was reported later that the IBS failed to report to the DoT and the TRAI about its ongoing talks with the Reliance in relation to the later was going to acquire IBS. This non-disclosure can be termed anticompetitive as it blindsided the other participants in the bidding process [V. Shridhar, Frontline, Spectrum Grab, 30/09/2016]. After the 3G allotment there was a lukewarm response for the latter 4G auctions. The IBS managed to buy one block each in 22 telecom circles all over the country, allowing it a pan India presence. Less than a week later IBS issued 95% of its share to Reliance making it the owner of the company, IBS was then later renamed Reliance Jio Infocom Limited [Jai Bhatia, Economic and Political Weekly: Vol. 51 Issue 39, Reliance Jio: Predatory Pricing or Predatory Behavior?, 24/09/2016].
It is alleged that rules were bent to allow the usage of the bands which were earlier meant to be used for data purposes only. When IBS applied for license to operate mobile and landline services it was granted permission to do so by granting a unified license. This caused the government an estimated loss of ₹ 22,842 crore and allowed Reliance to buy the spectrums at much cheaper rate than what others had paid for 3G. Due to the initial intended nature of use, that was making data service available in remote areas, the Spectrum Usage Charges were kept as low as 1% but since then the nature of use has change but the SUC have not. For what other companies are paying from 5% to 8% of revenue Jio is liable to pay 1% this shows a great anomaly. [V. Shridhar, Frontline, Spectrum Grab, 30/09/2016]
Spectrum coverage of Reliance, Vodafone and other Operators
Jio is leading the tables for maximum reach, with reach in all zones followed closely by Airtel which is present in 21 zones. Other competitors include Idea followed by Vodafone, BSNL and Aircel at last. Jio is the only telecom provider to have 2,300 Mhz bands all over the country. Except for Punjab, UP West, Bihar and Jammu and Kashmir it also enjoys 1,800 Mhz bands, and exclusive enjoyment of 850 Mhz bands for 4G in certain parts. BSNL is the only operator to exclusively enjoy 2,500 Mhz bands in all the zones it is present which are 14 in number. Airtel and Vodafone are a mix bag of 2,300 Mhz and 850 Mhz bands, whereas Idea has only 850 Mhz bands. Aircel has 2300 Mhz bands in the areas it is present.
Establishment and Entrance of Reliance Jio in the Telecom Business
Jio, in words of Mukesh Ambani was established taking into consideration the boom in the world and India was lagging behind due to the lack of mobile internet access. The idea behind Jio was to provide faster, better and cheaper internet access to the consumers. Jio has came up with very attractive offers as a part of its starting campaign. It offers free unlimited voice calls and a bunch of data options to select from ranging from ₹ 149 for 300 MB to ₹ 4,999 for 75 GB, this has brought down the price per GB of internet from the existing prices, also as a part of scheme of things customers who buy a LYF Smartphone and use Jio will are to get more offers, LYF happens to be a product of Reliance Industries. The company started with a equity capital of ₹ 15,000 crore and is said to be the biggest start-up in the world.
The public response towards Jio is appalling as was manifested by the serpentine lines which were before the offices of Jio in initial period, which is manifested in the fact that it has reached a number of more than 5 crore subscribers till now. The craze and demand of the Jio SIM is evident from the fact that even thought it was intended to be free of cost, people are buying it in black for costs upto ₹ 500 and above per SIM [Reeba Zachariah, The Economic Times, Reliance Jio sim being sold in black, 04/09/2016]. Though it can be said that majority of this is due to the free data and voice call options which is provided by the company, earlier the scheme was to last till December 31st, 2016 but now has been extended to March 2017.
Though it was in place from December 2015, when it was launched for the trial period. During that time its use was not only limited to its employees, their family members and friends, but reached a whooping 1.5 million people who benefited from it. Although such reach, before the formal starting of the operations of the company, is questioned by some.
The rise of Jio as a telecom provider in the Indian market is nothing but astonishing, be it for whatever reasons. This shows that the Indian society is poised to adopt the internet in a much larger and grander scale. With its inception Jio has also unsettled the existing few of the market.
Telecom Tower Sharing Agreement
Jio has plans for the pan India presence to capitalize the early bird opportunity in the 4G market. To ensure the benefits it eyed for the widespread reach is a must need. Jio in order to do so entered into tower sharing agreements with various existing players. The partners in this agreement include Bharti Airtel, Viom Network, Ascend, Reliance Communications and Indus Towers. Jio is currently using 192,500 network towers which include 45,000 of Reliance Communication, about 82,000 of Bharti Airtel and Indus combined, 42,000 of Viom and 4,500 of Ascend. The company has said that it would using its own as well as rented infrastructure to provide internet services.
These agreements give a strong push towards the pan India expansionist dreams of Jio. Agreements like these also instill confidence that any budding telecom operator needs not to necessarily worry about the infrastructural issues, if they enter in agreements they can start operations and with time can develop their own infrastructure.
Call drops and involvement of TRAI
The coming in market of Jio brought another less common issue as a prevalent one in the domain of the telecom industry. The Promoter of Reliance Jio, Mr. Anil Ambani claimed that about 900 crore calls of Jio were dropped since the service has started. It is alleged that though the customers are showing positive response the existing companies are not.
Call dropping is not a new issue in India, earlier also these kinds of problems surfaced. The TRAI mooted for the penalty of Re. 1 per dropped call, but it was rejected by the Supreme Court. After this it was said that the companies would spend more on building towers and necessary infrastructure to reduce this issue. The problem manifested again with entry of Jio as the calls failed to connect.
Seeing the state of affairs of call drop and the tussle over Point of Interconnection (POIs)TRAI came into the picture. Jio alleged that Jio to Jio calls did not drop whereas Jio to some other network initially 90% calls dropped. Jio puts the blame for this over the other companies. The Qo S Rules provide that not more than 5 of every 1000 calls made should drop and TRAI on the analysis of data found that the “call failure figures to be 0.5% quality of service standards”. TRAI called upon all the companies to come and settle the dispute, over which the companies promised to increase the POIs. The contentions that Jio itself is anticompetitive and thus hampers them was sided by the TRAI as the other operators are paid a termination charge for every call made to their network (i.e for every call a Jio user makes to X company’s number 14 paisa are paid to X). TRAI sided with Jio and put a fine of Rs. 3500 crore on Airtel, Vodafone and Idea combined.
Though after the intervention of TRAI and steps taken by the other players the call drop rate of Jio has came down to 20% from the initial of 90%. This data may seem satisfactory but is alarming as the telecom industry should have been better equipped and benefit of customers should have been made the top priority.
MNP Problem with Reliance and Jio
MNP stands for Mobile Number Portability, it allows the user to change its telecom operator without changing the contact number. Since not everyone favors changing their numbers for the sake of free offers that is where the MNP issue comes into Jio picture.
Jio alleged that the Bharti Airtel, Idea and Vodafone were not allowing the customers to change their numbers to Jio based on unsubstantiated grounds. It further claims it as a violation of Telecommunication Mobile Number Portability Regulation, 2009 and TRAI directions. It is also pertinent to note that when Reliance asked it’s employees to change their numbers to Jio then 4919 MNP requests of such corporate numbers were declined by Airtel [Sami Khan, International Business Times, Reliance Jio number portability issues: Airtel, Vodafone, Idea rejecting MNP requests, Jio tells TRAI, 16/09/16]. The companies have said that the claims of Jio are baseless and they are not stopping the conversions without proper reasons.
This becomes important as without this the existing customers would not be able to switch to Jio. This takes away from the customers a right to knit pick what they find best for themselves keeping their numbers save. The need of keeping a number intact is also manifested from the fact that a mobile number of a person is distributed to numerous person and making arrangements to tell all a new number may become cumbersome and redundant process. The companies at a fundamental level should not stoop to these levels as not only it is anti competitive and they hamper the growth of the other company, but also take the freedom of free choice from the consumers.
The price war, Predatory Pricing and Competitiveness
Coming of Jio launched a cold and bitter war of price and allegation from all sided. The already present companies call the tactics of Jio as predatory and Jio alleges that they by not allowing connecting the calls are behaving in anti competitive nature.
Predatory Pricing, as the word suggest is a method of pricing adopted by the company where it lowers the price of the services provided. Due to this the other players of the market have to reduce the price. The reason being that if they do not they lose the popularity and support of the customers, and if they do the benefit decline. It is usually done to unsettle the previously existing players and to then create a monopoly in the market. The Indian law defines predatory behavior as when the price at which the service is provided is much less than the cost price at which it is produced with a aim to hamper competition. When Jio announced its “ultra” cheap plans all the other telecom companies had to bring down their prices which ultimately lead to a price war where companies almost by cutting the price down by half tried to retain their customers. Companies like BSNL announced that they would compete with Jio on a plan to plan basis. The companies alleged that what Jio was doing was predatory in nature.
Indian telecommunication market is dotted with multiple small and big telecom operators. The real competition though was between the main three of the market, Bharti Airtel, Idea and Vodafone together control around 75% of the telecommunication market. They came into picture when the calls started dropping and allegations raised that they were willfully doing so, so as to refrain customers from switching.
What puts Jio in the position of command is the fact that though it has brought spectrums of lower frequency, but it is essentially focusing in 4G market. Whereas the other players have their respective 2G, 3G and voice based services to monitor, and also to lookout 4G developments. Jio eyes to take the ‘early bird’ benefit in the 4G market, but if the companies invest increasingly in the 4G sector the Jio effect may be turn out to be short lived. What needs to be considered is that not all the telephonic operations can be converted to 4G or VoLTE because of the social economic condition of Indian Society. The income variance still restrains the lower strata of the society to adopt these expensive technologies.
This was not the first time that companies such big came into this dogfight, same was the case with Ola and Uber, Flipkart and Amazon. As is with every case only time will tell that to what extent these offers were predatory.
Free Voice Calls: Is it Real?
Free voice calls, apart from the 4G data is one of the most talked aspect of Jio. The company promises unlimited free calls using the network. Question which needs to be raised is that how much this offer or claim holds true. Jio uses the VoIP (Voice over Internet Protocol) to transfer the voice calls which is different from what traditionally was done as only very small part of voice is sent as data in 2G and 3G services. Since Jio only has 4G services it has lesser options in respect of voice calls.
There are several caveats attached to the concept of Free Voice call which Jio if flouting. Firstly, the best of this service is provided when both the caller and receiver are using a VoLTE network and necessarily a 4G enabled device. When the caller would connect to a person of some other network then the same quality of transfer would not be provided as then Jio would convert the packet based data to circuit switched (which according to the present circumstances is the normal way). Secondly if the customer does not has 4G enabled phone then he would need to have the Jio4GVoice app to facilitate the calls. Finally if some over the top application such as Whatsapp, Skype etc would be used to make the VoIP calls then data would be deducted.
This should be looked in the backdrop of the fact that most of the mobile phones, at least those launched before 2016 are not 4G enabled, this means that if those consumers what to use the services they either need to get the app, or they need to have a 4G phone, which ultimately would make the cost incurred more than what is provided for.
The Prime Minister endorsed it (as per Jio advertisements), the media houses called it “revolutionary” and “game changer” and the competitors call it “predatory” or “anti-competitive”; the true nature however only future would manifest. But what Jio did is that it changed the entire outlook with which the telecommunication was seen prior to its entry. Predatory or not it has been able to set certain standards which the other companies invariably have to compete with. There are several caveats and underlining things attached to the rise of Jio in the Indian market, but it seems well accepted in the market.
This long due innovation was need to bring India at a level pedestal with word on this front, as well as making the fast and cheap internet accessible to all. One of the questions that this Jio battle seems to bring forward is to ponder and consider that how much time would be taken by the telecom industries to rise from this state of hybrid nature and completely shift to VoLTE and whether the same is bound to happen in near future or not.