THE PAN-INDIA launch of Reliance Jio (RJio) mobile phone services with “4G” network technology on September 5 has caused quite a flutter—in the media and the market and among the public. The stock values of other service operators have dropped, and the subscriber base is projected to grow to 25 million in the immediate run. According to news reports, the sale of 19 brands of 4G handsets offering the Jio platform together accounts for 65 per cent of the 67 million 4G handsets shipped to India up to June 2016. The company itself has stated that it has set a target of 100 million customers in the shortest possible time. Newspapers have reported that there was a huge rush for RJio SIM cards soon after the launch, and outlets were fast running out of their daily stocks, making people return the next day to line up from early morning. Downloads from Google Play store in India of RJio apps are outpacing mobile apps such as WhatsApp and Facebook.
So what is so unique about the technology and associated services that RJio is offering? RJio’s USP soon after launch is the offer of free voice calls for a three-month period and cheap data rates during the day and free data usage at night. RJio marks a paradigm shift in mobile telephony technology in the country by treating voice also as data.
Mobile networks use two separate modes of connectivity: circuit switching (CS) and packet switching (PS). CS is used for voice calls, and PS is used to send data, such as Internet services, over the network using Wi-Fi. While a voice call is transmitted over a fixed path in the network using CS, to send data, PS breaks the data into smaller packets, each of which is sent over the best path available on the network at that instant of time. Of course, Internet applications such as Skype, WhatsApp and Signal available on smartphones can be used for voice calls, which also treat voice as data and which existing service providers, even with the 3G technology platform, support. So one might ask what is new in the technology of RJio.
Voice connectivity in these applications is achieved through what is called Voice over Internet Protocol (VoIP), which treats voice as data and sends it in packets through Wi-Fi. One would immediately guess that RJio technology too would use VoIP in some form. Indeed it does. The only, but crucial, difference is that while all voice is data for RJio only a small part of the voice call traffic, which is Wi-Fi/Internet based, of the other operators is transmitted as data. What prevented these other operators from doing the same?
“With practically everything in communication being treated as data, this convergence of voice and data was clearly coming,” pointed out Prabir Purkayastha, who is associated with the Delhi Science Forum and the Free Software Movement of India. “This was already evident with Skype, etc., and this [convergence] has already happened in many other countries. These operators just didn’t see what lay ahead. About 70 per cent of their income is from voice calls for which consumers are being charged 60-70 paisa per minute, which should only be two paisa if treated as data. If they were to treat voice also as data, they would suffer a huge revenue loss, and to compensate for that, their earnings from data services should dramatically increase, which would require a major scaling-up of their networks. This is what they have not done. Instead, they have relied on the very high data charges and the huge income from their voice service, which is actually a legacy service from their earlier technologies, to make a killing from Indian consumers,” he added.
“India has some of the highest data charges in the world,” wrote Nikhil Pahwa of Medianama.com, a well-known commentator on telecom technologies. “For far too long, data services in India have been without significant competition, with Airtel, Idea and Vodafone together… clawing market share from everyone else. They largely served their customers well, but they served themselves better…. Bit by bit, call rates have also been going up, as competition is dying [and being acquired by one of the three].”
We call the RJio launch pan-India because before that no single private telecom network operator had ever acquired a pan-India licence in all the spectrum auctions in the country for 2G and 3G services. The only operator to successfully bid and acquire spectrum blocks in each of the 22 telecom circles in the country was a little known company called Infotel Broadband Services Private Ltd (IBSPL) in the auction of the 4G spectrum of the type known as Broadband Wireless Access (BWA/4G) in May-June 2010 for “mobile data only” services with the objective of increasing Internet penetration in rural areas.
How IBSPL metamorphosed into Reliance Jio Infocomm Ltd in January 2013, and how Reliance Jio turned this “data only” BWA/4G licence into a “BWA plus voice” licence post-auction, is a story of subterfuge and blatant violations of the laws of the land in collusion with the powers that be. It is this strategic and calculated game plan plus the business acumen of the Reliance conglomerate, aided by a corrupt bureaucracy that bent rules in its favour, that has enabled RJio to gain this (unfair) advantage over other operators in offering its 4G services across all the 22 telecom circles of the country.
RJio provides its pan-India 4G services on a technology platform called LTE (long term evolution). LTE basically has a higher spectral efficiency compared with 2G/3G technologies arising from its capacity for high-data throughput rates (in bits/s, or bps) for a given megahertz (MHz) block of the spectrum (and hence greater transmission speeds). In October 2010 the International Telecommunication Union (ITU) ruled that only LTE-Advanced and other equivalent technologies that allow for throughput rates of 1 Gbps and more would be recognised as “true 4G”.
However, coming under commercial pressure from business enterprises (of the United States in particular), the ITU has permitted even marketing LTE as 4G technologies. Although LTE has been deployed in many countries of the world—in fact, Sri Lanka was the first Asian country to deploy LTE for its 4G services in 2011 itself—the throughput of nearly all LTE networks is only up to a maximum of 500-600 Mbps; RJio’s throughput is currently only around 100 Mbps.
Basically, RJio’s 4G roll-out is on a legacy network that it assiduously built up in the six years between 2010 and now, ostensibly for BWA+voice services across the country, which, however, were never rolled out in the five-year period as mandated by the conditions of the 2010 auction. RJio is not the only company that is deploying LTE technology. Some operators—Bharti Airtel, Aircel, Idea, Telenor and Vodafone—have, in fact, deployed this already and others are waiting for the “4G ecosystem to develop” before they start. But the crucial difference is that these operators have deployed it for data transmission only even though all of them are licensees of the so-called Unified Licence (UL).
In 2013, the Department of Telecommunications (DOT), recognising the increasing convergence of voice, video and data, modified its policy of “segregated licensing, registration and regulatory mechanisms in these areas to enhance affordability, increase access, delivery of multiple services and reduce cost” and allowed telecom operators to migrate from their existing licences to UL. But none of the other 4G service providers has exploited what is called VoLTE (Voice over LTE, which is in the heritage of VoIP used in Skype, Signal, WhatsApp, etc.) technology, or other appropriate technology, for voice telephony as data.
For BWA/4G services, the DOT has released spectrum blocks in the 800 MHz, 1,800 MHz and 2,300 MHz frequency bands. After the latest spectrum auction in the 800 MHz band, in March 2015, RJio has now either 1,800 MHz or 800 MHz spectrum in 20 circles and the 2,300 MHz spectrum in all the 22 circles acquired in the 2010 auction through IBSPL. RJio has pumped in a huge investment of nearly $15 billion (about Rs.1 lakh crore)—which is about three fourths of Reliance Industries Ltd’s (RIL) $20 billion cash reserve earned from its core business of oil-to-plastics venture—to build up the infrastructure for rolling out its 4G services. It has been doing this through collaboration and partnerships with various telecom infrastructure providers.
According to news reports, RJio’s installation of about 70,000 sites is mostly complete. It has also apparently rolled out nearly 100,000 route-km (Rkm) of optic fibre cables, thus overtaking Anil Ambani’s Reliance Communications’ (RCOM) 70,000 Rkm fibre network. This is nearly how much the rest of the industry has laid in the last 10 to 15 years. Also, this is in addition to the fibre RJio has leased from RCOM. It has also built its own towers numbering about 30,000 as a mix of poles and full ground-based towers.
The basic attraction of an RJio connection is the promise of much lower data rates compared with those of the other operators. But a closer look at even the charges in RJio’s initial offer suggests that they are not as cheap as the company has claimed they are. “RJio does not have any existing voice customers, so they lose nothing by offering free voice calls. But in order to enjoy that free offer, the consumer will have to subscribe to a data plan. As long as the average revenue per user [ARPU] remains high in the data plans, Jio has no problem giving away voice free,” said Purkayastha.
“RJio’s ARPU—even for the lowest slab in their data plans, which is Rs.149 for 28 days—is more than what the bulk of consumers pay today for voice calls to existing telecom operators and almost the same as the ARPU of Vodafone, which has the highest ARPU of Rs.178 per month,” he added. The media hype is that Jio data rates are ridiculously low. For example, RJio has offered Rs.19 for free voice and 0.1 GB of data, which is unlimited at night. This, on the face of it, seems extremely low and attractive but, when looked at closely, is not.
“Rs.19 for a day means it is Rs.570 for a month and therefore not really low. Also night is defined as 2 a.m. to 5 a.m.! The RJio plans, once you look at them closely, look a lot less attractive than they appear at first sight. If we deconstruct the seven-day, 21-day and 28-day plans, offer by offer, and convert them to equivalent monthly plans, we see that there are others who offer services at similar rates. For example, RCOM is offering data services at Rs.500 for 5 GB as against RJio’s Rs.499 for 4 GB, which actually is cheaper than the RJio plan. The only attractive thing perhaps is the initial offer of bundled free voice calls, which will go away after the end of the year,” said Purkayastha.
“Besides the pricing of services itself, the performance of RJio and its countrywide acceptance by the public are going to crucially depend on how it sorts out the last-mile problem,” said Purkayastha. Significantly, 85 per cent of RJio’s fibre network is intra-city (access fibre link up to the towers). So, it would seem that RJio is conscious of the last-mile problem and is building infrastructure to take care of that. Already analysts are ranking the RJio network as the second largest telecom network and the largest intra-city network in the country.
But the other key issue for its performance would be the availability of a commensurate network infrastructure of other operators for RJio’s handshaking and interconnection with other networks. In a significant development during RIL’s build-up towards RJio’s launch, top telecom operators had said that they lacked the network capability and financial resources to provide interconnection to RJio subscribers. Mukesh Ambani, the RIL chairman, had protested against what he perceived as cartelisation by the other operators against RJio.
Indeed, on September 1, a day after Mukesh Ambani announced RJio’s impending rollout, the Cellular Operators Association of India (COAI) wrote to the Prime Minister’s Office raising this issue. “According to incumbents, offering more interconnection points to RJio will not only create a financial burden but also swamp their network[s], and outgoing calls of their customers could get blocked by the huge number of incoming calls from RJio,” Rajan Mathews, the COAI director general, reportedly said. Notwithstanding the reported long queues at the doors of RJio outlets, in the few days after the launch, several consumers have complained of poor service quality, primarily in voice calls. Of course, this could be a teething issue given the free voice call offer made by RJio for the first three months. The true quality of performance can be judged only after that.
The question analysts have been asking is, whether RIL’s $15 billion investment in RJio is fraught with any risk. Is the venture unique enough to sustain itself in the long run? The competitive advantage that RJio has built for itself, thanks to its success in policy manipulations through highly questionable means, could be short-lived, that is, until such time as the other operators catch up by launching their own convergent 4G services at much lower rates than available at present.
But the evidence of the last few years suggests otherwise. The fibre network that RJio has built is formidable and will be hard to beat even if others start today. RJio’s six years’ lead time to build a legacy network gives it a key advantage. The other operators were not awake to the technology advances made in the rest of the world, and it was only a matter of time before these arrived in India, especially after the award of UL in 2013. They should have been alive to its implications for telecom services in the country and made appropriate investments. They were just not prepared enough for this potential shake-up in the Indian context.