<div>Andrew S Grove, the former CEO of Intel Corporation, coined the term Strategic Inflection Point to describe a monumental change in business landscape that affects organisations.<div><br /></div><div> The data revolution unfolding in India is nothing short of an inflection point in the telecom industry. Reliance Jio (RJio) has designed its business to take advantage, and drive this data revolution, thereby upsetting the position of incumbents in the industry.</div><div><br /></div><div>RJio, by announcing that voice calls on its network will be free, has disrupted the telecom market in India. The data rates announced are also much cheaper than those of its competitors. The launch of RJio’s services has seen customers queuing up before stores to get new SIMs. That is the best response a new entrant can hope in a crowded telecom market.</div><div><br /></div><div>RJio’s offering stems from the realisation that growth in the telecom market will come from data and not from voice. The offering has resulted in exposing the fallacy of the arguments by incumbent players that their revenue is getting eroded by Over The Top (OTT) players like WhatsApp and Skype. When the Telecom Regulatory Authority of India (Trai) came up with a consultation on regulation of OTT providers, various telecom service providers and the Cellular Operators Association of India (COAI) raised concerns about the loss of earnings of voice and message services due to OTT players.</div><div><br /></div><div> It was further argued that the increase in data revenue is insufficient to compensate for the revenue lost due to services provided by OTT players. However, the RJio offer, where calls within India are free, has shown that data will be the new revenue driver. Data, as is often said, is the new oil, and the Reliance Group understands that too well. It is evident that RJio plans to ride the entire digital space from pipes to content to even data storage.</div><div><br /></div><div>The data released by Trai shows that 94% of Internet subscribers in India accesses the Internet through mobile. This highly skewed metric shows the importance of mobile data in the Indian telecom pie. This is where Jio has struck first and it also has clear plans to target the home and enterprise broadband market soon. It is clear that Reliance has done its homework before the soft launch. The company ensured that there existed an ecosystem with 4G-enabled phones and apps well before the launch. One of the reasons often cited for the low off-take of 3G services was the dearth of affordable 3G-enabled phones when the services were launched in the country. RJio was quick to plug this gap with tie-ups with mobile manufacturers and their own brand of Lyf mobile phones at low price points.</div><div><br /></div><div>The monthly Average Revenue Per User (ARPU) for GSM service is only Rs 125 for the quarter ending March 2016. With RJio’s base post-paid plans starting at Rs 149 and the next plan at Rs 499, the pricing is sure to affect the incumbents in the market, while ensuring an above average ARPU for RJio. This will start a price war that could further erode the ARPUs of incumbents.</div><div><br /></div><div>App-based</div><div><br /></div><div>A mobile phone is now much more than a communication device and RJio has set its sights to take advantage of this by its many apps ranging from TV to cinema to music. </div><div><br /></div><div>Reliance has its interests spread across various verticals from cinema to news channels. Other service providers who do not own content will find it difficult to compete with RJio which owns the pipes as well as the content. Even other content providers like “Gaana” will have a tough time competing with Jio. With Jio planning Fibre To The Home (FTTH) networks, cable and Direct To Home (DTH) providers will also face the heat soon as RJio tries to monopolise home entertainment.</div><div><br /></div><div>A conglomerate controlling communication pipes, spectrum and entertainment/news content raises concerns of monopoly and unfair trade practices. These concerns will surely mount with increasing user base and increasing acceptance of their content services and apps. If content owned by group companies of Reliance are given preferential treatment, this will raise questions of anti-competitive behaviour.</div><div><br /></div><div>Earlier this year, Trai notified the Prohibition of Discriminatory Tariffs for Data Services Regulations, 2016, prohibiting discriminatory tariffs on the basis of content. These regulations ensure that TSPs do not favour its own content channels or apps or those of their partners. How RJio’s content strategy will work and what impact it will have on the content space is anybody’s guess.</div><div><br /></div><div>The launch has also seen allegations of policy change that is purportedly designed to favour the newcomer. When Trai initiated consultations for reviewing the inter-connect charges paid by providers in whose network the call is initiated to the provider where the call is terminated, the incumbent operators raised objections that reducing the rate will only help new entrants. With RJio offering free calls to its subscribers, it has to bear the inter-connect charges for calls made to other mobile networks. Though the rates have been reduced to 14 paise per minute, this could be a significant drain for RJio. Reduction and eventual scrapping of the inter-connect charges as proposed by Trai could be a real boon to the new player.</div><div><br /></div><div>There have also been charges of incumbent players not providing enough inter-connection ports, and also rejecting porting requests from customers to switch to RJio. However, these could only be teething troubles and the incumbents will have to play by the rule. The launch and the alleged predatory pricing of RJio have seen allegations and counter-allegations flying, and this will heat up policy debates in the telecom space in the near future. RJio has announced plans to launch Wi-Fi hotspots and Fibre To The Home (FTTH) in a big way. Thus, the company is aiming to provide data access and content across various delivery networks. Wi-Fi hotspots and home Wi-Fi connection could be used to increase efficiency of the LTE (Long Term Evolution) network, as is done in some developed countries.</div><div><br /></div><div>However, as they say, the proof is in the pudding. Will the spectrum held by RJio be sufficient to sustain the claimed high speeds once the user-base increases? Moreover, Voice over LTE (VoLTE) is still largely untested at this scale. Many providers in developed markets use 2G and 3G networks as a fall-back for VoLTE. Will RJio be able to provide quality service as the operation scales up is an important question.</div><div><br /></div><div>How disruptive will RJio’s entry into the Indian telecom market will only be known in the coming months. But there are already rumours of mergers and acquisitions being negotiated that could result in consolidation of the market. However, it is clear that the market is seeing an inflection point, and data, not voice will be the driver.</div><em><div><br /></div></em><em><div><em>(The writer is a technology lawyer and Counsel at sflc.in, a New Delhi-based non-profit organisation)</em></div></em></div>
<div>Andrew S Grove, the former CEO of Intel Corporation, coined the term Strategic Inflection Point to describe a monumental change in business landscape that affects organisations.<div><br /></div><div> The data revolution unfolding in India is nothing short of an inflection point in the telecom industry. Reliance Jio (RJio) has designed its business to take advantage, and drive this data revolution, thereby upsetting the position of incumbents in the industry.</div><div><br /></div><div>RJio, by announcing that voice calls on its network will be free, has disrupted the telecom market in India. The data rates announced are also much cheaper than those of its competitors. The launch of RJio’s services has seen customers queuing up before stores to get new SIMs. That is the best response a new entrant can hope in a crowded telecom market.</div><div><br /></div><div>RJio’s offering stems from the realisation that growth in the telecom market will come from data and not from voice. The offering has resulted in exposing the fallacy of the arguments by incumbent players that their revenue is getting eroded by Over The Top (OTT) players like WhatsApp and Skype. When the Telecom Regulatory Authority of India (Trai) came up with a consultation on regulation of OTT providers, various telecom service providers and the Cellular Operators Association of India (COAI) raised concerns about the loss of earnings of voice and message services due to OTT players.</div><div><br /></div><div> It was further argued that the increase in data revenue is insufficient to compensate for the revenue lost due to services provided by OTT players. However, the RJio offer, where calls within India are free, has shown that data will be the new revenue driver. Data, as is often said, is the new oil, and the Reliance Group understands that too well. It is evident that RJio plans to ride the entire digital space from pipes to content to even data storage.</div><div><br /></div><div>The data released by Trai shows that 94% of Internet subscribers in India accesses the Internet through mobile. This highly skewed metric shows the importance of mobile data in the Indian telecom pie. This is where Jio has struck first and it also has clear plans to target the home and enterprise broadband market soon. It is clear that Reliance has done its homework before the soft launch. The company ensured that there existed an ecosystem with 4G-enabled phones and apps well before the launch. One of the reasons often cited for the low off-take of 3G services was the dearth of affordable 3G-enabled phones when the services were launched in the country. RJio was quick to plug this gap with tie-ups with mobile manufacturers and their own brand of Lyf mobile phones at low price points.</div><div><br /></div><div>The monthly Average Revenue Per User (ARPU) for GSM service is only Rs 125 for the quarter ending March 2016. With RJio’s base post-paid plans starting at Rs 149 and the next plan at Rs 499, the pricing is sure to affect the incumbents in the market, while ensuring an above average ARPU for RJio. This will start a price war that could further erode the ARPUs of incumbents.</div><div><br /></div><div>App-based</div><div><br /></div><div>A mobile phone is now much more than a communication device and RJio has set its sights to take advantage of this by its many apps ranging from TV to cinema to music. </div><div><br /></div><div>Reliance has its interests spread across various verticals from cinema to news channels. Other service providers who do not own content will find it difficult to compete with RJio which owns the pipes as well as the content. Even other content providers like “Gaana” will have a tough time competing with Jio. With Jio planning Fibre To The Home (FTTH) networks, cable and Direct To Home (DTH) providers will also face the heat soon as RJio tries to monopolise home entertainment.</div><div><br /></div><div>A conglomerate controlling communication pipes, spectrum and entertainment/news content raises concerns of monopoly and unfair trade practices. These concerns will surely mount with increasing user base and increasing acceptance of their content services and apps. If content owned by group companies of Reliance are given preferential treatment, this will raise questions of anti-competitive behaviour.</div><div><br /></div><div>Earlier this year, Trai notified the Prohibition of Discriminatory Tariffs for Data Services Regulations, 2016, prohibiting discriminatory tariffs on the basis of content. These regulations ensure that TSPs do not favour its own content channels or apps or those of their partners. How RJio’s content strategy will work and what impact it will have on the content space is anybody’s guess.</div><div><br /></div><div>The launch has also seen allegations of policy change that is purportedly designed to favour the newcomer. When Trai initiated consultations for reviewing the inter-connect charges paid by providers in whose network the call is initiated to the provider where the call is terminated, the incumbent operators raised objections that reducing the rate will only help new entrants. With RJio offering free calls to its subscribers, it has to bear the inter-connect charges for calls made to other mobile networks. Though the rates have been reduced to 14 paise per minute, this could be a significant drain for RJio. Reduction and eventual scrapping of the inter-connect charges as proposed by Trai could be a real boon to the new player.</div><div><br /></div><div>There have also been charges of incumbent players not providing enough inter-connection ports, and also rejecting porting requests from customers to switch to RJio. However, these could only be teething troubles and the incumbents will have to play by the rule. The launch and the alleged predatory pricing of RJio have seen allegations and counter-allegations flying, and this will heat up policy debates in the telecom space in the near future. RJio has announced plans to launch Wi-Fi hotspots and Fibre To The Home (FTTH) in a big way. Thus, the company is aiming to provide data access and content across various delivery networks. Wi-Fi hotspots and home Wi-Fi connection could be used to increase efficiency of the LTE (Long Term Evolution) network, as is done in some developed countries.</div><div><br /></div><div>However, as they say, the proof is in the pudding. Will the spectrum held by RJio be sufficient to sustain the claimed high speeds once the user-base increases? Moreover, Voice over LTE (VoLTE) is still largely untested at this scale. Many providers in developed markets use 2G and 3G networks as a fall-back for VoLTE. Will RJio be able to provide quality service as the operation scales up is an important question.</div><div><br /></div><div>How disruptive will RJio’s entry into the Indian telecom market will only be known in the coming months. But there are already rumours of mergers and acquisitions being negotiated that could result in consolidation of the market. However, it is clear that the market is seeing an inflection point, and data, not voice will be the driver.</div><em><div><br /></div></em><em><div><em>(The writer is a technology lawyer and Counsel at sflc.in, a New Delhi-based non-profit organisation)</em></div></em></div>
