SUPERHOUR: The SECRET behind Vodafone’s Rs 16 offer

It is no secret that India’s second biggest telecom operator by revenue — Vodafone — is under threat from a rapidly growing No 3 — Idea Cellular — and an aggressive newcomer — Reliance Jio.

Though Idea is still behind the British firm when it comes to total revenue, Idea has already overtaken Vodafone as far as the data business is concerned, according to sources.

Unlike Vodafone, Idea invested early, and heavily, into 4G. By the end of September — the latest month for which data is available — Idea had 25,000 4G towers, while Vodafone had only 13,000.

It’s perhaps no wonder that the British firm is being forced to come up with innovative models to spur data off-take on its network, and the latest ‘superhour’ plan is probably the most aggressive in this respect.

The concept brings back a billing model that was the norm when Internet services were introduced in India two decades ago. At the time, service providers like BSNL charged by the amount of time you kept your connection on, rather than the quantum of data you consumed.

Charges were around Rs 25 to 60 per hour for a 56 kbps connection.

With speeds increasing, companies were forced to go for data-based billing.

Vodafone faces a peculiar problem.

Since its charges are comparatively higher than the promotional tariffs offered by Bharti Airtel (and in some circles, Idea Cellular), the company had two options; one — to cut data existing prices drastically, and two — to allow users to consume more data without going for a headline cut in tariffs.

However, if Vodafone cuts the price of data to say Rs 25 per GB (as Airtel has done in some cases), it would immediately clog up its network in places like Mumbai and lead to extreme data congestion and poor user experience.

It will also lead to many people — who are currently paying Rs 100-250 per GB — to abandon their current plans and move to the new tariff, drastically reducing the company’s income.

At the same time, if tariffs are not cut, most of Vodafone’s new 3G and 4G network would remain severely underutilized and the company would continue to lose data market share to Idea, Jio and Airtel.

MASTERSTROKE

It is in this circumstance that the company’s marketing department has come up with an innovative offer — unlimited internet for Rs 16 per hour on its 4G and 3G networks in most circles.

This is useful primarily for heavy users — such as those who want to watch or download movies or video, while it will not attract most others.

In other words, people are not going to abandon their current data plans and shift to the new one en-mass. This meet objective No. 1 — to prevent a mass migration of people from more ‘expensive’ data plans to the new, cheap plan.

The plan is also massively suited for meeting Vodafone’s second objective: Utilizing idle 3G and 4G capacity created by the company in the last eight months.

In many places, especially in smaller towns, Vodafone has a state-of-the-art LTE network which is currently not being used optimally. In fact, one should not be surprised to find out that utilization levels in many of these towers are in single digits.

In these places, customers would easily be able to get 5 to 15 Mbps on the company’s 4G network.

But since these are rural and semi-urban markets, users cannot often pay current charges of Rs 100-200 per GB, or about Rs 65-130 per movie download.

It is in this context that the Rs 16-per-hour unlimited offer makes a big difference.

For example, if you get an average speed of 5 Mbps, you can download 2.25 GB using the Rs 16 pack in one hour. Similarly, if you get an average bandwidth of 10 Mbps, you can download 4.5 GB in one hour.

In other words, you can download between 4 to 8 movies for Rs 16. The per movie download cost comes to just Rs 2 to Rs 4 — compared to Rs 65 to 130 earlier.

This is a price that even rural subscriber would be able to afford.

CONGESTION PROOF

At the same time, the company doesn’t have to worry that the offer will increase congestion on its network.

Why? Because in congested areas, people will not opt for this pack due to the low speeds.

If your local network is giving you a speed of only 400 kbps, you can download only around 180 MB of data using the 16-rupee pack. You will need to spend around Rs 50 to download a single movie.

As a result, people in cities where congestion is present — such as Mumbai — are unlikely to go for the new pack.

In fact, this ‘built-in congestion guard’ works at the tower level as well.

For example, if a tower in a rural area is facing heavy usage, people in that locality will not recharge with the Rs 16 coupon.

Similarly, even in a congestion-prone circle like Mumbai — if there’s one tower where there is no congestion — people in that area could take advantage of the situation and use the Rs 16 coupon for downloads.

In other words, instead of having different tariffs in different circles to keep congestion down — the company has come up with a unique and novel pricing structure that is already congestion-proof.

Given that Idea Cellular is also facing issues of capacity utilization versus congestion, the scheme is likely to be copied by the Aditya Birla Group company very soon.

The Vodafone scheme is available from today in all circles except Bihar & Jharkhand, MP & Chattisgarh, Punjab, HP & J&K and AP & Telangana.

In addition to the data pack, the company has also introduced a superhour pack for Vodafone to Vodafone calls at Rs 7. For 2G data users, the price for unlimited data is Rs 5 per hour.

The price of superhour changes from circle to circle, and users are encouraged to check the price in their circle before recharging.


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