A year has passed since Reliance Jio announced its plans to disrupt India’s telecom industry with free domestic voice calls and zero roaming charges. Since then, the company has converted 67% of its 108 million customers to a paid tariff and increased its average revenue per user (ARPU) to 20% higher than its competitors.
Its latest move to offer consumers a free 4G-enabled phone has been a further decisive victory, bringing millions of previously unconnected consumers to its network. On the first pre-order day alone, the company is said to have exceeded its own expectations by attracting over 6 million bookings and 10 million online registrations of interest.
But Reliance Jio’s success contrasts starkly with the rest of the telecom industry, which continues to suffer from plummeting ARPU.
India, after all, has relatively low data tariffs; 1GB of data can be bought for the equivalent of US $3.5 as opposed to $10 in the US itself. Returns gained from data packages are already slim and income mostly comes from voice services, which made up two-thirds of total revenue between 2015 and 2016. Jio offers free voice calls, thereby eating into another traditionally lucrative revenue stream for telecoms.
Across the global telecom spectrum, the story is similar. Users are becoming accustomed to cheaper data and, to retain customers, more operators are offering uncapped plans; this year, Verizon, T-Mobile, and AT&T have all opted to provide unlimited data. Additionally, voice profitability has been plummeting — last year Deloitte predicted 26% of smartphone users in developed markets wouldn’t make any voice calls in a given week.
As a result, anxiety levels about declining ARPU are rising. Although low-cost services are good news for users and short-term loyalty, constant demand for better deals is making it difficult for operators to stay competitive. Clearly, it’s time for mobile monetisation to evolve.
Many telcos have acknowledged the need for change, but so far, efforts have focused on adjusting market rules or increasing their footprint. Vodafone India has warned that industry revenue is set to fall further and called for the government to slash interest rates. Meanwhile, networks are consolidating to improve price-cutting ability, the most recent example being a rumoured merger between Sprint and T-Mobile.
Such reactions, however, are unlikely to turn out well. The creation of new telecoms giants will do little for equal market opportunities and potentially also damage user loyalty. Conversely, competing on data costs alone will almost inevitably accelerate a ‘race to the bottom’ that puts business longevity at risk.
Instead, to create new revenue streams operators must, like Jio, innovate by embracing the increasing need for connectivity across online platforms and extending their repertoire of services to provide alternative sources of user value.
Here are a few ways operators can do this:
1. Enhancing Wi-Fi capability
User appetite for Wi-Fi is continuously growing. In fact, over 60% of mobile traffic will be offloaded via Wi-Fi this year. By investing in integrated Wi-Fi technology, operators can save on overall connection costs and deliver better coverage that attracts more users and opens up a new flow of steady revenue.
2. Increasing IoT compatibility
Gartner estimates that over 8.4 billion connected things will be in use globally by the end of this year. So, to ensure any potential future reduction in voice or data revenue is offset, operators should incorporate IoT compatibility into their services.
3. Offering useful add-ons
To stand out in a marketplace where all players are competing on price, operators must offer something unique — such as additional, yet related benefits. For example, on top of its other services, Jio offers a bespoke security app and, in response, rivals such as Vodafone India and Bharti Airtel have started providing insurance.
4. Monetising customer data
Telecoms possess a vast pool of first-party data that can be authenticated by individual billing addresses to present a detailed view of user behaviour. Amid the volumes of generic data, this insight is a rare asset that advertisers and businesses will pay to obtain. But there is a caveat; operators have a responsibility to protect individual identity and comply with privacy rules, particularly with the General Data Protection Regulation (GDPR) coming into force on 25th May 2018.
5. Opt-in advertising
The conventional advertising exchange has been overshadowed lately by a focus on ad blockers and poor user experiences, but by bringing the crux of it back to the fore — user value — operators can unlock a powerful revenue source that works for their subscribers and the bottom line. For instance, carriers can offer a value exchange of connectivity or content rewards for users who opt-in to unobtrusive advertising, such as personalised ads and offers on the lock screen or in apps or websites.
6. Adopting sponsored data
The mobile ecosystem is fast evolving and developing new modes of connectivity — one of which is free, brand-sponsored internet access to specific apps and websites. Brands and publishers are increasingly attempting to forge closer bonds with digital audiences by paying for data consumption when users view their content, use their services or shop on their online stores. Facilitating these kinds of sponsorships increases operators’ overall data usage and revenue from brand marketers.
Jio may have turned the industry upside down but it wasn’t the first operator to do so, and it’s unlikely to be the last. There is no avoiding the fact that consumer needs are shifting: data demand is soaring, and traditional revenue streams are running dry. By harnessing new opportunities and diversifying their range of connected services, operators can evolve to meet consumer needs and create new revenue streams that enable them to compete with the likes of Jio on a global scale.