The Big Picture- Internet Based Mobile Telephony: What Will Be The Impact?
The era of mobile phones is on the verge of undergoing a vital transformation. From a time when we had to pay Rs.32 per minute, we may be entering into a phase of free calls. The announcement of launch of Jio Mobile Services by Reliance has taken the entire country and telecom industry to a new level. Reliance Jio’s plan will have a cascading effect on the entire industry as it is expected to move from voice to data services in a major way where voice services are being expected to be offered free. The data services are also supposed to be available at drastically reduced prices in comparison to what other companies are providing at present.
Transformation and Impact on People:
What Reliance has done is quite innovative, visionary and impactful. This is going to reposition the whole telecom industry in terms of providing, pricing and experiencing of services. The bars set will be very high for other operators. More and more services are being offered on the digital platform to the consumer. Customer experience along with network is the key which is going to take it forward from here. The Indian customer is very intelligent and price sensitive so he/she would not mind switching to a different network.
The services are not really free as there is a data cap. Looking at the data plans, it cannot be said to be as attractive as they initially seemed to be. For example- Rs50 per GB will be charged when a consumer subscribes to Rs.1400 per month kind of data plan. Voice calls are being provided on VoIP (Voice over Internet Protocol). Therefore, whether call rate goes down or not, charges for data being consumed for the voice call will have to be paid by the customer. From circuit switching we are moving to packet switching. The benefit of this service lies in the fact that from being a voice country, India will become a video country. This is a paradigm shift where now a consumer will get an option to have access to education plus entertainment in the form of video content.
On the other hand, the infrastructure for this kind of seamless network is not in place yet. Right now the network is already choking at the pace consumers are using it. So, they need to be transformed at a rocket speed which is not going to happen. Call drop is a major issue which needs to be addressed. How the infrastructure and related resource capabilities of Reliance will play in the coming time is important as it has slightly bigger edge compared to other players in this field.
Reliance has 4G spectrum at present because of takeover of Infotel. The last mile infrastructure is missing while they do have the backbone infrastructure of broadband (optical fibres). Again at the base station level, microwave infrastructure is not very sound. There might be severe call drops because of this up to 60-70% while connecting to another network. VoIP is never going to give that voice quality which is provided by a 2G GSM services. Connectivity also needs to be seen with other service providers as well because initially a new user tends to make 90% of the outgoing calls to other networks than he/she receives. People may need to buy new cellphones to have a device which supports 4G network. Security of the network is something that has not drawn attention of people. How personal data of individual Indians will be secured on a completely data driven network is a big question.
Impact on Other Operators:
As of now this is an open field and only announcements are made. We need to see what plans will be finally announced by Reliance. If in case there are any monopolistic practices, safeguards are provided for that under Competition Act. The services being provided in the trial period if continue to go on, that would further bring the question of competition in the scene. Free pricing can be offered only for a limited period of time attracting a large chunk of consumers initially. This might appear disruptive to other service providers and they can demand that this predatory pricing will finish off competition eventually. But for this, complaint has to be made if someone is legally aggrieved by it. Just under the garb of Competition Act, one cannot be stopped from offering free services to consumers.
Telecom sector is already stressed. There are indications from the investor community as well as stock market that this kind of pricing will lead to elongation in payback period and return on investment might be subdued. The company should be cautious while going through this route of free pricing and should not fall into a death spiral like some airlines companies did and killed themselves.
The shift has already started and people are moving to data in both urban and rural areas. Other service providers have already geared themselves up to face the competition. In case of any disruption, Reliance does not have a 2G or 3G network to fall upon as compared to other networks. What is apparent now is the fact that 2G might fade away slowly with 3G/4G services running parallel for some time.