Reliance Jio’s fiber broadband will force BSNL, Airtel, Atria Convergence, MTNL, Spectra, Hathway Cable, DEN Networks and Siti Networks to come out with innovative business models in the broadband space.
Mukesh Ambani-promoted Reliance Jio has invested $36 billion plus in building the digital communication company and became the largest 4G operator in two years’ time in telecom market dominated by Airtel, Vodafone and Idea Cellular.
Reliance Jio’s fiber-based broadband services called JioGigaFiber will come with routers and a set-top box for television indicating that it wants to rule both MSO cable and broadband market.
India has 18 million wired broadband subscribers and BSNL is the leader with 9.3 million users. Bharti Airtel is in the second position with 2.18 million. Atria Convergence has 1.31 million, MTNL has 0.87 million and Hathway Cable has 0.78 million customers in India.
India Ratings believes that the launch JioGigaFiber, a fibre-based broadband for homes and businesses, by Reliance Industries, has the potential to disrupt the retail broadband segment and open up new digital avenues for the enterprise broadband segment.
JioGigaFiber will increase competitive intensity among MSOs and DTH players. The impact across MSOs and DTH players would depend on their geographical diversity with regard to subscribers, the attractiveness of the market, and tariffs and service offerings.
India has a fixed broadband subscriber base of about 18 million, representing about 7 percent of the total household base of nearly 290 million and a 10 percent TV household penetration. Reliance Jio has set a target of 50 million households, representing 18 percent of the total households, without setting any timeframe to achieve the target.
India Ratings analyst Prashant Tarwadi said Reliance Jio’s broadband target is achievable due to its investment in aggressive marketing plans. Jio’s aggressive marketing could lead to an expansion in the broadband market.
Based on the estimated monthly broadband tariff of INR500-600 per household, the potential market size for 50 million households could be INR300 billion-360 billion and Jio could grab majority.
The entry into fiber broadband will assist Mukesh Ambani and team to grab more revenue share from the Indian telecom market. Reliance Jio’s 4G ARPU is not enough to run a viable business.
Jio will not get more than half a million of broadband subscribers in its first year, says Faisal Kawoosa, head – New Initiatives, CMR.
There is an upfront cost of Jio GigaRouter which CMR expects to be in around Rs 2500-3000 along with the offer. The additional cost for STB will be Rs 2000-2500 for supporting 4K content. “Achieving 50 million by a single operator seems highly unlikely,” Faisal Kawoosa said.
Media reports suggested that Airtel has started to remove FUP (fair usage policy) on some of its broadband plans in Hyderabad offering unlimited data without any cap on Internet speed. The strategy of Airtel is to retain its broadband customer base.
Last-mile connectivity to enter the household segment will be challenging due to a large number of approvals required from resident associations and local authorities, permissions required for gaining access to buildings and customer homes to deploy in-house and in-building cables, and resistance from local cable operators, India Ratings said.
High-density broadband markets are likely to witness competition during fiscal 2019-2020, as the ecosystem is already in place for Jio to start providing its offerings. Regional broadband and cable players operating in third- and fourth-tier towns may not be a competition threat, said India Ratings.
Consumers may shift to Jio as its service offerings including content library and video calling would be superior to basic cable services from existing operators. The majority of MSOs are currently incurring large Capex to expand their optical fibre networks.
India has not seen much consolidation in the wired broadband space. Vodafone recently bought You Broadband. The hyper competition will force small MSOs and broadband cos to look for innovative business models. They need more content to attract customers. Right partners for consolidation will be the key for growth.