Vodafone Idea CEO Ravinder Takkar has urged competitors Bharti Airtel and Reliance Jio to gradually move away from daily data plans, and said such plans made ‘no sense’ as consumers don’t use data uniformly.
Daily data or unlimited plans were introduced by Reliance Jio as part of its Welcome Offer when it launched its services five years ago.
The idea behind offering a generous amount of data that would expire at midnight was two-fold. First, it would help consumers get over their ‘fear of running out of data’ by promising a refill by the time they wake up the next day. Secondly, it was designed to address the ‘data hoarding’ mentality borne out of the high price of data till then.
Before Jio, a consumer who purchased a 3 GB data pack for Rs 600 would not think of using it for watching Youtube videos, as he could easily exhaust his monthly quota in a couple of days. For the remainder of the month, the user would not be able to get access to data even for basic necessities such as email and WhatsApp.
Jio, which gave new data top-ups every night, delivered users from this fear of running out of data.
Secondly, it countered the ‘hoarding’ mentality and spurred consumption through the forced expiry of the daily quota after 24 hours. Since the data would anyway lapse at midnight, users started consuming it for watching Youtube videos and so on, something they would not have done earlier.
However, there was also a ‘selfish’ reason behind the ‘daily data’ model, to do with Jio’s network.
If a telecom services provider gives 30 GB or 45 GB of data with no daily cap, chances are that subscribers would use most of the data for watching videos on holidays and weekends. This would result in a highly suboptimal use of the network, which would remain grossly underutilized most of the time, and while becoming congested on the weekends and holidays.
The daily data, or unlimited pack, strategy paid off big time for Reliance Jio, which soon edged out Idea Cellular, Vodafone India and Bharti Airtel to become India’s No.1 telecom operator in around 3.5 years. Soon, others like Bharti Airtel and Vodafone Idea too jumped on the bandwagon.
Today, Takkar’s company is today the most aggressive in offering lavish daily data plans.
Vodafone Idea today offers a whopping 4GB/day at Rs 8.33/day, or about Rs 2 per GB. This represents a 99% decline in pricing from the pre-Jio age, when the average data tariff used to be around Rs 220 per GB.
However, in his interaction with investors after unveiling his company’s fourth-quarter results, Takkar urged the industry to move away from daily data plans back to the fixed allocation model.
He said the daily data model is standing in the way of price increases, and without price increases, there’s no way for telecom companies to survive.
“The biggest issue or problem in this sector today is pricing. Pricing is much lower than it needs to be, whereas the consumption that customers enjoy is much higher than it used to be. How we move towards repairing that, there are several ways in which it can happen,” Takkar said, adding that the government coming out with a minimum price for data would be the most effective method.
However, he said, the industry cannot afford to wait for the government to put a floor price, and should implement some changes on their own to increase prices, and the biggest impediment to this are daily data packs.
“Somehow, in our industry, the price plans that are most impregnable today are the per-day type of usage plans that we provide, which means the user gets 1 GB or 1.5 GB or 2 or 3 of GB a day, depending on what bucket you want to get,” he said.
“This is a very strange model; one, because customer usage doesn’t always work in that manner. People use a certain amount of data, sometimes they use more, sometimes they use less. But this recurring daily model, it doesn’t not make any sense.
“Secondly, if you look at the total amount of data that you are given in a month is significantly higher than the actual usage…So it’s a very strange thing that how do you actually move people up to a higher payment ladder,” he pointed out.
Takkar’s comments are in keeping with the general tradition followed by former incumbent operators Idea, Vodafone and Airtel.
Traditional telecom operators have always been wary of sudden increases in consumption, worrying that such trends would affect the network quality and force them to invest more and more into their network.
In contrast, Reliance Jio, which entered the market in 2016, looked at increasing consumption of data and voice as an opportunity rather than a threat.
The company is credited with making wireless data affordable to the masses. Before Jio’s entry, an average telecom consumer would pay around Rs 400 or 450 per month for 2 GB of data for the entire month. After Jio’s entry, the same consumer was getting 2GB/day for the same amount.
FIXED DATA PLANS
In the meantime, even Jio has introduced non-daily plans in recent months, offering 25 GB for around Rs 250 per month, and 75 GB for around Rs 600 per month. However, in this segment, Vodafone Idea is far more competitive, offering 100 GB for around Rs 350 with a validity of 56 days.
Takkar said these non-daily plans are a step in the right direction.
“We believe that the new plans that have been introduced recently, which offer a bucket of data which you can use during a period of time — 30 days, 60 days, 90 days — and you can use that any time — daytime, night time, weekends, week days.. and when you run of that, you can buy more data, which I believe is the right architecture for a price increase,” he said.
However, Vodafone Idea’s aspirations of pricing increases faces another threat in the form of emerging technology. Reliance Jio is likely to cut the price of data even more when it starts offering 5G services sometime towards the end of 2021. 5G is expected to further drive down data prices to less than Rs 1 per GB, and eventually to a fraction of that, especially if the government does not price 5G spectrum at the same level as 4G spectrum on a per-MHz basis.