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Subramanian Venkatraman
Principal Analyst,
MTN Consulting

Jio Sends Shock Waves With FTTH Broadband Service Announcement

The recently concluded annual general meeting (AGM) of Reliance Industries is sure to leave Reliance Jio’s competitors in jitters, as Jio unveiled plans to roll out optical fiber to the home (FTTH) across 1100 cities in India. Its commercial launch is planned for December 2018.

Despite not being currently active in the fixed broadband market, JioFiber will benefit from Jio’s wireless internet market share (ranked #1 as per TRAI based on subscriber base). Jio’s recent acquisition of the distressed carrier Reliance Communications is also a plus. However, Jio will face hurdles initially given the challenges of underground fiber installation.

Jio hopes to replicate its wireless success with GigaFiber

After growing from zero to 215 million wireless users in just 22 months on its new 4G network, Jio already has everyone’s eyebrows raised. Jio has now shifted its focus toward its FTTH broadband service via Jio GigaFiber. The fiber service includes Jio Giga TV, smart home accessories, and a landline connection. Jio’s FTTH rollout could kick start the local broadband market, where penetration is low. TRAI’s March 2018 data estimates that India had only 21.2 million fixed broadband internet users – as against 472.7 million mobile data users.

While Jio is new to the fixed market, Jio has been installing fiber aggressively for the last 4 years. Its fiber optic network now spans over 300,000 km. That includes metro and access fiber designed to support an eventual FTTH offering. This should allow Jio to differentiate from other operators, which tend to provide fiber optic cables only to the building, and use a variety of technologies for customer access (VDSL, ethernet, wi-fi). Jio’s fiber will instead be connected directly to the user’s CPE. Jio does have competition, though. Airtel launched its vectorization-based service, V-Fiber, in Pune in late 2016. V-Fiber offered up to 100 Mbps at launch, but Airtel recently announced upgrades to bring maximum speeds to 300 Mbps over wi-fi.

The effect of Jio’s broadband launch is also being felt on the leading fixed player, BSNL, which slashed its broadband plans soon after Jio’s FTTH announcement. In June 2018, BSNL launched two FTTH monthly plans with promotional rates of INR 777 ($11.3) and INR 1277 ($18.6) at a speed of up to 50 Mbps and 100 Mbps, respectively. Similarly, Airtel responded to Jio’s fiber announcement by withdrawing FUP (fair usage policy) limits on its broadband plans. From an internet speed standpoint, Jio still stands tall as it aims to offer internet speed up to 1 Gbps.

Jio’s purchase of RCom assets will accelerate FTTx network expansion

Last December, RCom announced the sale of its assets to Jio for $3.75 billion. If the deal goes through, Jio will gain vital assets in the form of spectrum, towers, and fiber. Jio already has 300,000 km of fiber, but this deal will result in addition of 178,000 km of optic fiber to its portfolio. This will help Jio cover a broader section of the population.

However, Jio is sure to face challenges in FTTH deployment. A major hurdle is getting approvals from state governments for laying fiber and securing the requisite right of way (RoW) permits. Operators face these challenges elsewhere, but India’s permit process is especially burdensome. As per World Bank’s Doing Business report, India ranks nearly last (181st place) among all economies in terms of construction permit process effectiveness. This has contributed to India’s slow fiber rollout.

Moreover, FTTH investments require huge CapEx in rural areas where the penetration is low in comparison to the national average. Government-supported fiber deployment efforts have struggled in the past. But the 2014 change in government helped expedite India’s national fiber optic network, Bharat Broadband Net Ltd (BBNL). This government company aims to rollout 1 million km of fiber across 250,500 villages by March 2019. This is good news for Jio which needs fiber to fill in FTTH coverage gaps.

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