Our “Innovators Worth Watching” series spotlights interesting and potentially disruptive players across a spectrum of industries.
Reliance Jio’s entry into India’s telecommunication industry has grabbed the attention of industry leaders and analysts alike. A subsidiary of Reliance Industries Ltd., Jio is the new kid on the block who hopes to capture the two-thirds of India’s population who are not yet online.
Jio boasts an initial investment of $20 billion in network and market infrastructure, funded by Reliance chairman, managing director, and largest shareholder Mukesh Ambani. Referring to the ambitious project, Mr. Ambani noted that data is the new oil, and intelligent data is the new petrol.
Jio launched its commercial services last September with eye-catching offers that included free lifetime voice calls and roaming services, along with data at one-tenth of prevailing rates. In just 170 days, Jio added 100 million customers to its 4G-only network.
By undercutting the market price through attractive discounts, Jio is pulling customers from incumbent networks, enabling it to rapidly scale and recover its initial investment. For other telecom players in India, the average revenue per user (ARPU) languishes at $2. Initial data shows that Jio’s ARPU will surpass that. Unlike its competitors, all voice calls offered through Jio are made through data pipes, and industry experts agree that demand for data always outstrips supply.
Reliance Jio is clearly innovative, and strong initial demand shows there is a market for its offering. But is it disruptive to incumbents like Airtel and Vodafone-Idea Cellular? Let’s find out.
1. Does it target people whose only alternative is to buy nothing at all (nonconsumers) or who are “overserved” by existing offerings in the market?
Yes. Jio’s target market includes users who are not yet online (nonconsumers) as well as those who feel the current offerings by industry leaders are too expensive. With its recently launched 4G phone—free for users who join the network—Jio is driving more people to acquire phones and experience the internet. Even among users who already have a phone but use Jio as a secondary sim card (approximately 82% of Jio’s users), there is a strong desire for the cheaper connections offered by Jio. Through discounted offerings, Jio is successfully targeting the low end of the market.
2. Is the offering inferior to existing offerings as judged by historical measures of performance?
Yes. Jio has procured a license to offer coverage across India, a seemingly superior offering compared to other telecom players constrained to certain zones. However, anecdotally and from my own experience, Jio seems to face signal and call drop issues in more remote parts of the country. There are also fluctuations with internet speeds hampering user experience.
3. Is the innovation simpler to use, more convenient, or more affordable than existing offerings?
Yes. Jio’s plans are the cheapest in the world. They do, however, require that phones be enabled with Voice over LTE or VoLTE. But Jio has tackled this slight inconvenience head on. Customers without VoLTE-enabled phones can either download Jio’s proprietary app, Jio4GVoice, to their legacy feature phones, or receive an enabled phone for free when they sign up for a Jio plan.
4. Does the offering have a technology that enables it to improve and move upmarket?
Yes. Jio’s technological core is its network—already the largest 4G and LTE network in India. With fixed-line high speed broadband services, Jio plans to bring nextgen connectivity to enterprises, homes and public spaces. And, unlike its rivals who are financially burdened with the management and maintenance of legacy 2G and 3G infrastructures, Jio’s investment in a 4G-only network may work to its advantage as it moves upmarket.
5. Is the technology paired with an innovative business model that allows it to be sustainable?
Yes. Jio has apps to watch live television, message friends similar to WhatsApp, subscribe to music, and pay for certain products. Once users are onboarded into the apps ecosystem, Jio can charge for premium content. Essentially Jio is competing against the free time of end users, luring them in with its expansive suite of apps and then capitalizing on its premium content. This approach will enable Jio to tap into granular level consumer insights. By monetizing customer data, Jio can cross-sell or up-sell various services. This initial investment in network infrastructure can enable Jio to move up-market to become more of a media and content company along with traditional telecom services.
6. Are existing providers motivated to ignore the new innovation and not feel threatened by it at the outset?
No. Incumbent providers are responding to Jio with offerings that mirror Jio’s pricing in order to prevent defections from their networks. If Jio is not able to differentiate itself moving forward, this could prove to be problematic.
Jio seems likely to be disruptive to industry leaders thanks to its data-driven business model. Yet the fact that incumbents are fighting back with similar packages is a challenge Jio needs to overcome. To do so, Jio can leverage its app ecosystem and its investment around network infrastructure to build on-demand network(s). These can connect independent unorganized markets who provide services to customers (in the same way that services like Uber connect drivers with passengers). This way Jio can channel virtually all consumer activity—from listening to music, to connecting with friends, to facilitating business transactions—through its network.
While incumbents may try to mimic Jio’s app ecosystem, Jio will have the upper hand because of its data-driven business model coupled with network infrastructure. Regardless, the fact that Jio is reaching people who formerly lacked access to mobile phones and the internet is a promising sign for India’s economic growth. Already, thanks to Jio, India has become the world’s top mobile data user. In the years to come, there is a huge potential for the Indian population to contribute to the economy as a result of this increased connectivity.
