Mobile data has become ubiquitous with cellular packages, and its usage is likely to increase further. Access to mobile data is essential for consumers due to the unreliability and privacy concerns of public Wi-Fi networks and long commuter hours spent around the globe. However, even with increasing demand, data prices in India (which houses the world’s second highest number of mobile users) have been drastically decreasing since 2016. The reason for this is the ‘Jio Effect.’ But what is Jio and how has it revolutionised the way data works in India?
Jio was launched in September 2016 on the 4-G network in India and has since become the country’s largest network provider, and the third largest in the world, with approximately 370 million subscribers. Although described as a start-up by Mukesh Ambani, the company’s founder and India’s richest man, it had nearly $23 billion in investment  and the backing of its large parent company, Reliance Industries Limited. This is an advantage very few start-ups can even dream of having.
Being backed by a parent company with deep pockets has significant benefits. For one, an investment in the largest Fiber Optic Network, has enabled Jio to have faster and more efficient data speeds throughout its infrastructure. With evolving network technology, Jio also enjoyed a late-mover advantage. Jio uses 4G technology throughout its systems ensuring a superior overall performance as compared to incumbent network providers. A number of Vodafone-Idea and Airtel users, on the other hand, are still on 2G and 3G connectivity, and have not upgraded due to cost or usage requirements. As a result, these companies need to maintain all three networks – 2G, 3G, and 4G – and have poured money into the infrastructure and staff to support them. The cost to producers of upgrading between networks is minimal when compared to the price increase for consumers, and the cost of maintaining multiple networks is substantial. Furthermore, the average revenue per customer and the overall user experience on each of these networks is very different.
A second benefit of the backing is the staying power it provided. Jio launched with a consumer bonanza that was unheard of – three months of free unlimited calling, four gigabytes a day of 4G data and free messaging services. Jio’s launch offer was widely broadcast across the country with aggressive advertising across media platforms and sponsorships of high profile events such as the Indian Premier League. The initial strategy was baffling to many, with the question ‘how are they making any money?’ frequently asked. Within three months however, in a market that had been previously dominated by well-entrenched large telecom giants such as Vodafone (which merged with Idea in 2018) and Airtel (the second largest network provider in the world), Jio managed to gain fifty million users. More importantly, Jio managed to tap into the underpenetrated rural Indian market where consumers previously unwilling to subscribe to expensive 3G networks embraced the offering of high-speed mobile data from the company.
Jio used the three-month launch period to influence consumer behaviour. People who had either not used mobile phones or only used them for voice or low-bandwidth data could now stream video. Jio also ensured that at the end of the launch period, prices were much lower than those offered by competitors. As a result, after the three-month free trial period, rather than losing consumers, Jio continued to gain. It expanded not only its share but also the overall pie of 4G users in India. From 150 million users of data before September 2016, India expanded to 550 million users.
Furthermore, Indians became the world’s number one average data consumer, using around ten gigabytes per month, a large jump from their earlier ranking of 155th. A 2019 study also showed India to have the cheapest mobile data in the world, averaging at $0.26/GB significantly lower than the UK’s at $6.66/GB and the world average at $8.53/GB. Jio has drastically distorted the Indian market for data and what is considered the norm for data prices in the country, significantly impacting its competitors.
Network effects from availability and accessibility of high-speed data are also visible. In 2018, Reed Hastings, the CEO of Netflix, stated, ‘we hope someone would do a Reliance Jio in every other country,’ due to the added demand that increased data has generated for streaming platforms such as Netflix and Amazon Prime.
Due to Jio’s number of portability services and the three-month free usage period, Vodafone immediately saw a significant decrease in its customer base. When Vodafone (which later merged with Idea) dropped their data prices as a competitive response, most consumers did not move back. This is known as the endowment effect  where ‘people are more likely to retain an object they own than acquire that same object when they do not own it.’ Consumers who had left Vodafone were happy to stick with Jio even when Vodafone, a globally reputed company in the industry, offered similar, and occasionally better, packages. While the telecom industry in India was undergoing challenges even before Jio’s arrival, the latter’s cheap prices have meant than incumbents needed to lower theirs in order to retain their customer base, resulting in massive losses.
Vodafone-Idea, recently recorded its sixth successive quarterly loss in India with a $7 billion shortfall, even with close to 30% of the market share (300 million subscribers). It is also under a strict timeline, enforced by the Indian Supreme Court, to pay $13 billion in historic levies and penalties to the government (a regulatory conflict dating back to 2003) This has raised questions as to whether the telecom powerhouse will announce a withdrawal from India. A deadline of the 17th of March to pay its fines to the government has further worsened Vodafone-Idea’s situation with Chairman Kumar Mangalam Birla stating ‘it is true we will shut shop if we don’t get relief,’ when referring to lack of an extension. While a probable Vodafone exit will impact Jio positively with a great influx of potential subscribers, it will significantly affect the Indian economy, as Vodafone-Idea employee numbers stretch into the hundreds of thousands in India. Furthermore, the exit of competitors from the market could result in an even larger share of market power for Jio – potentially allowing them to increase the prices to average world standards, disadvantaging Indian consumers and firms.
Jio has already moved on to influencing more industries through its introduction of home television services and multiple streaming platforms such as JioSaavn and JioCinema. It seems as though Jio is trying to take over most of the technology space in India, and so far it has succeeded at that, even with a plethora of sceptics. Could it take what it has learned and expand overseas? Jio’s success was based around gaps in mobile data, a low standard of internet speed and cheap factors of production. Therefore, for its success to be replicated in other countries, one would expect similar conditions to be needed. Whether Jio is sustainable and could grow even more will significantly rely on what the competitive outcome is in India. Jio has only just kick-started this revolution, and we will have to wait and see if it can continue being the leader of change.