Will Mukesh Ambani disrupt the Indian telecommunications market again?
A bundled offering allows applications to be tied to the device (consumer lock-in), ensures a recurring revenue base per consumer (cuts churn out) and additional usage (brings in higher ARPU). Cross-bundling between applications, broadband and content enables broad choice of usage, increases stickiness and ensures consumer loyalty. Since broadband ARPU is about six to seven times that of mobile voice ARPU, this is bound to be a money-churner when tens of millions of subscribers sign on, thus creating a captive demand base for all kinds of services. An already existing rich mobile VAS ecosystem of developers will then start building services for the broadband world, enriching user experience and increasing choices.
Should all of this work well, it would indeed be possible for a farmer’s son in Assam to become aware of a national competitive examination three years ahead, plan for it, find distant teachers, download courseware, qualify for the examination, and acquire higher education, just by having access to information through a national digital highway built by Ambani.
So, what are the unknowns that could stifle this ambitious plan?
A key difference between Indian telecom circa 1999 (when Ambani first tried to disrupt it) and the present is, back then cellular was a proven, mature technology that needed no proof of delivery. But LTE today is still very new, and although it is getting deployed in large networks globally, the Time Division (TD) variant that India has allowed is still in minority. This could impact the timely availability of devices that would support the relevant spectrum bands deployed in India. And unless volumes build up, prices don’t drop.
There are still several unanswered questions in India on the issue of spectrum farming as mandated by the regulator. Should the 700 MHz band open up, then another operator would be able to drive a far superior level of spectral efficiency on it than on the higher bands that RIL currently owns.
Voice-over-LTE (VoLTE) is still a green and unresolved area where several operators have differing views. While some global operators are in trials, large-scale VoLTE is still not a reality. RIL’s network should carry both voice and data—and be able to make calls to subscribers on other 2G networks. This has a regulatory bearing as Voice over IP (VoIP) hasn’t yet been fully confirmed by regulators.
Historically, while Reliance has an enviable track record of stellar project execution, much of its success has come in wholesale business-to-business operations. Retail consumer businesses where Reliance sells to the end user have not been enormous successes.
While India’s dismal broadband penetration indicates an enormous unmet opportunity, continuously meandering through a heavily-regulated sector to ensure long-term profitability will require something more than just willingness, readiness and ability.
Maybe that something is called good fortune?
Sridhar Pai founded Tonse Telecom in 2005 as a research and consulting services organisation focussing on Indian telecom. Before that, he was marketing director for US-based tech firm IntelliNet Technologies. He is advisor to select firms, and is on telecom panels at Nasscom and other industry bodies. He holds an MBA from the University of Oklahoma.
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