Jio’s business model has been the most aggressive and lucrative at the same time in the history of telecom business in India. People are standing in long que is the proof of excitement that it has created among the citizens in this country in every nook and corner. After reading this answer, you will realize what a clever businessman Mukesh Ambani is.
Why Mukesh Ambani wants to enter networking field so badly?
This story requires us to know why Mukesh Ambani is investing so much in yet another telecom company especially when there is already another company named Reliance Communications. In 2002, when Dhirubhai Ambani died, there were some major ownership issues between his two sons – Anil Ambani & Mukesh Ambani. After some public feud between two brothers Reliance split into two parts in 2005. Anil Ambani got telecom, power, entertainment and financial services business while Mukesh Ambani received the flagship Reliance Industries and IPCL.
Although Anil Ambani is heading the Reliance Communications now, it was Mukesh Ambani who started it and revolutionized the Indian telecom industry which made mobile phones affordable to Indians.
In 2010, as soon as the non-compete agreement (between two brothers) was scrapped/expired, Mukesh Ambani bought 96% stake in Infotel Broadband which had won PAN India 4G spectrum. Later they rebranded it to Jio, and started building fiber optic network around the country.
The experience gained in starting up Reliance communications helped Mukesh Ambani to realize that existing network providers are not good enough and that he can easily compete with them and win. He can easily control Internet/communications in India.
Jio’s Business Model.
Look at this tariff plan.
Which plan would you choose? If you are a voice-only kind of person, then you would be okay with the Rs 149 per 28 days plan, as you will get free unlimited voice calls. If you are someone who uses over Rs 150 worth of voice calls every month then it is a totally awesome plan for you. But, my point is that other telecom companies make about Rs 150 per month on average from each user by charging for voice, SMS, data and roaming. Jio will be making the same/more amount of money on average from each user even after providing SMS, roaming and voice calls for free.
Just notice that there is no plan in-between the Rs 149 and Rs 499 plans? This is basically a psychological trick to get you into the Rs 499 plan. Many people will compare it with the smaller plan and see that you are getting unlimited 4G night data will definitely lure them to get that plan.
They do have some smaller plans at Rs 19, 199 and 299. Though, these offer less data per rupee, this may be adequate for many people on short time basis. Who wants not to spent Rs. 19 for unlimited voice calls, 200 MB of data and unlimited 4G data at night? So it guves more flexibility to users. Though for practical purposes, you will be spending more for lesser value through these packs, these are useful for those who want to use some internet & voice calling once in a while.
How can they provide unlimited night data?
Once an entire network infrastructure is ready, it really doesn’t cost anything for the network provider to give you internet data.
The reason why most internet providers limit your data is basically because because of the lack of enough bandwidth to handle so much data. In case of Jio, they have already laid an awesome fiber optic network which is designed to even handle the 5G and 6G. So, they do not have any bandwidth bottleneck.
Other telecom companies designed their network were primarily to handle voice calls and they have limited data bandwidth and also other companies do not have nationwide fiber network, so they end up paying for using the fiber network of other companies. This is the most important reason why other companies don’t usually provide unlimited plans.
Jio currently have the ability to provide truly unlimited data plans. They have already decreased prices on average by 50%. This means people will anyway be happy to use their services. If they provide more GBs in the lower end plans, then lesser people will buy their higher plans. When other companies reduce their prices, it is likely that Jio will also further reduce their prices.
And, the unlimited night usage is only valid for hours in-between 2AM and 5AM.
How can they provide unlimited free voice calls?
Again, Jio has an all IP network, so all voice calls will go through the internet just like skype or whatsapp. There is not really any point in charging for voice anymore. It is an outdated system and there shouldn’t really be any surprise in why Jio totally abandoned it.
But the story doesn’t end here. When Jio customer calls to other 3rd party customer, then Jio bears the cost and pays the 3rd party operator which is thousands of crores on yearly basis. Here is the trick. Most of the big companies don’t want do business from day zero. First make the customer base and then do business. That’s the success mantra of any big company. For doing business, you have to invest in big amounts first. Jio is expecting other customers to migrate to Jio and then the business will be fruitful and till then Jio will bear the cost. But Reliance as a company can easily bear that, others in Indian market can’t. That’s simple. No company can provide everything for free for 3 months as preview offer. It’s fact.