Dressed in identical waistcoats, Reliance Jio's three executives looked like some kind of alternative boy band when they appeared on stage at last week's Digital Transformation World event in Nice, said Mark Newman, a chief analyst with event organizer the TM Forum. "What's your first song?" joked Newman on introducing India's most exciting operator.
Uniform as they appeared, Reliance Jio was not cut from the same cloth as India's older operators. And if one had to put a musical theme to it, the style would surely be guitar-smashing rock instead of production-line pop. In less than two years, it has gone from zero to 200 million customers by flouting tradition and leaving a trail of destruction behind it. Rivals have been blown out of the market. (See Fierce Competition Batters Airtel Profits Again.)
When you are literally giving away voice connectivity, and charging peanuts for data, it helps to have an owner with the elephantine pockets of Mukesh Ambani, India's richest man. Few other companies worldwide could have dreamt of building such a network from scratch. Even in India, where the absence of low-cost data and a profusion of players meant potential for disruption, people doubted RJio's strategy.
"One of the beliefs was that people would not use data that much," says Anish Shah, RJio's IT president, during an interview with Light Reading after his on-stage appearance in Nice. "We proved it wrong."
But if the lack of any existing infrastructure or customers was a huge investment challenge, it also left RJio unencumbered by the old technologies and mindset that have made digital transformation such a headache for the industry. It took inspiration from the likes of Facebook and Google (Nasdaq: GOOG), and not other telcos, when designing its network.
What it has now built is one of the most automated and decentralized networks on the planet. Its operating costs are just one half those of Bharti Airtel, its biggest rival, according to Shah. It spurned the likes of Amdocs Ltd. (NYSE: DOX) and Netcracker Technology Corp. when picking a billing and charging system, going instead with the totally unproven SAP AG (NYSE/Frankfurt: SAP). Samsung Electronics Co. Ltd. (Korea: SEC), rather than Ericsson AB (Nasdaq: ERIC), Huawei Technologies Co. Ltd. or Nokia Corp. (NYSE: NOK), was chosen as the main RAN (radio access network) vendor. And the infrastructure is becoming more web-like by the day. One half of the technology footprint is now fully open source, up from just 5% when RJio started out.
Decentralization has been critical from commercial, regulatory and technological perspectives. Rather than having departmental clusters in giant urban facilities, it has scattered about 1,000 "Jio centers" across the country. In essence, each center is a fully autonomous mini operator that can function independently, even if other centers experience problems.
"It is a full business unit with technical, channel management, customer support, admin and regulatory staff," says Kiran Thomas, a president at Reliance Industries, RJio's parent company. "If you need permission to dig on a road it is a local officer you approach, not a national body. Being closer to them means getting work done in the fastest way."
This decentralization will go even further with the development of even smaller "Jio points" to serve rural communities. About 10,000 of those points are planned. At some point, such efforts will prove counterproductive, acknowledges Thomas. But the idea is to push decentralization as far as it will go before this happens.
This approach sounds potentially expensive, and yet RJio can point to a healthy margin for earnings (before interest, tax, depreciation and amortization) of 33% in its last fiscal year. While that is lower than the 36.4% Bharti Airtel Ltd. (Mumbai: BHARTIARTL) reports, RJio spent a whopping 42.9 billion Indian rupees ($630 million) on access charges, partly for terminating calls on networks that serve more customers. At INR49.2 billion ($720 million), its network operating costs were not massively higher.
Automation from the outset has kept those costs to a minimum. "If there is interference or congestion, our antennas can be tilted remotely," says Shah. "Humans are already out of the loop in a lot of areas. The next wave will be driven by artificial intelligence."
Reliance Industries does not break out employee numbers for RJio, but Indian press reports over the last two years put the figure at about 40,000. Future cutbacks seem likely to be much sharper at less automated companies. Anish and Thomas agree with assessments that most of today's networks could be operated with between 10% and 20% of current staff numbers. But they believe new business areas, like the much-vaunted Internet of Things, will provide fresh opportunities for people. (See Huawei Can Help Cut 90% of Networks Operations Jobs, Says Senior Exec .)
In the meantime, RJio's automation lead might give it a big advantage with the rollout of 5G networks, which will have too many configurable parameters for humans to manage, say experts. RJio has already built an open source framework for automating performance management, configuration and fault management. It has also integrated this framework with systems from Ericsson, Hewlett Packard, MYCOM OSI and Nokia. "There is an upgrade path in that for moving to 5G in future," says Shah.
Open source is also driving the development of tools and components used in artificial intelligence (AI). While largely dependent on external partners right now, RJio expects to become more self-reliant in the next year or so. It has opened offices to recruit talent and developed internal programs for training in the use of open source technologies.
Next page: Rage against the machine
Rage against the machine
Without splashing this generous dollop of open source over its networks, RJio fears it will not be able to scale up fast enough in the coming years. Working with SAP on a closed system for billing and charging took as long as a year, notes Shah. "I don't think we will have that time in the future," he says. "We are building our own capabilities."
But these comments beg two obvious questions. First, why did RJio start off with licensed rather than open source technologies? And second, what does the shift to open source mean for existing partners? After all, a company like Cisco Systems Inc. (Nasdaq: CSCO), which RJio has used in its network, is not known for its commitment to openness. (See Cisco Bows to Carrier Demand for Software Outside the Box.)
Shah says a decision to start with proprietary technologies was taken largely because open source was insufficiently mature when RJio was booting up. "There are many things we've seen in the last three years that were not mature at first," he explains. "We wanted a strong and solid foundation."
He also downplays the threat to RJio's existing suppliers. A fair point is that the percentage of technologies using open source is growing as the network and business expands into new territories, including the enterprise and fixed-broadband markets. That means an open source push does not necessarily have to come at anyone's expense. In addition, nearly all vendors now have an open source strategy, including Cisco, says Shah.
What seems irrefutable is that an open source strategy will put further pressure on those vendors to adapt. If traditional suppliers cannot satisfy telco demands for open and interoperable technologies on more favorable terms, their business may eventually dry up, as operators turn instead to more flexible startups and in-house R&D.
RJio is certainly not afraid of tearing up the rulebook and taking risks: "Our most unproven solution was our billing and charging system," says Shah. "We were the only telco using SAP for online charging at scale." RJio settled on the German software company after deciding the usual suspects were interested mainly in supporting brownfield rather than greenfield operators. "SAP was hungry to get into this space and invested engineering time in adapting their products to principles that were sacrosanct to us," says Thomas.
Samsung, similarly, was chosen in preference to much larger RAN vendors as the main provider of 4G technology. Partly, it seems, that was because RJio also had a smartphone problem to solve, and Samsung could offer both network gear and handsets -- presumably under favorable terms. But Samsung was eager to show it could measure up on the networks side, according to Shah. "The product was solid and the engineering commitment was there," he says. "It was a business opportunity for them to prove they could do it."
RJio regularly makes headlines in Indian newspapers for the impact it has had, and continues to have, on the country's telecom sector. And while those headlines have naturally focused on the operator's marketing and commercial success, it could never have happened without an appetite for creative destruction in networks and IT. Like any decent rock band, RJio is still raging against the machine.
— Iain Morris, International Editor, Light Reading