> In case people aren't aware, the Indian mobile sector was one of the cheapest and most pioneering markets of its time.
Not sure in what way you mean pioneering but it was definitely not the cheapest! Everything cost money. Text messages, phone calls, data, roaming between states, out-of-state phone calls. Everything. All this in addition to the cost of the cell phone itself - no bundled offers with phone like AT&T did with Apple in the US.
Furthermore, you could get away with a connection from private companies like Airtel and Vodafone if you lived in a big city. Rural coverage by these players was notoriously bad. The only substitute available was the one provided by the government itself - BSNL - which got a reputation of having the "best coverage".
All that changed dramatically when Reliance came up with a Rs.500 phone which included a connection with free unlimited calls between two Reliance phones. That was the beginning of true mass adoption of cell phones in India.
> People created the 0 cost phone call - farmers and mobile users could give a missed call to a number they heard on the radio, and then they would get a call back.
This is not an example of a model working well. This is an example of a workaround to mitigate high call costs.
Having multiple SIMs in India will go away, or at least become something only the rich have, it's only a matter of time. This is because having that second SIM is no longer cost-free.
Multiple SIMs in India were a side-effect of it being near-free to have a prepaid SIM to receive calls. This was subsidized by high calling charges (calling from one part of India to another was expensive) and even higher data prices.
Then Jio entered the market with a ground-up 4G network and said, this is BS. Calls and texts are free, with no reasonable limits. We'll only charge you for data, and we'll provide 1.5GB a day or more -- starting at INR 150 a month paid 3 months at a time. The party ended for a lot of operators at that point as they hemorrhaged customers. Most operators simply folded or merged until now there are only 3 private players and one non-serious state player.
Driven by pressure from Jio, the other two private players (Airtel and Vi, aka Vodafone) have decided to amp up monthly charges for pre-paid phones. Essentially, if you're not spending at least INR 120 a month they don't want you. India has number portability so it's not like you're held hostage or anything.
INR 120 sounds super low but it's not for a lot of Indians who earn salaries closer to India's median per-capita income, and also it's an extremely limited level of service, for actual use you need to pay more -- typically around INR 250 monthly for 1.5GB data per day (remember, most Indians don't have wired Internet so 1.5GB data per day is not excessive). Jio and its competitors have hiked prices substantially, of course.
The last refuge for people on limited budgets is the state-run telco, BSNL, but the government will sell it -- it's only a matter of time. Expect prices to spike again, then.
Anyway, multiple SIMs in India are increasingly less viable for ordinary people. It'll take a while for behaviour to change, but it'll change.
It wasn't affordable earlier. In fact internet/data plans were fairly expensive before the 4G days. It's a lot saner now.
>>Companies collapsed and merged and now the duopoly is jacking up prices so much that poor people have to pay 100rs just to keep card active
Please stop spreading lies, I still freshly remember the earlier days of paying some 500 rupees for a recharge and getting barely 150 minutes of talk time and that too with some 25 days of validity. And yeah the SMS, and other services were charged like 1 rupee per SMS.
One of the big wins Ambani claims to have achieved is how Jio exposed scammy pricing practices were in the telecom sector before.
>>All else being equal, the cellular equipment will cost the same
I'm not sure where I read this. But I remember reading several years back, Airtel doesn't buy telecom equipment, it actually leases it, and pays for it as it goes. Which is why the prices were so low even for a new tech rollout like 4G.
Not sure if Jio has the same model.
>>Telecom infrastructure is like any other infrastructure—vastly more expensive to build in the west
Apart from land acquisition costs. India doesn't buy TBMs(Tunnel Boring Machines), from what I know. TBM's are a very capital expensive investment. But pace of building things is very slow in India compared to any such project in the west.
Having said that India does do frugal engineering well.
You can check what ARPU and per individual costs were in the world comapred to India historically for calls. India has always been one of the cheapest places to have calls, and one of the lowest ARPU in any market - and it managed to get multiple mobile phones per person and has a thriving telecom market.
The 0 cost phone call is an example of the market working well - people at the bottom of the pyramid have no money to spend, and given what ARPU was, expecting even lower prices is the stuff of fantasies.
This is innovation at work. I don't know what people are expecting when what they had was already impressive for the time.
>As an Indian, believe me when I say this: "We already have good internet". Our data rates are extremely cheap. I paid less than 1 INR per day (it costs more to get a cup of coffee, which costs around 5-10 bucks) while using Opera Mini on a Nokia dumbphone.
I don't know which part of the country you live in but most of rural India can't even pay Rs. 1 per day for the internet. Also they can't even afford smartphones.
>>"[...] Indians will be able to use Jio for free until the end of 2016, and pay as little as 149 rupees ($2.25) a month for data after that."
For additional context, Jio data rates on a $/GB basis are around one-fifth the price of competing data rates in India, and voice will evidently remain free nationwide, without roaming charges, even after the promotion period ends.[1]
This seems like a game changer, provided Jio can take enough market share and start to turn a profit on their 4G network with the subsidized smartphones and free voice calling.
Free voice calling scares Reliance's competitors because voice still constitutes over 60% of average revenue per user (example: in early 2016 voice was over 70%+ of Bharti Airtel's ARPU[2]). If Jio is successful, voice ARPU should drop like a rock for everybody else. The same will happen with Reliance too, but at least they're dictating the pace and degree of change on their own terms.
I have to also add, that the same parent company (Reliance) was also responsible for the mobile phone explosion[1][2] in India in 2002-03, at the very same price point. I can still remember the long queues in my hometown (pretty distant 2nd tier city) to get a hand on the Rs. 500 phone on the days before. They essentially put a mobile phone on every Indian's hands, and forced entire market prices to come down. Before that, the average handheld mobile was way out of economic reach for most Indians.
Reliance has gone through a lot of restructuring, family issues and some shady flak, but they have been the major drivers of both mobile and internet revolution in India. Interestingly, both at the same price point then (2003) and now: INR500 (USD7 at today's rates).
> If this is an affordable way for governments to bring some Internet access to places that currently have none,
But India is big on cellular. There's cell coverage almost everywhere, especially in states like Andhra Pradesh. You can get pretty decent speeds via 4G.
More people in India have mobile phones than have access to sanitary toilets.
The average Indian user is worth about 0.03c to a network, with no contracts or lockins, and people frequently switch network to network depending on deals.
In fact, in order to avoid fees, a new system has appeared. Calling, letting it ring once, and hanging up. It doesn't cost but it DOES ping the other person.
These call-backs are becoming so pervasive that businesses let people call-back and the business calls them back, at their own expensive, to offer whatever service. Some Indian apps are also incorporating the call-back system into their communication structure.
Don't think that just because we have dumb contracts and bills that the developing world will as well.
Nope. Not anymore. It was in early days of iPhone coming to India. Now users just go for a new iPhone or an excellent Android phone usually at a much lower price.
> Because most indians will glady sell their data for saving up a dollar?
Keep it it mind that a single dollar can buy cooked meal for two persons, or major ingredients like flour rice potato etc for 3-4 persons.
Obviously not everybody is so poor in India, but World Bank defines lower middle class household as somebody earning $10-50 a day [1].
Personally, I had used Jio Sim cards, prepaid, in data dongle, but never installed any of their apps because never felt like I needed. And yes, the reason was exactly you described, best rates, about $5 for a month, for 3GB daily.
Jio is also memed as Oil (Mirror image of Jio), because Data is the New Oil.
Any form of monopoly is bad. However, it's important to note that prior to Jio's entry in the market, the data prices were unaffordable for majority of the population. Post Jio's entry, the same incumbent network providers had to slash their prices.
So they didn't cartelize, and only recently after the insane noise over the 3g auction which fizzled out, did we lose that market.
We've now essentially cartelized (all remaining firms raised rates in tandem), and the few players left are also teetering with Vodafone considering leaving.
This means that we will likely see Jio, and Airtel left, with BSNL constantly being denuded.
Their profits are terrible, and the debt burden because of arrears means they need a rescue, or the future situation will become - impressively - even worse.
I guess when you talk about India you mainly talk about Jio. They are founded by Reliance Industries which is largest publicly traded company there. Most of the network rollout and phone prices (nobody knows real BOM for their phones) are subsidized and the general business plan seems to be to make money from value added services that can be obtained from Jio in the future.
Also to make rollout cheaper they negotiated some exclusive deals with Samsung; wrote their own operational support systems instead of buying off the shelf ( very expensive for deployment and integration) and probably did a whole bunch of other stuff.
It's not something that can be repeated without having large sums of money to support it
> 5. There's a HUGE grey market for phones in India.
I don't think this it true anymore. Brand name Android flagships are available for $150-$200. On the lower end, Jio along with data plan for one year costs $50. There is no price point for Grey market anymore.
This is a bizarre article in the flavor of NY Times India coverage which cannot look at India except through the lens of cow, caste and curry. After all how could a third world entrepreneur build the biggest data network in the world for the cheapest price? Not once but twice!
One instance of how the article is riddled with errors:
"From 1980 to 1985, the number of equity investors in India rose from 1m to 5m, and by 1985 1 million of them owned shares of Reliance. Since equity investors are likely to be middle class and above, this gave Reliance a broader political constituency: instead of buying individual regulators with bribes, they nudged the electorate with dividends."
As per [1] 240 million people cast votes in the 1985 election. So with 0.25% of the total vote scattered across hundreds of constituencies Reliance was able to swing the electorate which is fractured across die-hard political affiliations, economic interests, religions and caste hierarchies. Sure whatever.
Perhaps it is hard for the author to admit that Mukesh Ambani, the current CEO of Relaince/Jio and son of the founder, is a unparalleled operational genius. He singlehandedly led the team that rolled out the biggest refinery in the world in Gujurat in 1999 [2] where "biggest in the world" and India never went together for anything manufactured.
He also rolled out Reliance Communications in the 1990s which was then the cheapest mobile provider by an order of magnitude [3]. That business went to his brother Anil in the family split in 2006 and Anil ran it into the ground. When their fraternal non-complete expired Mukesh built out Jio which again dropped data pricing by an order of magnitude and made voice free. Jio now has the cheapest data in the world [4]. This bankrupted all his competitors who were centi-billion market cap companies and forced them to drop prices and merge. It also bought hundreds of millions of extremely poor Indians to feature phone ownership for the first time. They had the opportunity to what he did but could not. They also wielded the same power with the bureaucracy that he did but were not able to leverage it.
I certainly would like 12GB of data $1.23. Heck, even 10x that is a bargain. But instead of pondering what he did the author spins dark tales of subterfuge, mafia, corruption and bribes.
Mihir Sharma’s book Restart (2014) has a good chapter on this. The answer it seems was, no.
It’s not in the national interest to charge maximal prices for natural resources, and this is followed by many countries even today — China and the US included — and such rights are given away for a nominal or modest price, and always with a view to ensuring wide market participation.
Even European spectrum auctions have a clear aim of ensuring a sustainable market of 4 or more effective competitors.
This has been historic practice in India also. For instance, the British colonial government gave India’s other big industrial group — the Tatas — rights to coal and iron mining in the late 1800s for free to set up India’s first steel plant. Even the BJP’s own Vajpayee government did this.
The CAG’s “notional loss theory”, he argues, is rubbish. And looking at the events in India’s once vibrant Mobile Telecom industry, which has has now been reduced to an effective duopoly, one can argue Sharma was right.
India's billions have had access to Internet for several years now. While traveling last year in rural areas, I was able to get voice and Internet (3G), with data plans costing $4 per Gb. And I had the option to choose from 4 different providers.
Jio has definitely taken the lead in country-wide LTE, compared to HSPA+ from other providers.
This is more like evolution than revolution. Yet Fareed Zakaria goes on and on about richest man, most expensive home, cash generating business, etc.
"My dad left Bangladesh because he didn't want to raise kids in a country where he had to pay a bribe just to get a second phone line installed."
In India we had this problem, I have two anecdotes which demonstrate this.
In 1992 we waited for over a year to get a phone line installed at our place. When the 'lineman' came, we offered him lunch, and I'm sure the dad paid him money for the service.
Fast forward 12 years later in 2004. During this time, Indian government liberalized the telecom market and allowed private sector to provide telecom services.
In 2004, my dad got a temporary phone line for the summer vacation so that I can have faster internet. He got it within 2 days of applying for it. Two months later when my dad wanted to cancel it, the telecom company people kept on trying to make him keep the connection. After an hour of negotiations (when they tried to sweeten the deal) they finally agreed to cancel it.
I'm just saying that it was the same town, same group of people, the difference was clearly in the economic system they were following. The culture evolves in response to the systematic pressures. Change the system, and you'd change the culture.
Not sure in what way you mean pioneering but it was definitely not the cheapest! Everything cost money. Text messages, phone calls, data, roaming between states, out-of-state phone calls. Everything. All this in addition to the cost of the cell phone itself - no bundled offers with phone like AT&T did with Apple in the US.
Furthermore, you could get away with a connection from private companies like Airtel and Vodafone if you lived in a big city. Rural coverage by these players was notoriously bad. The only substitute available was the one provided by the government itself - BSNL - which got a reputation of having the "best coverage".
All that changed dramatically when Reliance came up with a Rs.500 phone which included a connection with free unlimited calls between two Reliance phones. That was the beginning of true mass adoption of cell phones in India.
> People created the 0 cost phone call - farmers and mobile users could give a missed call to a number they heard on the radio, and then they would get a call back.
This is not an example of a model working well. This is an example of a workaround to mitigate high call costs.
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