|High VOLTE shock|
|Friday, 13 January 2017 06:03|
A Rs 1,500 smart-phone will shake up the market
Though RJio’s entry into telecom has already sent tariffs through the floor – from an average of Rs 250 per GB, incumbents are now charging Rs 50 in the 4G space – the play has really been at the medium- and top-end of the market. Only those who could afford to buy a 4G smart-phone could avail of the RJio services for all practical purposes, and with this costing around Rs 5-6,000 for a reasonable phone, the market was always limited. It is this that allowed players like Bharti Airtel and Vodafone to slash data tariffs even more for those buying new 4G phones – Bharti Airtel has just announced Rs 9,000 worth of free data for those buying new 4G phones in a new plan that for Rs 345 also offers free voice calls.
All of this will change dramatically with RJio expected to introduce Rs 1,500-2,000 feature phones which can work on 4G bands and offer VOLTE voice calls, the technology used by RJio – some days ago, when in India, Google chief Sundar Pichai had also talked of how introducing a lower-cost 4G phone would completely change the market. Immediately, the game will shift to free voice calls, not just for the middle- to upper-end of the market since even those in the lower price segments will look favourably at spending Rs 1,500-2,000 in order to get free voice calls for life.
This is where government policy becomes very important. Right now, incumbents are using 4G spectrum to offer data services to subscribers and continue to offer voice calls using older GSM networks. If there is a surge in voice traffic after free voice becomes the norm, these telcos will then have to invest more in capacity to augment their ability to carry voice traffic on their GSM networks. Their best bet, in such a situation, is to accelerate their migration to VOLTE networks of the type RJio has – some of them have, in any case, been carrying out trials on this in select areas. The problem, however, is that while lower frequency bands are better suited for this, none of the incumbents have a pan-India network of, say, 900MHz spectrum where VOLTE networks can be deployed. The best bet in such a situation is 700MHz, but thanks to the regulator putting an arbitrarily high reserve price for this spectrum, and pegged it at four times that of the 1800MHz band, there were no bidders for this band in the last auction. The result of this was that telcos which already had spectrum in the 800/900MHz bands continued to enjoy an unfair advantage – the 800MHz spectrum RJio is using was ‘liberalised’ by RCom at a cost of around Rs 5,000 per MHz as compared to the Rs 11,200 crore reserve price for 700MHz. In the past, when the regulator had come up with irrational reserve prices, the government had reduced it – in 2012, while Trai recommended 800 MHz be priced at twice the 1800 MHz price, the Cabinet lowered this to 1.3 times and when the auction still failed, the reserve price was further cut by half in 2013. For reasons best known to it, the government chose not to do the same this time. Were the government to continue to price 700MHz spectrum very high, this will result in a big advantage to RJio.