Building RIL Empire

How RIL Controls What we Hear, See and Think

Shantanu Basu

Reliance Jio is all set to launch its Giga TV DTH network in Mar-Apr, 2019. As if on cue, in the guise of letting the consumer choose his/her channels and pay for them, TRAI mandated choice of individual channels that was hitherto optional. In the process, prices of SD&HD services have been raised by operators by 50-70%. For instance, we subscribed to a premium SD package from DEN Networks for two TV sets for a monthly price of Rs. 610 that has now been revised to Rs. 1020, a huge hike of 67%! Interestingly, on one Airtel HD DTH, the cost for the top-end HD package and a Bengali optional package has risen from Rs. 700 to Rs. 770 per month, i.e. by about 10%.

The obvious conclusion is that cable distributors are being steadily phased out as intermediaries with feed beamers and content owners/generators taking the share of cable operators' profits, never mind the large numbers of personnel that stand to lose their jobs. If Reliance Jio comes out with a predatory price of, say Rs. 400-500/TV/month for their premium HD services, operators like Airtel, Sky and Dish networks could go out of business. With cable and DTH operators going out of business, the Reliance Jio monopoly would emerge. Add more than a third of e-media channels owned by RIL, including conglomerates like Network 18 & Viacom 18, NDTV, English and vernacular like Eenadu (by preferential content sharing), a frightening picture emerges.

As if this were not enough, even though 5G is still years away from being a widely available service, Reliance Jio is already working to bring the next-generation network to its consumers. According to online reports, the company plans to launch 5G services as soon as six months after spectrum auction, which is likely to happen in mid-2019. An unnamed Jio official claimed that the company already has 5G-ready LTE networks and it is aggressively deploying optical fibre lines to enhance the backbone of this network. While we are unlikely to see an actual 5G launch from Jio in the next year, the company will very possibly start the network trials as soon the spectrum is allocated. The company is already performing localised live 5G trials. The government believes the transition from 4G to 5G will be quicker compared to transition from 3G to 4G. No other operator, least of all MTNL and BSNL, have the financial resources that RIL has.

The voice over Wi-Fi (VoWi-Fi) is another service that Jio could be officially introduced this year. It has been in trials since July this year and the testing seems to have been recently expanded to multiple states, including Andhra Pradesh, Kerala, Madhya Pradesh, and Telangana. VoWi-Fi also known as Wi-Fi calling allows the telecom operators to keep the consumers connected even when the cellular signal is not available. It lets the consumers to continue or start voice calls over Wi-Fi in the absence of mobile network. Many of the existing smartphones already support VoWi-Fi and select others can get the support after a software update. It is unclear whether the service will be chargeable or free for the Jio users. BSNL and MTNL will turn fossils within the next year or two.

Reliance Jio's household ambitions aren't limited to just GigaFiber or GigaTV services, the company plans to build a complete connected home platform on the back of its fiber network. This smart home play will include devices like smart speakers, Wi-Fi extenders, smart plugs, door sensors, TV cameras, audio/ video dongles, smart locks, thermostats, and various connected cameras. According to the details shared during the company's AGM, the Jio Smart Home platform will enable the consumers to control nearly every aspect of their home from an application. The company is expected to start offering smart home solutions soon after the GigaFiber commercial roll-out this year. Jio states that the consumers will not have to worry about setting up the smart home solution and the company will be responsible for everything. It claims that the while Jio Smart Home package can be installed in less than an hour by the company's engineers.

After disrupting the telecom sector in the country, Jio is now aiming to do the same with enterprise service market. The company's enterprise offerings are reportedly already in a soft launch phase with the official launch expected in the next few quarters, making it possible for a 2019 debut. According to online reports, the company is looking to offer unified communications, cloud services, managed video conferencing, and more. Jio is apparently in talks with Cisco to extend their partnership for the enterprise services. Cisco has been working with Jio since 2012 on several areas, including the deployment of VoLTE services. The company's enterprise prowess will certainly help Jio tap this lucrative market.

Last, but not the least, is the manner in which TRAI has aided RIL in its endeavors. Generally, private operators do not provide telecom services in rural and remote areas as it is not economically viable. That is the reason that the government created a universal service obligation fund (USOF) to provide connectivity in these places. All operators pay 8% of the adjusted gross revenue (AGR) as fee to the government, out of which 5% goes towards USOF contribution. Jio gave services free for the first four months of its launch. The free data offer was further extended for another three months. Then it made another offer giving unlimited voice and data for four months for about Rs 400. This forced competitors to reduce tariff and as a result the revenue of the industry went down. This also means that the licence fee collected by the government also reduced.

Telecom minister Manoj Sinha told Parliament that the license fee collected by the government fell to Rs 3,450.1 crore in the quarter ended December 31, from Rs 3,584.04 crore in July-September and Rs 3,975.7 crore in April-June. Revenue from spectrum usage charges dropped to Rs 1,553.2 crore in October-December from Rs 1,820.03 crore in July-September and Rs 1,995.2 crore in April-June. This resulted in reduction in allocation of funds to USOF by Rs 1,600 crore for the financial years 2016-17. There was a growth of about Rs 2,300 crore in the funds in 2015-16 compared to the previous year. Generally, USOF fund contribution has been growing every year. This is for the first time that there is a drastic fall in the licence fee collection. If funds are depleted from the USOF, this could, in theory, certainly delay the goals of Modi's Digital India program as the government would have less funds to tap into while setting up networks in rural areas. In effect, this means GOI would remain hobbled in underwriting rural connectivity. Obviously, RIL would then step in and provide these services for an attractive return on investment. Let us also not forget Rcom (ADAG) declaring bankruptcy; presumably this company will be picked up for a song by Bade Bhaiyya.

Related to Jio Giga Fiber are the recent GOI rules that now bar Amazon and Flipkart Online Services PTE from owning inventory and require them to treat all vendors equally, throttling discounts and exclusives—a huge advantage to homegrown companies, including RIL's new venture. RIL which owns India's largest retail chain and third-biggest telecommunications network has the potential to evolve into a local version of Amazon or Alibaba Group Holding Ltd. Reliance can gain market share in new-age retail given its starting point of 280 million telecom subscribers, a broadband offering, extensive content and a web of 10,000 stores nationwide. The company also wants to partner with India's 12 million mom-and-pop shops to create distribution and delivery centers. Reliance resembles Alibaba in its ability to offer bundled services in a fast-growing, fragmented market with low online penetration. Both Amazon and Walmart will have to reduce cash-back payments and discounts—a sore point for smaller sellers, who accuse the pair of predatory pricing. To meet rules, the companies have also removed thousands of products from virtual shelves, must redraw contacts with merchants and brands and are bracing for a full-fledged e-commerce policy that is under review. Flipkart's losses may rise 20 percent to 25 percent following the changes. Effectively, competition is being wiped out to make way for RIL's new venture leading, eventually, to yet another private monopoly.

In the final analysis, GoI, and RIL, has developed a cosy crony relationship founded on deliberate exit from the critical telecom sector and leaving it to the monopolistic mercies of India's largest industrial conglomerate. The existing mobile/broadband operators are mired in debt, twice more than what their current earnings justify. RIL will now invade our homes and privacy and hold the GOI to ransom, indeed as a parallel govt. RIL has grown from the early 1980s and retained a secular approach to ruling political parties. RIL's digital push has come the most in the last five years. Is it then surprising that TRAI's order mentioned in the opening para of this post is happy facilitation by a compliant Govt. on the eve of crucial general elections in 2019, when RIL's expansion plans are finally commissioned? India's ruling govts. may well be decided by the likes of RIL today, as they already do TRAI Chairpersons.

[The author is a senior public policy analyst and commentator.]

Vol. 51, No. 52, Jun 30 - Jul 6, 2019