Fiery Firepower...

Reliance has been working on this mega project for almost 2-3 years now and

in a fairly hush hush manner. So scarce has information on this been, that the

minibytes that started filtering out about four weeks prior to the launch were

picked by the media and gave the project a huge build-up. This generated more

media hype than the past launches of many competitors. If this was a calibrated

strategy to arouse curiosity to unbearable levels, then that itself was a

marketing coup. Rs 100-crore-plus media blitz. 5-paise-per-15-second calls. Live

teleconferencing between six chief ministers. 50,000-strong sales network of

distributors. MMS, Internet, MP3 services. Specially-imported handsets. You name

it, Reliance had it. And all these without a formal launch and without a formal

announcement except for one interview by Mukesh Ambani. The actual launch was

somewhat different, though not less aggressive. Prices went up a bit due to TRAI

regulations. And the Prime Minister replaced the chief ministers.

Clearly, Reliance has pulled out all the stops on this one–a real grand

display of economic and marketing firepower.

What is more important than the numbers is the market redefinition that’s

taking place. What Reliance is attempting is to make the telecom revolution more

real for the average Indian. Mobile services of the past have been directed at

the upper crust of society, with a filter downwards. This has happened to a

large extent in major cities, but not across towns and villages. Reliance is

directing its efforts at the base of the pyramid, with some 10 million

subscribers being aimed for, initially. That is a huge number, considering the

total base of all operators collected over the last five years. Coming in as a

late entrant, Reliance had to be different–and it has done precisely that. New

technology, low pricing, countrywide reach, multiple services...

The services being promised are not just mobile telephony–which is what

most operators got into initially. Riding its huge optical fiber infrastructure

that’s been built up, Reliance has thrown in a whole range of goodies. Digital

TV services, Internet access, video on demand and webstores (which will double

up as coffee corners)–all through a countrywide distribution network which

will also double up as gas agencies.

And if that weren’t enough, there is the Reliance Knowledge City, the

Dhirubhai Ambani entrepreneur program, the Reliance Control Center (which some

writeups have compared to NASA!) and, of course, the 132-acre Reliance corporate

headquarters with a five-acre lake.

The campaign itself is basic but huge (five full-page ads in major newspapers

at the time of last count and a mega-hoarding campaign to follow). And it is

directed at India with the promise of leapfrogging the country into a new

telecom orbit.

Designed to make the heartbeat a little faster and rouse the patriot in

you... With the launch happening on the late Dhirubhai Ambani’s birthday, the

menu is complete. Reliance is doing what it knows best–go direct to the

people. For the ICT space, this is a first, and one that’s likely to shake up

a number of people.

Mobile

operators are likely to be impacted the most. They have been fighting a series

of battles against license terms for WLL operators. The WLL service was

initially planned as an extension of wireline services–as a means of providing

quick access in areas otherwise difficult to address. Technically, there is

nothing limited about the technology. CDMA can provide all the mobility that GSM

can. In fact, the USA has worked for years with CDMA technology across the

country. Neither is the service intrinsically cheaper. These are artificial

conditions that’ve been imposed by the terms and conditions under which

licenses have been granted. GSM operators (all mobile operators) contend that

the license fee they are giving to the government should also be charged from

new entrants, regardless of the technology they use. In the absence of sych

license fees, the new entrants are able to offer cheaper access and project

their services as a poor man’s mobile. They argue that this is not a cheap

service, since the options being provided (three-year plan by Reliance at Rs

15,000-odd) far much more expensive than GSM handsets. Therefore, they want the

licenses cancelled. Considering the huge investments made, that is an unlikely

scenario. Under the present terms, CDMA operators like Reliance and Tata

Teleservices cannot provide either roaming or SMS services. Subscribers in any

one local area can use the service in that area only. Delhi is one area; Haryana

has 22 local areas and UP has 42. That means that if the subscriber goes to

another area, his mobile will not work. Similarly, SMS will not work since that

is not permitted by the license conditions. The limitation can be got around by

offering a subscriber different numbers in each local area–but that’s a poor

solution. Because of the controversy, GSM operators are threatening that they

will not interconnect to CDMA networks–as a result, CDMA subscriber will not

be able to talk to GSM subscribers, and vice versa. The handsets for the two

services are also different and a subscriber cannot switch from one to the other

easily in case his needs or preferences change. As usual, the courts are being

approached to solve problems caused by policies that have been inconsistent and

improperly framed to start with.

Conceptually, under present conditions, users who want to have mobility

within one area only should choose CDMA, while those who need roaming (which is

about 25 % of present GSM users) should choose GSM. In practice, the

distinctions could get blurred, provided that pricing plans do not change and

GSM becomes equally attractive within the local area. In that case, pricing

ceases to be the decisive factor, and services being provided kick in.

Limited-mobility CDMA services are also a threat to fixed-line service providers

if the pricing is comparable and the services better. It is akin to being able

to carry a cordless phone to the market, to the office and anywhere within the

local area.

The bottomline, of course, is the size of the market. But in India’s

low-density telephone penetration scenario, that will not turn out to be a

limitation. But the present picture, with moving playing fields, makes the job

bumpy–to say the least.

Eventually, there’ll have to be settlements to make everyone happy–or at

least satisfied. In the meantime, Reliance has put its hat in the ring and

raised the ante with its aggressive launch.

The customer should, of course, gain by way of more services and better

pricing–provided he can make out what is better for him in the current maze of

pricing and options which change on a monthly basis. At the same time, there’s

no such thing as a free lunch and, eventually, the telecom business needs to be

profitable to sustain itself. For now, everyone is making losses and betting on

the future. Hopefully, that future will not remain a mirage.

Shyam Malhotra is Editor-in-Chief of

Cyber Media, the publishers of Dataquest

Editor’s Note: Subsequent to the writing of this column, GSM operators

affiliated to ‘IndiaOne’ announced the first round of rate cuts, lowering

STD and roaming rates significantly. Even as more cuts and sops are being

promised, the Reliance Infocomm launch has already caused its first ripples.

While subscribers are bound to gain from this war for numbers, what’s clear is

that in the absence of policy changes–and therefore, tight budgets for

operators–service quality and value-adds are bound to suffer.