Can’t do free calls with dumb phones PDF Print E-mail
Friday, 26 May 2017 04:30
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If India had a billion smart-phones, all networks could be 4G ones, and the price-quality equation would get better

Telcos are forced to run 2G networks since that’s the only way 500mn+ people with older phones can stay connected — this dramatically lowers network efficiency





There can be little doubt that, until RJio came along, India hadn’t really experienced the data revolution. How much user behaviour will change once it starts charging users for data remains to be seen, but with 110 crore GB of data per month, RJio’s subscribers are using as much data as the entire US does. Similarly, till RJio came along, India didn’t have ‘free’ voice—people pay for data usage, not for voice calls—but now most telcos are offering some version of it.

In which case, the obvious question is whether the incumbents were taking consumers for a ride and, more importantly, how fast things will change. While incumbent telcos charge more for voice calls than they do for data usage—every ‘voice’ call uses up some amount of ‘data’—with the industry in the red as a whole, there is no question of overcharging as many believe.

What is critical is that, with the advent of 4G technology and the availability of enough spectrum, the game has changed for everyone, indeed RJio itself is based on 4G. Till a few years ago, the average spectrum that most telcos had was around 10 MHz—today, spectrum holdings are up to around four times that. Add to this, the capacity advantage that 4G offers, and we’re talking of a very different world of telecom.

If on average, a voice call on a 3G network takes up 1X of space, it ends up taking up 2-3 times that on a 2G network and around 0.7X on a 4G network. A word about RJio’s VoLTE network here: there is no doubt it offers greater voice clarity than even the incumbents’ 4G networks, but what is VoLTE? If a voice call is made on a 4G network, the quality isn’t very smooth and seems to have gaps—anyone making a WhatsApp call has experienced this. If, however, the network prioritises the voice data-packets through some commands, that call becomes a VoLTE one. As you read this piece, several incumbents are converting parts of their network to VoLTE. This is most certainly a response to RJio, but till 4G networks weren’t available, they couldn’t have done it

More important than this is the revolution that awaits subscribers with, thanks to RJio, the per-byte pricing that has already become the norm. Some years ago, with just 10MHz of the spectrum, and 2G at that, telcos were struggling to cope with even the 400 minutes of voice calls that, on average, customers made. Even if this goes up to 2,000 minutes, on a 4G network—whether VoLTE or not is irrelevant—the usage probably won’t exceed 150-200 MB per month. The capacity that telcos have, however, is so enormous, they can afford to give free-voice to anyone—in terms of having the capacity, that is.

A Bharti Airtel, for instance, has around 26.4MHz of the non-2G spectrum (weighted by revenue-share of each circle). That works out to a data capacity of around 13,900 million GB per year, based on the number of towers it has and the amount of data capacity that each tower has. What its 57 million data subscribers use, however, is around 900-1,000 million GB. So, it has enough, and more, capacity to not just give ‘free’ voice but also to keep offering more data free to its customers, should it want to. If you take just Bharti, Vodafone, Idea and RJio, they have a data-capacity of around 46,000 million GB per year. Even if you assume a 10GB usage per user per month, or around 10 times that on incumbent networks—RJio is reporting such data usage right now—the industry’s 200 million data subscribers use around half this capacity.

If the entire industry has not moved to 4G, and VoLTE after that, it is not because of the money involved, it is because just 300 million of India’s billion phones are 4G—if, however, the government was to pay for upgrading the rest, the entire country could catapult to 4G and the significantly better speeds it offers. Indeed, running 2G/3G/4G networks puts an additional strain on incumbents as making all systems compatible is a real challenge—running 2G is critical if the bulk of Indians, especially in rural areas are to remain connected. So, let’s not blame the incumbents for their legacy networks.

As to why tariffs aren’t coming down further, with telcos having spent upwards of Rs9 lakh crore on capex, the industry needs around Rs140,000 crore of ebitda just to meet interest and amortisation costs versus the Rs50,000 crore or so of industry ebitda today. Unless there is a dramatic hike in revenues—through higher pricing or increased usage—this means a large part of the industry must shut down. And unless government reduces the huge regulatory burden on industry, tariffs can’t come down.



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