The telecom industry is extremely dynamic; the near-term future is likely to see a number of players disrupting the market, making existing companies and their offerings irrelevant. Reliance Jio recently entered the market with a big bang that many industry analysts termed a disruptive move. Has Jio really disrupted the industry?
Some ‘mega trends’ are emerging; we only need to recognise them! Internet mobile connectivity is exponentially increasing and costs dwindling; in fact, people in India own more mobile phones than toilets. Connected devices are becoming ubiquitous, with digital technologies becoming accessible across industries, education and healthcare included. The Internet of Things (IoT) is already driving up data usage and exchange exponentially.
Content creation and delivery, cognitive computing, cloud and analytics are emerging in a big way and are considered to be the future in this business. With connected devices and digital explosion, bandwidth consumption will explode, for sure. Network and data security will start playing a major role and having ‘data security’ capabilities will become a key differentiator for service providers. Although last-mile internet connectivity will happen largely through fibre optic cables, internet penetration is likely to deepen through space, balloon or drone-based carriers.
What is disruption?
This mega-trend has enormous implications for service providers; to remain in business, leave alone succeed, telecom companies and service providers need to create new capabilities that are required in such disruptive settings. The mega trends discussed will transform the way the customer deals with data and voice in the short- to near-term future.
A quick discussion is warranted on the following issues: what is a disruption? Has Jio disrupted the market? If not what has Jio done?
In essence, disruption is about redefining the way a product or service is delivered to existing and potential customers. This involves completely revamping the way a product or service is orchestrated, viably establishing a new ‘value network’, thereby making existing players and their business models irrelevant. Disruptions are made possible by combining customer insights and cutting-edge technologies and, in most instances, simplifying the product or service delivery offering. More than anything, once a player disrupts the industry, it takes a while for the second mover to imitate such disruption; the originator clearly has a reasonable time-frame to scale up the disruption and make it economically feasible!
No unique capabilities
So, what has Jio done? While close to 75 per cent of the industry’s revenue streams come from voice-related services, Jio has offered to provide voice free for lifetime, along with data, which is charged at significantly lower levels! In effect, users pay for only one service. Data-related services have also been thrown in free for the next three months.
Jio is also swiftly gearing up to provide its own handset ‘Lyf’ that supports 4G operations. Customers are encouraged to use and test Jio’s voice and data offerings and gain experience over the next three months. Jio is likely to put out a new tariff structure early in 2017, after the customer experiences Jio’s service quality.
So, the pertinent question is whether Jio’s entry can be considered a disruption in the telecom industry and among its incumbent players? If we say Jio has caused disruption, it should have built unique capabilities in line with the emerging mega-trends, which existing service providers such as Vodafone and Airtel have not done. Has Jio redefined the way telecom services will henceforth be provided to customers? Has Jio reengineered the telecom service network in such a way as to make existing business models redundant? Is what Jio has done inimitable? The answers to all these questions are most likely a ‘no’.
Hugely risky
Hence, by no means is Jio’s entry a disruptive innovation! It has for sure bloodied the industry with a deep ‘price cut’ (remember DoCoMo?). It is reported to have substantially enhanced congestion on the overall telecom network (competitors call it a ‘tsunami of free voice calls’) and destabilised the incumbent players’ viability but has created the right buzz for customers to test out its services.
It is an enormously risky path that Jio is treading! One cannot forget that Jio has had some major issues with the quality of its network, being tested for several years now. There seem to be a number of hurdles it has possibly overcome. Now, having invested close to ₹1.5 lakh crores, it is in a ‘do or die’ mode and has, hence, made a decision to enter the market aggressively with the freebies so that the customer’s first experience, albeit a bit turbulent, comes with a sweetener that is bound to make it more palatable! More importantly, Jio wants more and more people to try its network.
However it is widely reported that in the last few weeks since its launch, customer responses have been mixed and reports point to severe quality issues in terms of an inability to achieve the claimed speed and response rate. Its capabilities in a service business (telecom and retail) are yet to be fully demonstrated. Even if you take its technology deployment at ‘face value’ its management depth in running a massive telecom operation is questionable.
Data traffic
In spite of these shortcomings, Jio’s assessment that ‘data’ is the future, and its attempts to create capabilities in this dimension are a major plus! Especially, laying miles and miles of optical fibre to achieve last-mile connectivity is a winner, for sure.
At one level, voice is almost free around the world and is generally bundled along with other services. To that extent, Jio’s free voice offer may not be as ridiculous as it sounds. But one cannot forget that even advanced economies are struggling to garner data-related revenue streams that can compensate for the lower voice offering. India has still a long way to go in generating a critical mass of data-related traffic.
In summary, the industry is in for major challenges; customers will want faster and reliable services at the cheapest prices. Regulators will seriously penalise call drops. Investments in technology will need to be maintained. Infrastructure spending will continue to be critical. Spectrum availability, which is in short supply, will be the biggest challenge; companies will bid at the highest price to secure access, but this can fire up their debt, which is already at disastrous levels!