RJio's 'Free' Strategy: Success or Failure?

India's Reliance Jio, which launched commercial services in September, claims to have captured about 16 million customers in its first month of operation. But how many of these subscribers will stick with the company once the offer of free data services expires on December 31?

The increase in customer numbers has already come at a substantial cost. The latest data from the Telecom Regulatory Authority of India (TRAI) indicates that Reliance Jio offers some of the lowest data speeds in India today, of about 6.2 Mbit/s. According to TRAI, market leader Bharti Airtel Ltd. (Mumbai: BHARTIARTL) provides the highest average 4G download speed -- 11.4 Mbit/s -- while Reliance Communications Ltd. , Idea Cellular Ltd. and Vodafone India offer average speeds of 7.9 Mbit/s, 7.6 Mbit/s and 7.3 Mbit/s, respectively. RJio's apparent inferiority could prove very disappointing to customers that raced to join the service.

RJio has responded to the publication of TRAI data with a statement that tries to explain why average speeds are lower than for India's other telcos. "As you may be aware, under the Jio Welcome Offer, there is a daily fair usage policy (FUP) limit of 4GB data consumption per user … Before this FUP limit is reached, Jio customers enjoy unmatched 4G LTE speeds on the Jio network," it says. "However, after the FUP usage limit is reached, speeds are reduced to 256 Kbit/s. Full 4G LTE speeds are once again restored once the next 24-hour period begins."

RJio had expected its generous offer to trigger a sharp rise in demand, and taken steps to support the addition of up to 1 million subscribers each day, but its infrastructure has struggled to cope. It has been targeting 100 million subscribers by the end of the year, but at the current rate is likely to end up with about 60 million.

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Even so, the quality of services seems bound to suffer as subscriber numbers grow. That could be very damaging for RJio, which has been trying to differentiate itself from older rivals on the basis of quality. Another problem it faces is that most customers currently joining the network are using RJio SIMs as secondary devices, having been lured by the free voice and data package. They are unlikely to start using RJio as their primary service if quality remains in doubt.

In all likelihood, then, RJio will lose a good chunk of its subscriber base once its free data offer comes to an end. With other telcos upping their game by expanding networks and reducing prices, subscribers may have plenty of alternatives.

Media reports suggest that RJio might extend the free offer for another three months (until March 2017). But the operator might still need to take drastic steps to improve its network, and ensure new customers do not disappear.

— Gagandeep Kaur, contributing editor, special to Light Reading

komatineni 11/7/2016 | 5:30:05 AM
Free = lets use it but paid = change/swap the sim Rjio just want people to experience but as we have seen in the past and in other service consumptions, Indian market is a bit special. It is very hard to make people habituated and pay for it. In addiiton the biggest driver today is Video and most of the people do enjoy video at home or use WiFi to download or get the small SDHC cards at dirt cheap price. So overall I am pessimistic and really hope RJio would be succesful in creating the eco-system for masses to pay for data and use it.
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