Ever since the advent of Reliance Jio, mobile internet costs tanked tremendously. The decline was so steep that India’s mobile internet rate per GB was the lowest across the globe by a fair margin. And as the dust around market consolidation settled a bit, we saw the telcos increasing the tariffs steadily. However, to date, Indians enjoy the cheapest 4G mobile connectivity.
During this time, while the average global price per GB of data was $8.53, the price India was approximately Rs. 11.88 as per TRAI. However, all this is set to change. Time and again telecom companies have asked TRAI to set the floor pricing for mobile Internet and if that happens, the honeymoon days are over for sure.
Recently, Bharti Airtel’s Sunil Mittal has stated that the current pricing is not sustainable for companies and has hinted at a major overhaul of data pricing in the country. According to Mittal, if the current data consumption habit includes mainly streaming movies, songs and other content online then it needs to be paid for accordingly.
He has hinted that the Average Revenue Per User (ARPU) which is currently Rs.157 per user needs to go up to Rs.200 by the end of the year, though he would prefer this to be around Rs. 250. This suggests that users need to buckle up for a price hike of up to Rs. 100 per GB of mobile data by the year-end.
But why the price hike now?
According to IAMAI, as of May 2020, India has approximately 500 million internet users that are driven mainly via mobile internet services, yet the internet penetration is just 36 per cent. While the users in the rural base are as low as 22% which suggests that there is still a lot of scope of improvement in internet adoption in the country.
While IAMAI had stated that it is impractical to choose such a limit with barely three service providers in the market and does not support deciding a limit especially when each service provider has different cost structures and different cost of delivery of services.
However, according to the telco’s the current internet rate is way too low for them to sustain and have thus urged the regulatory body to fix a minimum price band per for mobile Internet.
Given a major shift to VOIP and streaming services, Telco’s feel that their revenue share has decreased drastically. Now a single recharge helps users to watch video content and make calls over the applications like WhatsApp, Google Duo etc.
With a decrease in revenue, the telecom companies are holding back on investing in new infrastructure and network upgrades. India still operates over a 4G network despite Reliance Jio promising massive investments to upgrade to 5G. Also, this has resulted in a sharp industry restructuring. Since then most companies are struggling to recover the heavy amounts invested in the infrastructure.
Vodafone-Idea, on the other hand, has been vocal about its struggles and had approached the regulatory authority to raise the floor limit and thus ease some tension. Though the company has a massive amount to pay up its AGR dues, it has clearly stated its inability to infuse further equity into the business to clear these dues.
This discussion around the floor pricing would have happened by now if the coronavirus outbreak had not disrupted our lives.
Reliance Jio, while has been the market disruptor, is also reportedly in favour of a floor pricing for mobile Internet in India. Though it had proposed an amount of Rs.20 per GB as compared to Rs. 100 quoted recently by Airtel’s Sunil Mittal. Among all the local telco’s, Reliance Jio is not only in the best position as of now thanks to the massive inward investments that it has gained during the lockdown but also has been readying its indigenous 5G solution.
Given the current situation and all three major telecom service providers looking for a floor price, it looks very likely that your phone bills may increase shortly. How much, only time will tell. And while the telcos are gunning just for the floor pricing, TRAI also plans to start a debate on floor pricing for data and voice soon.