Why did Reliance Jio Seek to Stop Rivals’ Premium Offerings?
Image source: DNA India
About a week ago, a small news story caught my attention. The article published on The Mint said TRAI had issued orders to block a new scheme offered by both Bharti AirTel and Vodafone Idea to treat premium users to faster internet speeds on their smartphones. It struck me on two specific grounds (a) why would a regulator block better service and (b) what prompted them to take up cudgels with the two service providers in the first place?
The article quoted an unnamed TRAI source to suggest that the plans of giving premium service to all customers on Rs.499 plans and above was “in violation of quality of service norms. It will shortchange existing customers and it is also not clear what the new customers are being offered, given that the parameters are not quantifiable.”
Sounds crazy, isn’t it?
The argument sounded specious and one could even say facetious. For, why would a regulator object to better service to those who pay more? And, how did they decide that the parameters weren’t quantifiable? There are several options available to state and define quality of service for both internet and voice services, aren’t there?
Answers came within 48 hours itself as another report, this time in Hindu Business Line, said it was Reliance Jio that complained to TRAI. The report quoted from a letter dated July 7 from the company that termed its rivals’ tariff plans as discriminatory. “In case a service provider deploys a method to provide priority access to only one set of customers, it will undoubtedly deteriorate the service quality available to another to another set of customers…any such offering can clearly be claimed as discriminatory,” the letter reportedly said.
The matter didn’t end there. Reliance Jio claimed that offering higher speeds to those paying more was not measurable or verifiable by regulators and customers, it said while suggesting that “claims of faster speeds by the telecom service providers can also tantamount to a case of misleading customers.” Obviously, R-Jio lawyers, or whoever it was that wrote the complaint, haven’t heard of Tutela or Open Signal.
Mirror mirror on the wall…
Or maybe they have. Because when I did my own ferreting around these websites that offer users the ability to measure quality of voice and data services, I came across this report. It goes back two years but what it states is significant as readers can themselves see. Furthermore, the links to Open Signal and Tutela also indicate that Airtel was the leader on most of the key parameters, viz., consistent quality, download throughput and latency. Both Vodafone-Idea and R-Jio battled for second spot. You can download the report via the Tutela link given above.
Thankfully for Airtel and Vodafone-Idea, the telecom tribunal ruled in their favour and said both companies can continue signing up customers under the premium packs. It was Vodafone that had approached The Telecom Disputes Settlement and Appellate Tribunal (TDSAT), which has also allowed TRAI to continue its probe into whether the schemes violate customer norms.
A report in the Hindustan Times said Vodafone Idea had alleged that the TRAI order was “only to help the cause of Reliance Jio which was not even a proper party to the case though Jio had pleaded that it would be directly impacted by the case. This begs the obvious question: Why would R-Jio be worried about how good or bad a rival’s customer experience is? And what is the “direct impact” that the company talks about in its original complaint?
What’s the trouble though?
This is where things get rather murky. For, in their rush to become the market leader, Reliance Jio went about offering connections to everyone and their grandmothers. Though the company doesn’t believe in sharing such data, reports say that premium subscribers account only for a very small percentage of their customers but contribute to a quarter of their revenues.
Moreover, in their frenetic race to the top of the pile, the Jio network slowed down as millions of customers sucked up low-cost bandwidth, leaving the premium customers thirsty. In fact, it is only TRAI that places Jio at the top of the pack for internet speeds, while most others place it on second or third slow now. Why else would Jio sue Ookla (Speedtest.net) for declaring Airtel the best in terms of internet speeds?
But, that’s not the only reason that Reliance Jio is having to bare its fangs. Since the company now holds 30% of market share, as per TRAI regulations, it is now a “significant market player” and therefore not allowed to undercut its rivals in terms of price. Which means the company too may have to create a premium band if it hopes to retain its high-end customers. And this could mean extra expenditure to enhance bandwidth availability at least in the cities as the choked pipelines caused by low cost users needs to be expanded or freed up.
So, if its competitors offer a better surfing experience to their best paying subscribers, there is a real chance that both Airtel and Vodafone-Idea could end up luring more Jio subscribers. There is a bigger issue at play because Reliance Jio would be left with more low value customers who could then clog their pipelines even further.
With investors like Facebook and Google having forked out big sums of money, they too would demand a pound of flesh by way of subscribers who can shop on their networks. And, no prizes for guessing who these potential shoppers would be – those using Rs.499 packs!
It is not easy to cut the clatter of Reliance Jio’s regular media blitz and focus on something that appears to be just a spec on the horizon but could end up as a dampener to the whole Reliance Jio Platform dream.