Changing Optics Of Telecom War: RJio, Airtel Compete For Broadband Biz

The next big battle between the country’s two telecom giants, Reliance Jio and Bharti Airtel, is set to be fought on the home broadband front, with both players preparing to grab customers with the triple-play of video, data and voice.

After over a year of testing the waters, Reliance Industries’ Chairman Mukesh Ambani announced last week that the group’s telecom arm, Reliance Jio, would commercially roll out fibre-to-the-home services (FTTH) from September 5 across 1,600 towns. The proposal makes great sense. But Jio will face a tough competitor in Bharti Airtel, which has been first off the block in this arena. Airtel is currently furiously switching its 2.36 million subscribers to home broadband in 100 cities from copper in the last mile to fibre at no extra cost to consumers, either for the Wi-Fi router or the higher speeds.

Airtel’s plan, according to sources in the company, is to connect over five million homes in the next three years. It currently has a fibre network capacity to connect around 10 million homes. According to telcos, on an average only 25 per cent of the homes through which the fibre passes actually take a connection. Airtel, though, is not looking at numbers alone. Its gameplan is to move from average revenue per user (ARPU) to increasing average revenue per account, or the monthly bill of a household using Airtel services for mobile, DTH, broadband, landline and content.

Going beyond the hype of the Jio launch, this means that the two rivals could be neck-and-neck in terms of acquisition of FTTH subscribers if their plans fructify. This is also because Jio has gone in for a more realistic plan than what it had earlier envisaged to reach: 20 million homes, which translates into five million connections, instead of 50 million earlier.

The change in plan, say analysts, could be because of the challenges involved in laying fibre underground, which is not only a slow process, but also expensive because of the high cost to get right-of-way permissions, especially in large cities. Jio launched FTTH in select pockets at an upfront cost of Rs 2,500 to Rs 4,500 for the instrument and free broadband. But despite the free broadband offer it managed to connect only a modest 0.5 million homes. The freebies, however, will soon be over.

It is clear that this time around, unlike during the launch of mobile services, Jio is not looking at becoming a disruptor. Its 4G LTE services for mobiles came with zero tariffs followed by rock bottom prices. The broadband base price, though, has been set at Rs 700 a month for 100 mbps speeds, only slightly lower than Airtel’ minimum base price of Rs 799 per month.

Moreover, most telcos admit that the size of the FTTH market at the prevailing price for triple play services is limited. The is so because only 30 million homes in the country currently have an annual salary of over Rs 10 lakh, the household income level at which FTTH price tag becomes affordable. If rural area is taken away from this equation, then the number of homes that can afford the service falls to 20 million. Even fixed broadband is available only in 7 per cent of Indian homes and big cities like Mumbai fare no better with just 25 per cent homes connected to fixed broadband.

So how does one woo more households to home broadband? Interestingly, the two players are pursuing different strategies. Airtel is wooing its 16 million DTH consumers (about 30 per cent live in cities) by offering them an integrated set-top box that will, apart from broadcast channels (linear TV) through DTH, provide internet, landline telephone as well as OTT channels.

“We think DTH is the most efficient way to deliver linear TV across the country as cable does not reach everywhere and laying it is expensive. For broadband, we have FTTH, through which we will power OTT channels, gaming, conference calls, smart homes, home surveillance and also voice calls,” says a source in the company.

To begin with, Airtel has already piloted a triple-play integrated plan for Rs 1,399 to Rs 1,899 in three cities, which includes postpaid mobile connections, DTH, internet and OTT channels bundled together. Consumers have to pay only one bill for all services from mobile, DTH, broadband, OTT, landline amongst others, and will have a single customer care number. The company will soon launch an integrated set-top box that will power all these services with no requirement for separate ones.

Jio’s strategy in comparison is more diverse, with FTTH being its centerpiece. Mathew Oommen, president of Jio, says “Fibre is full proof and with new technology delivery costs are coming down.” Of course, it also offers the highest speeds. So the set-top box given to FTTH customers will offer broadcast TV and OTT channels, while an IP phone will offer voice calls.

But aware of the challenges in rolling out FTTH, Jio has also bought over cable distribution companies. Through the acquisition of Hathway, Den and GTPL they now have access to over 23 million homes, or 12 per cent of all TV households. But merely a little over 2 million of them have broadband, which has been possible through replacement of the cable backbone to fibre or improving the quality of the coaxial cable.

Jio plans to work with the 30,000 local cable operators (LCO) it acquired via the three companies to find new subscribers for its triple-play box for high-speed internet and OTT channels, while leaving the LCOs to offer TV channels as they did before. But that’s not all. Jio is working on a new technology to use cable infrastructure to offer voice calls. It also has plans to replace coaxial cable with fibre, and upgrade some of the customers acquired from cable companies. Regardless of whether all this is going to be disruptive for telcos or not, one this is certain: New standards of broadband speeds are sure to be set in the industry.―Authored by Surajeet Das Gupta, Business Standard