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Event update: Media - JioGigaFiber round the corner; to disrupt the fixed broadband space?

Event

Mr. Mukesh Ambani, Chairman of Reliance Industries Limited, announced the launch of fiber-based broadband connectivity solutions, JioGigaFiber, for homes and businesses across 1,100 cities. Along with FTTH, it would provide TV, video conferencing, voice-activated virtual assistant, virtual reality experience and smart-home solutions. As of now commercial launch details (pricing, date) are unavailable; however, registrations would begin from 15 August 2018. JioGigaFiber will be first rolled out in those localities from where it receives the highest number of registrations. JioGigaFiber is building a platform that can potentially connect 50m homes (timelines were not specified).

Our thoughts

Fixed broadband different than wireless: Unlike the wireless telecom business where passive infrastructure (towers) is readily available and shared amongst telcos, physical infrastructure has to be created afresh on the ground in the wireline broadband business. It is a painstakingly slow process as every building has to be physically connected. Jio has already laid enough intra-city fiber across hundreds of towns and it has to now extend it to the last-mile.

Fixed broadband an under-served market with huge potential: India’s current fixed broadband subscriber base stands at 18m which translates to a penetration of 6.5% of total house-holds (HHs) and is abysmally low. In the US and China, fixed broadband HHs as a percentage of pay-TV HHs exceeds 98% and in India this number stood at just 14% as of CY17. Even if this were to increase to 30%, India could potentially have ~45m fixed broadband connections, more than 2.5x the existing base! However, fixed broadband requires massive capex and Jio might be up for it given its huge commitment to upgrading India’s digital infrastructure. Jio would be aiming for a sizeable share of this market.

Jio’s unique way of understanding consumer demand: Consumers can register their interest for JioGigaFiber on Jio’s website or the MyJio app starting from 15 August 2018. Given Jio’s promise of ‘tremendous value’, its registration drive could ignite a lot of interest and will help it execute the last-mile connectivity in those areas where there is latent demand, thus cutting down on time-to-market in high demand areas. This would also lead to capex efficiency and better understanding of consumer demand dynamics across these 1,100 cities.

Pricing/launch time-line not disclosed: Jio has not disclosed its pricing or commercial launch date. We expect Jio’s pricing to be extremely competitive and initial 3 to 6 months could be completely “free”, just as was the case during its wireless service launch. We believe that an entry price point of Rs500 (for basic broadband service) could lead to massive penetration and this price could be increased as more value-added services (such as TV, video calling, etc.) are provided on top of this. The price point of Rs500 would be far lower than the average ARPU of larger MSOs and also lower than their entry packs.