Tech is the Best Way

JIO is ready to disrupt the Industry with Gigafiber

With a firm and ever-tightening grip on the wireless cellular space, Jio’s ambitions have grown to include the wired broadband space as well. To this end, it is set to announce its wired broadband offering—Jio Gigafiber—on 15 August. In a country with an average internet speed of 6.5 Mbps in 2017 according to Akamai’s State of the Internet report, Jio Gigafiber is promising speeds of 1 gigabit. It’s a promise that will have consumers excited, but competitors worried.

And these competitors are not just limited to the wired broadband space. Mukesh Ambani, chairman of Reliance Industries, said that Jio Gigafiber will offer broadband internet, cable television and landline voice services. In telecommunications parlance, it’s called a triple play. One provider offering three services to a household. This effectively means it will be Jio versus everyone—cable television operators, internet service providers (ISPs) and DTH services.

The shockwaves have already been felt. Shares of multisystem operators (MSOs)—which offer both cable and broadband services—fell after the announcement. On the day of the announcement, Hathway’s shares fell by 15%, Den Networks and Siti Networks fell by 10%. Airtel, Jio’s biggest rival in the telecom space, is already readying for the fight–it did away with its fair usage policy (FUP) on wired broadband services in the Hyderabad circle. FUP is a cap on how much data a customer can consume at high speeds, beyond which speeds drop to 512 Kbps.





Jio’s goal is grand—onboard 50 million home broadband users across 1,100 towns and cities. This is huge, considering that Telecom Regulatory Authority of India (Trai) data from March 2018 shows wired broadband players in India have 21.24 million subscribers in total. The total number of fixed-line telephone users in India stands at 22.81 million. The total number of active paying DTH subscribers stood at 67.53 million. Jio doesn’t want to simply enter these segments, it wants to take over.

To make this a reality, Jio says it has allocated Rs 250,000 crore ($37.57 billion) to push its wired and wireless broadband. A senior telecom analyst in a financial services company told The Ken that Jio has allocated Rs 65,000 crore ($9.97 billion) just to build its optic fibre cable network. At present, he says, Jio has over 300,000 route kilometres of optic fibre cable across the country.

The Ken sent a detailed list of questions to Jio, but with the launch of Gigafiber so close at hand, the company was unwilling to answer questions.

At this point, it seems like the existing ISPs, MSOs, DTH companies and other cable providers are spectators watching the juggernaut of Jio rolling in. After the success of its wireless cellular services, another wave of Jio-powered disruption seems like an inevitability. But will it really be so straightforward? Far from it.

Beta trials for Gigafiber


To start with, it needs to be noted that, while Gigafiber is yet to officially launch, Jio has been laying the groundwork and testing the service for the past year. Apart from simply fine-tuning the product, Jio’s extensive beta trial period is geared towards monitoring customer usage of the service to figure out their pricing plan, says Viranch Damani, a technology journalist in Chennai. Damani has been tracking the beta trials along with a friend who is part of the programme.

In addition to Damani, The Ken spoke to two other people who are part of Gigafiber’s beta trials to better understand Jio’s game plan. All three concur that the “giga” in Gigafiber is a bit of a misnomer. At least in the beta stage. They say that the average speed per Gigafiber household is closer to 100 Mbps.

As for data, Ajay Awtaney, editor of business travel website Live From A Lounge, says that in Mumbai, Jio currently offers a 100 GB cap but with the option of top-ups. “Right now, users will get 100 GB of data each month, and if they run out of data, they need to go to the MyJio App and top-up with a recharge. The top-up is currently free, and they get an additional 100 GB of data,” he explains. Awtaney says that he got on the Jio Gigafiber trial in January, when the company started laying optic fibre cables in his neighbourhood of Ghatkopar, Mumbai.

In Chandigarh, a source who works as a doctor in a prominent hospital, said that he was able to get into the beta trial as he saw people laying the fibre near his home. In cities like Chandigarh, he says, the entire infrastructure for fibre is hooked onto electric poles. Gigafiber’s data caps here follow a different system than in Mumbai, though. “They give you 40 GB increments 25 times in one month. They call it special tariff voucher,” the source says. This means that customers could get up to 1,000 GB every month as part of the beta trial. The speeds, he adds, are lower than what they’d advertised. “They’ve been advertising 100 Mbps, but I’m getting around 70-75 Mbps download and around 60-65 Mbps upload speeds,” he says.

The one consistent feature across locations, the source and Awtaney confirmed, is that the company charges Rs 4,500 ($65.53) as a security deposit for installation of the service. As part of this, says Awtaney, customers get an Android device which looks like a set-top box but doubles up as a wireless router and can connect to televisions. The device also has an output for a phone landline connection. In the Chandigarh source’s case, however, the officials said that they would install the set-top box for television later. He was only provided a router.

Media reports indicate that the initial trials were held in some parts of Navi Mumbai and South Mumbai.

A Jio customer care executive The Ken spoke to said that it takes six months to connect customers once they have registered. But if the fibre is already being laid out in a neighbourhood, this can drop to one month after getting permissions from housing societies.

Now that Jio has laid out the groundwork, the question is whether this will translate to market dominance when Gigafiber moves out of the beta phase.

The street fight
Unlike in their wireless cellular operations, Jio is unlikely to explode onto the scene when it comes to wired broadband. The fact is that a wired broadband play is very different from a wireless telecom one. The latter is far easier to scale, with telephone towers granting coverage to large masses of people. The former, however, requires a lot of effort to reach each user.

“If it (Jio) has, say, 100 million homes as a target, it's probably going to take around 4-5 years to get there.”

A SENIOR TELECOM ANALYST.


The CEO of an MSO company, who did not wish to be named, explained that it isn’t easy for companies to wire individual homes. “For a single house, it takes a team of two people and at least 3-4 days. And if one has to do it underground, which MSOs often do, it’s a lot more difficult. It will take years for Jio to penetrate [the segment],” he says.

Similarly, Udit Mehrotra, CEO and managing director of Gurugram-based ISP Spectra, says that it takes weeks to months for Spectra to enter a new neighbourhood. To illustrate his point, he lays down the number of steps it takes for a customer to get a fibre connection. “If you go to Spectra’s website and order fibre broadband, it’s going to be quite an engaging process. You have to fill up the paperwork. Then we need to verify the details. We will call to fix an appointment. You will need to be present or ensure someone else is present. It takes two 2-3 hours to fix the whole thing. You also need to agree to the path the cable will take to enter your home. Then our team will connect the fibre broadband,” Mehrotra says.

And then there are the permissions.


Simply to enter a town or city, a company has to get right of way from the local municipal corporations. After that, it needs further permissions from residential complexes and housing societies to enter neighbourhoods. With commercial buildings, owners have to give permissions.

In Jio’s defence, there is talk of fixing right-of-way permissions in the government’s Digital Communications Policy. Mehrotra, though, is sceptical. “The right of way is given by a local municipality, and it is their issue. It’s not even the state’s matter, let alone a matter for the Centre. So, even if there is a national policy you would still need consensus of the local residents,” he says.

Cut the cord


Earlier this week, telecom and ISP associations protested the Bruhat Bengaluru Mahanagara Palike’s (BBMP) decision to cut optic fibre cables which were above ground. The associations said that they were constrained by a lack of permissions from the BBMP, and had to resort to installing the cables above ground. They also called for comprehensive policy to ensure right of way in the city.

Spectra’s current operations, Mehrotra explains, are a reflection of this reality. After 18 years as an ISP, Spectra is only present in six cities—Delhi, Gurugram, Noida, Mumbai, Bengaluru, Chennai, and Pune. Mehrotra says that it has been a challenge to enter a new neighbourhood, nevermind a new city. Spectra, he indicates, felt it was more prudent to spend their efforts building capacity in the existing cities rather than spreading themselves thin.



Because of the difficulties involved in ensuring last-mile connectivity, MSOs tend to partner with local cable operators (LCOs). Jio, though, doesn’t want to enter into agreements with LCOs, as it wants to own the entire infrastructure and maintain a direct relationship with the customer. This, said the MSO CEO, will require a lot of manpower and could slow Jio’s expansion.

Adding to these challenges are the costs involved. A 30 July report from brokerage firm Ambit Capital pegs the cost of reaching a subscriber in wired broadband to be anywhere between Rs 7,000-31,000 ($101-451), with deployments of fibre-to-home being on the higher end. The type of construction also affects this cost, says Kunal Bajaj, CEO of CloudExtel, a Bombay Gas venture which provides fibre network services in South Mumbai. Connecting greenfield projects, where the building is still yet to be built, will be on the lower end, Bajaj explains. “But if you have to go back and connect units in low-lying areas or older areas, then you can get a cost of more than Rs 10,000 ($145) a home,” he says.

Is the price right?


Perhaps then, Jio would look to make its presence felt in the wired broadband space just like it did with wireless telecom—pricing. Leaks on price comparison websites like MySmartPrice say that Jio Gigafiber will start their plans from Rs 500 ($7.28), with speeds starting at 50 Mbps and a baseline FUP limit of 300 GB per month. Speeds and data caps will increase with marginal (roughly Rs 250 or $3.64) increments in pricing. Its premium plan is expected to cost Rs 1500 ($22) per month and will offer users a speed of 150 Mbps and an FUP limit of 900 GB per month.

The rumoured plans are, by all accounts, attractive. However, unlike in the wireless telecom space, they aren’t that much better than what incumbent ISPs are offering. Broadband players such as ACT Fibernet offer similar speeds at comparable price points. However, they offer slightly lower FUP limits than Jio. But even on this count, they are willing to take Jio head-on, offering users an extra 1,500 GB of data if customers buy half-yearly or yearly plans.

At Spectra, the company has a similar strategy when it comes to pricing. Mehrotra said that the company’s strategy is to offer time-bound offers only for specific neighbourhoods. “Unlimited plans is something that we offer across the board. It is one of our foundation stones. That and offering speeds of 1 Gbps. But depending on the opportunity, we keep considering special offers in areas,” he added. Similarly, Mumbai-based Hathway is slashing its prices, offering 100 Mbps speeds with a FUP cap of 200 GB for Rs 700 ($10.19).

Interestingly, Jio’s own exploits in wireless telecom have also eroded its ability to win the wired broadband battle on the back of pricing alone. After all, why spend on broadband when you have enough mobile data to meet your requirements? In fact, according to the Ambit Capital report, large daily data allowances by telecom operators have made wired broadband connections redundant altogether for light users (homes consuming less than 100 GB a month).

Hathway has also come to terms with this. In their March 2018 quarterly analyst call, Hathway MD Rajan Gupta made it clear that the company is more focused on users who consumed over 60 GB of data a month. Those who consumed less than this, Rajan indicated, were invariably being drawn away from fixed-line offerings by cheap mobile internet.

Digital killed the TV star
In the end, a lot of Jio’s hopes for market domination will rest on its TV play. This is because the primary driver for internet consumption in India is video streaming. However, the mass market isn’t consuming video through streaming services such as Netflix or Hotstar. Instead, they still favour television. Jio wants to be a bridge between these worlds by bringing television online.

To do this, Jio aims to provide all the television channels offered by MSOs and DTH companies through their Jio TV app.

For months, Jio has been tying up a number of content deals with broadcasters for its TV app. Currently, the Jio TV app is available for mobiles and tablets on both iOS and Android operating systems and is free for users. At the moment, it has more than 575 channels for customers to choose from, including 60 HD channels. Jio now wants to make these channels accessible on larger screens, effectively disrupting DTH players and MSOs. Predictably, this has irked incumbents in the segment, who are trying to protect themselves.

In July 2018, when analysts asked Jawahar Goel, Dish TV’s CEO, what he made of Jio’s entry into wired broadband, Goel was none too pleased. “Some of the broadcasters said that they only have a contract for the small screen, and specifically, the bigger screen contract is barred as far as Jio is concerned. I asked them to issue a statement to that effect, addressed to all the stakeholders in the distribution space whether it is DTH or Cable,” Goel stated.

Goel, though, insists that even if Jio did manage to secure contracts for bigger screens, it wouldn’t be the end for players like Dish TV as it will only affect affluent urban consumers. “We should also not forget that we have families living in the semi-urban and rural markets,” he said.

Another advantage that DTH players have is their wireless service, which many feel will act as a buffer against revenue and subscriber erosion. Not only do they already have a national footprint, but DTH is able to reach areas that Gigafiber will not be able to reach. “The challenge is going to be the premium DTH subscribers,” says CloudExtel’s Bajaj. These users, he explains, account for a significant portion of DTH revenue as they’re the ones who spend on HD, video-on-demand and annual packages.

For all players—ISPs, MSOs, and DTH services—Jio’s threat to their market share is very real. But it doesn’t threaten their very existence. At least not yet. In time, though, Bajaj says, they will have to consider consolidation so as to defend against the unceasing march of Jio. With Jio breathing down their necks, it isn’t a question of if but when.
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