Reliance Jio has finally launched its services commercially, six years after winning the spectrum through an auction in 2010. Though the company will start charging its customers from 2017, it is a commercial launch as Reliance has filed its tariff structure with the Telecom Regulatory Authority of India (TRAI). For first four months, customers will not be required to pay for services.
Everyone is talking about low tariff and prices of handsets that the company is offering to the customers. There is no doubt that the tariffs are low and it would start a price war in the market. I would like to demystify Reliance’s strategy on giving services free for four months.
In one of the discussions on a business TV channel in which I was also a panelist, an expert commented that for the first time a Telco is asking its potential customers to test the services for four months and subscribe to it only when they are satisfied. It was a statement about the honesty of the company and how it wants its customers to make a decision after experiencing the services. It sounds great. However, this is not the philosophy behind the free offer. It is more of a necessity.
Reliance has set up a new network. It is a large network and covers the whole country. It is for the first time that any operator is launching services on such a large scale in India. Any new network takes time to stabilize. Generally, for first few months the quality of services is not good.
It may be more in the case of Reliance Jio as it is offering voice on VoLTE (Voice over LTE). It is basically Internet telephony. It is for the first time that VoLTE is being offered commercially on such a large scale anywhere in the world. It has many advantages and would provide good quality voice. However, the fact is that it is not working commercially in any large market in the world. There is always an element of uncertainty.
Then there is unresolved issue of Points of Interconnection (POI). When a call travels from one network to another, it has to pass through POIs. Basically, POIs link two networks. So any new network has to take POIs from the existing networks so that its subscribers can call subscribers of old networks.
Reliance Jio has also sought POIs from Airtel, Vodafone and Idea Cellular. It has asked for 12,000 POIs. The incumbent operators have however given it only about 1000 POIs. So the customers of Reliance Jio are not experience good quality of voice call as of now. There are frequent call drops when you talk to any network outside Reliance Jio.
Let us assume that the existing operators start giving POIs to them from September 5. It will take at least three months for the company to establish Interconnection. A subscriber will not mind poor voice quality if the company does not charge anything. Moreover, he is getting high speed data absolutely free and has been promised low tariff from January.
So giving free service is compulsion for Reliance Jio. There is no doubt that the customer would soon become king. I expect incumbent operators to strike back.