Blame the start of Telecom Data Price War on Jio

A telecom data price war may have started and could get worse…

When Idea Cellular announced that it would cut data prices for high value customers, it was the beginning of a price war on data. The data segment of the telecom industry has not really seen a price war as in the voice segment. So, what exactly has triggered this price war in the data segment?

How the price cut will work…

To begin with, Idea will focus its price cuts on the heavy data usage segment. Typically, customers who utilize over 10GB of data per month are classified as heavy data users. It is for this segment that Idea Cellular has cut the data pack charges by up to 60%. These will be available across the 3G and the 4G spectrum. The idea behind this rate cut is very simple. The data services are steeply priced in the Indian context. As a result, the usage of data is not able to achieve critical mass. This is somewhat similar to the situation that India had on voice calls prior to 2000. Post 2000, the price of outgoing voice calls fell steadily by over 95% and that is what resulted in the rapid spread of voice mobile telephony across India. While internet access over phone has definitely picked up in India, the price of the data packs continues to be a major impediment. For a nation that would want to download heavy duty stuff, the current data plans available in the market are either steeply priced or they are virtually incompatible. The need of the hour was a drastic cut in data charges.

Blame it on Jio…

It would not be wrong to say that a large part of the blame for this aggressive price war lies on the proposed launch of Jio. In a way, Jio is likely to disrupt the data segment with much superior quality of networks at substantially lower prices. Sample this! Reliance Jio will be charging 88% lower costs for data compared to competition. While Idea and Airtel charge data at the rate of 4p/10kb, Reliance Jio proposes to offer data at 0.5p/10kb. While Jio proposes to charge voice calls at the prevailing rate, it plans to disrupt the industry on the data side. The only way Idea and Airtel can compete with Jio is by launching an all-out price war.

Data is the battlefield…

According to Bloomberg, India is the world’s second largest smart phone market. The smart phone market is likely to grow from 105 million users to 220 million users in the next few users. With little to choose between telecom services, the price advantage is all that will matter. It will almost be a case of “Winner takes it all” and the best price will win. Obviously, Idea has been forced to cut data prices. The big story in telecom is in the spread of smart phones and the incremental data revenues. As the market grows exponentially, data becomes profitable even at a fraction of the price. We saw it happen in voice and now in data! ©

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