COAI vs Reliance Jio: All you need to know about this telecom war

The genesis of the ongoing battle between the incumbent telecom operators, namely the Big Three, and Reliance Jio has emerged as the big story of the week. The battle started on Monday with the Cellular Operators Association of India accusing the sector regulator of being biased, which was followed by another letter accusing Reliance Jio of masquerading a full blown commercial launch in the garb of a trial.

Jio retaliated with a strong 8-page letter defending its own position, while accusing the Big Three telcos of abusing their dominant position. The letters, the warring parties claim, tell their own story.

Following are the links to the two letters that sum up the battle between the Big Boys of corporate India.

1) Reliance Jio's 10th August letter to TRAI, accusing existing operators of using dominant position to stifle competiton

2) COAI's 8th August letter to TRAI, accusing Reliance Jio of choking networks under the guise of testing services

The genesis of the ongoing battle between the incumbent telecom operators, namely the Big Three - Airtel, Vodafone, Idea -and Reliance Jio lies in the fact that the latter wants to transform the structure of the country's mobile business. Given that Jio is focused on data, it wants to change the entire market's revenue structure towards data and make voice irrelevant. Currently voice business accounts for 80 per cent of the industry's revenues, but Jio wants to change the revenue mix and increase the share of data. And to do this, it needs to make voice irrelevant or unviable for other players. 

Jio intends to do this by offering voice free even though voice transmitted through data is six times cheaper than on traditional circuit switch fallback route. Currently, voice realisations stand at a meagre 36 paise per minute, but the same voice call is priced at six paise per minute if it is made as a data call. The root cause of the fight between the two warring sides is this. And in order to offer voice at really cheap rates, Jio wants the interconnect charge to go, as it automatically loads 14 paise to the call's cost. 

If Jio does not have to pay this upfront cost - in the beginning most subscribers of Jio will make calls to other networks - then it will be able to price voice at throwaway prices.

Given that the existing players have sunk in trillions of rupees in building their networks, they will not allow a new player to come and change the rules of the game. While Jio has sunk in Rs 150,000 crore into its all IP network, it will want to focus on data even for the voice business. The tussle, thus, is about the business models. Over the years, the existing telcos have sunk in Rs 800,000 crore in building infrastructure and if a player challenges this investment overnight, it is definitely going to fight back.