It’s interesting to read the responses of cellular operators (cellcos) in these two Business Standard articles to the Reliance WLL launch. It’s pretty clear that their preferred weapon for countering the WLL threat will be regulatory appeals and FUD. What neither of them will admit is that each cell service viewed itself as a “premium provider”, whereas Reliance is betting heavily on commoditizing telecom and growing the market. It’s interesting to look at the arguments cellcos present:

Most subscribers who are left in the market are the pre-paid card types who will not pay anything more than Rs 300 a month. Yes, but that could be because they are scared of running of humongous cellphone bills. Consider the number of Indian parents who ‘finance’ their teenagers’ cellphones, I’d say that there are a lot of people out there who wish they could talk more, but are scared of ballooning bills, Airtel’s (to choose a cellco at random) non-prepaid tariffs being what they are (Rs 2.60/minute incoming and outgoing, for example). Also, let’s examine that Rs 300 number in detail. Airtel’s tariffs in Madras provide a 300/mo card, but the talk value of that card is only Rs 50. At their rates (Rs 2 incoming, Rs 4 outgoing) one gets something like 25 minutes incoming talktime a month, assuming zero outgoing calls. Each SMS further reduces the talktime left.

In contrast, plans like Reliance’s provide cheap Long Distance (STD) services and free incoming calls, and outgoing calls going at 1.20/minute, it will be a cakewalk for a lot of kids to sweet-talk their parents into a service that’ll only cost marginally more (600 bucks per month) and provide much more value. The cost of entry is also temptingly low, Rs 3000 for starters.

Customers will be paying upfront for the new Reliance services and the cellcos will be pointing out that this could be risky. It is after all an untested service. Classic FUD. On the other hand, the cost of entry is low: Rs 3000 (plus Rs 600/month), about the same as the deposit for a postpaid connection (and a Java-enabled phone in the bargain. I wonder if someone can supply Stingers in India at around this price. Otherwise, Microsoft may kiss yet another large market goodbye, especially with Mukesh Ambani’s new-found love for Java). Also, I don’t know about other cellcos, but Airtel’s service is not anything to write home about: Airtel. Busy Signals are our middle name :).

WiLL customers won’t be able to talk to 10 million mobile phone customers until the interconnect agreement is signed. The cellcos are in a bind here: Reliance’s STD rates are Rs 0.40/minute, and the only way they can provide that is if BSNL or Bharti provides similar prices. Given Bhartis current STD performance, I am doubtful; BSNL may be better placed and in fact says will match Reliance’s rates (one wonders what these greedy incompetent ****s were doing these last 50 years!) On the other hand, any cellco who wants to provide STD through Reliance will almost certainly have to sign for interconnects with Reliance. And given that interconnects are required by law (and the TRAI can enforce this), it is only a matter of time anyway.

Vikas Saraf, CEO, Essar, GSM cellco: [Customers] should be educated that they are paying extra because for instance, they are getting SMS as a value add. I pay Rs 1 per SMS I send anyway. Users get CDMA-based text messaging for free in most of Reliance’s plans. ‘Nuff said. CDMA/GSM message interop is another question, but there is no technical barrier.

The GSM operators strongest point is that intra-circle (typically, circle==state) cell-to-cell calls are much cheaper than an equivalent STD call. Of course, thanks to GoI stupidity in handing out licenses, most subscribers in metros cannot take advantage of this (they are a circle unto themselves). But if you call STD out-of-circle you’re out of luck. Of course, STD rates will probably crash anyway, removing this advantage from GSM operators.

Reliance package is a niche package. Very few customers will go for this, said a Delhi-based cellular operator. Yeah sure. The niches are: folk who think a prepaid is too restrictive (and at Rs 50 talktime for every Rs 300 you spend, you bet it is!), and that’s a huge niche. Folk who use STD extensively and are `left out of the intra-circle rain’ — these tend spend a lot on talktime. And intra-city only users who are sick and tired of incoming charges (of course, expect to see free incoming across the board from GSM cellcos soon).

After all this, the killer app Reliance has up its sleeve is Data. At a theoretical max of 144k/s, Reliance steams past the GSM cellcos struggling with 3G (this mirrors European problems with 3G recently). The bandwidth scene in India isn’t too good, with most landlines maxing out at 33k/s. If Reliance delivers great service, it will sweep India’s software hubs: Bangalore, Madras, Pune, Hyderabad, Noida. Geeks love toys! So Reliance has yet another niche going for it: the high-speed mobile internet user, something the GSM cellcos have no answer for. Also, if they can get some form of video communications onto their phones — well, the next campus craze isn’t too hard to predict. So potentially, the niche for Reliance has suddenly widened to the 14-21 segment, and definitely the 22-35 yuppie crowd.

End of day, the fundamental mismatch between cellcos and Reliance is the same as the mismatch between HIndustan Motors and Maruti — the former trundled out average performers aimed at people who saw cars as premium items, the latter made cars mass-market, and snazzy and fuel-efficient to boot. For too long, GSM cellcos have seen themselves as offering a premium service (and not very good one at that) and dismissing the vast bulk of users in India as “300-rupee pre-paid types”, and Reliance is changing the rules of the game by commoditizing connectivity. Only time will tell which vision is correct.