Now that we have finally entered December, it’s an interesting time for any telecom enthusiast in India. The reason for the enthusiasm is the purported launch of Reliance Jio. Although Reliance Jio has declared that they would launch officialy/commercially in December 2015, we shouldn’t hold our breath since it’s fully possible for the launch to be further delayed.
Given the enormous rise of smartphones and the move to stream content from cloud, data consumption is at an all time high not only in India but all over the world. This has led to ubiquitous wireless broadband coverage (3G/4G) being a necessity for someone to make the most out of their smartphones. India for a long time has lagged other developed countries when it comes to 3G/4G deployment and speeds. Reliance Jio, with its massive investment, plans to change that. Most tech enthusiats don’t take telecom services seriously or think about it deeply since it’s a back-end of sorts for our computing needs, but this back-end is often what dictates our smartphone experience in an era where “good-enough” smartphones are abundant and specs wars are redundant. There are reasons to be genuinely excited about Reliance Jio’s upcoming launch and they are as follows:
Advantages for Reliance Jio
1. Pan-India 4G network
India was already late to the 3G game. Even when 3G spectrum was auctioned in 2010, a very limited quantity of spectrum was sold to a large number of bidders. No single private operator was able to get hold of pan-India 3G spectrum in 2010. Also, since the quantity of spectrum available was so low and the number of bidders were so high, this led to two drastic effects –
1. Every operator was at best able to get just 5 MHz of 3G spectrum in the circle where they managed to win.
2. Since less spectrum was auctioned and a lot of players were interested, whoever won paid an astronomical price for the mere 5 MHz of spectrum.
The two combined and gave 3G a rather dull start in India. With max 5 MHz of spectrum made available to every operator, the 3G capacity and coverage enabled was very low. Similarly, since an astronomical price was paid for it, most operators’ ability to invest in expanding their 3G network had wound down significantly. This meant that Indians suffered poor 3G speeds and coverage outside cities was indeed pretty patchy for quite some time.
While most operators were fighting over 3G spectrum, Reliance in 2010 had quitely and brilliantly acquired Infotel that had managed to win a pan India 20 MHz 4G spectrum. With careful planning and investments, Reliance has managed to build out a pan India 4G network whose coverage far exceeds the 3G coverage of current operators. According to reports, Reliance Jio plans to launch with 70k 4G BTS as compared to 45-50k 3G BTS which Airtel (largest 3G operator in India) currently has. Also since Reliance has built out a 4G network, it’s inherently faster to 3G but the icing on the cake is that Reliance has 20 MHz spectrum all over India. Most 3G operators in India still have 5 MHz of 3G spectrum in circles with some operator managing to extend it over to 9-10 Mhz in certain circles. I’m aware that the spectrum of 3G operators is paired and therefore theoritically an operator having 10 Mhz 3G spectrum has same quantum of spectrum as that of Reliance Jio but in paired spectrum, a portion of spectrum is fixed for upload and download, whereas in case of Reliance Jio spectrum allocation can be dynamic and more priority can be given to download.
This advantage of having 20 MHz of spectrum was perhaps best demonstrated in Wankhade stadium in Mumbai where Reliance Jio gave out free Wi-Fi and recorded some rather impressive statistics as mentioned below.
As you can see, Reliance Jio has recorded one the best Upload and Download speeds on an international basis and what better way to test the performance of a network than a jam packed stadium.
Having access to such a network that has such vast capacity and coverage will have the potential to radically alter the experience people have with their smartphones, especially the high end ones such as iPhone 6S or Samsung Galaxy S6 where the raw performance is so high that an high performance wireless network has the potential to meaningfully improve the overall experience.
2. Impact on competition
Data rates are rising at a rapid rate all over India. The problem is complicated by the fact that the top three telecom operators in India have formed a cartel. A cartel in this case means that these telecom operators unanimously raise their tariffs to a similar level leaving the end consumer nowhere else to go. The top three telecom operators in question are Airtel, Vodafone and Idea. Whenever either of these three raise their tariffs, the rest follow almost immediately. Both 2G and 3G tariffs have steadily risen at a rapid rate over the years. Just three to four years back one could get a 2GB 2G data pack for just Rs 200 making the effective value of Rs 100 per GB. As of today, in several circles, 1GB of 2G data costs Rs 175. This is a 75% increase in tariffs in just 3-4 years.
The reason why the top three telecom operators have been able to raise the rates of their data packs so much is because the remaining telecom operators in India have very bad data networks. Especially when it comes to 3G, the strength of the top three is further broadened from the rest of the industry giving them more opportunity to increase prices. Only a network like Reliance Jio whose capacity and coverage are so wide can force the current top three operators to reduce their rates. So once Reliance Jio finally makes a launch, expect a price war in the data segment which would last for some time but not forever.
3. Post-FUP speeds
In India, this has been a wide problem that no telecom operator has addressed. Unlimited data packs are unlimited only for name sake since after a certain limit the speeds are throttled. I understand the need to throttle speeds. A wireless network is made of limited spectrum which in turn limits the capacity, if everyone is allowed to use data at full speeds on an unlimited basis, then the network quality would come down during peak hours as the network would be congested and all the network resources would be concentrated at the hands of a few. Although throttling speeds after a certain limit is a practice that might be necessary, in India it’s done at unusable levels by current telcos. Most telcos throttle speeds to upto 80 kbps (10 kBps) which is even lower than 2G.
This has made streaming an unviable proposition in India. Generally, most of our media consumption has happened on an unlimited basis. I mean, when you watch TV through cable or satellite, you watch it as much as you want by paying a fixed fee every month. Similarly, in case of radio, you can tune in and listen to music as much as you want. However when it comes to smartphones, streaming content is done against a data cap that’s fixed. This makes the entire streaming concept a mess since you need to always keep looking at the data being consumed.
In US, T-Mobile has come up with Music Freedom and Binge On to make sure users can stream as much music and video as they want from multiple sources. Reliance Jio can adopt something similar or else if nothing else they can at least increase the post FUP speeds to 512 kbps or so which would make the internet connection slow but meaningful, as current post-FUP speeds are a joke. Also Reliance Jio is setting up a nationwide network of Wifi hotsposts which can further help in offloading data from its network.
Again the reason I’m betting that Reliance Jio can meaningfully improve its post-FUP speed is because they have much more capacity than traditional operators. It’s also possible that Reliance Jio might offer a no-strings attached unlimited data plan, but that seems less of a possibility given the chances of abuse.
Reliance Jio can follow Airtel like way where streaming data can be exempted for its own suite of media apps and that seems highly possible given the lax attitude towards net neutrality by the government.
But one thing is for sure, if Reliance Jio does indeed increase the post-FUP speeds, others would have to follow and this can jump start the streaming revolution in India.
Challenges for Reliance Jio
Although I have mentioned the positive effects Reliance Jio’s entry in India can have, at the same time it faces quite a lot of challenges as well.
1. Addressable market
Since China and India have nearly identical 4G networks, there has been a steady flux of 4G devices in India. The circulation of 4G devices has been gradually improving but the 4G enabled devices right now is still a meagre 1.6% according to a study conducted by Nokia. This means the core addressable market for Reliance Jio is still very small and telecom is a game of scale. It’s absolutely mandatory for telecom operators to have good scale to operate profitably unless ARPUs are abnormally high. Airtel, Idea and Vodafone all have 60% + market share together, whereas in case of Reliance Jio, the core addressable market is just a mere 1.5% as of now. But it’s important to know that LTE shipments are increasing at a very rapid rate with a jump of around 2400% according to Counterpoint.
Leaving the core addressable market problem, there’s also the problem of Ecosystem. Currently, Reliance Jio has spectrum in three bands namely 1800 MHz band, 2300 MHz band and 800 MHz band. The first two bands can’t penetrate (in terms of coverage) as well as lower 800 MHz band. This 800 Mhz band is absolutely crucial for Reliance Jio to have a robust coverage. Most recent 4G smartphones in India support 2300 MHz and 1800 MHz, but very few support the 800 MHz band. How Reliance Jio intends to make handsets support 800 MHz band is yet to be known.
3. Vo-LTE and Vo-Wifi
Since Rjio is a 4G only network, they are planning to carry voice over their LTE (VoLTE) but as usual very few smartphones currently support it. Also the handoff between Vo-LTE and Vo-Wifi is very tricky which even lot of international operators have failed to get right. I understand that calling is now just a feature in the grand scheme of things people do on a smartphone, but it’s still a feature nonetheless and if a network can’t reliably place calls, then that’s an issue for a lot of people.