Reliance Jio is preparing to disrupt the fixed network business as it has disrupted the mobile services business in India. And, as was the case for Jio's attack on mobile markets, it will be hard to separate the various elements that make Jio's attack possible.
The ability to control one’s costs is a key reason why some participants and observers of the access business believe facilities-based competition allows for more innovation in packaging and pricing, especially when combined with differentiated technology choices and business models. In fact, facilities-based competition arguably is most disruptive when it is the business model that is disrupted.
As in the case of Skype or WhatsApp, it is difficult to compete with those who “give away what you sell.” Something of that nature drives Reliance JIo’s success in taking market share from the leaders in India’s mobile services market.
Some would argue it is hard to separate the elements of Reliance Jio’s strategy--radically lower prices, better technology, data-first, voice free--from the vast financial resources that allow Jio to subsidize losses to gain share.
It is not so clear that Jio could have done so if its cost structure was based on sourcing capacity from a wholesale provider.
Some might argue it was not the “legacy free” 4G only approach that lead to Jio success, or even its data-first, content focus, but a business model based on the ability to invest long enough, even at a loss, to drive competitors from the field.
Of course, there is another way of looking at such investment. In markets where profits are scant, investment in facilities is often untenable or quite risky.
In such cases, a reliance on wholesale mechanisms, with a single facilities provider, (open access) have been considered the only realistic choice, even if price competition arguably is greater when contestants compete using their own physical networks. Almost by definition, there is only so much retail price differentiation possible when every contestant buys wholesale at the same prices.
In India, Reliance Jio’s GigaFiber apparently will be priced at half the rates offered by cable TV operators, and is expected to disrupt the cable TV market. Already, before launch, share prices for public cable TV companies in India have started to fall.
The reason is the feared loss of market share. Reliance Jio has triggered a massive consolidation and reconfiguration of India’s mobile services market, in large part because Jio’s entry nearly immediately broke the business models of many smaller providers with sub-optimal scale, and forced even the leading providers to seek additional scale to compete.
As was the case for Jio’s assault on mobile markets, Jio will attack with the latest technology platform. In the mobile business, that meant 4G only, with faster speeds and an emphasis on content services, with low-priced handsets and prices that are drastically lower than originally offered by the other leading competitors.
Jio’s GigaFiber will focus on bundles based on internet access, digital TV, voice and other content and applications.
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