Why Jio’s new price plan could be broadband’s 4G moment

Jio’s new offering, named ‘Broadband Back-up plan’ is priced at Rs 198 per month. It will come with a top Internet speed of 10 megabit per second. Earlier, the minimum price for availing Jio Fiber connection was Rs 399 per month. The company has also provided an option to upgrade the Internet speed to 30 mbps or 100 for 1 to 7 days by paying in the range of Rs 21 to Rs 152.

Jio has 84 lakh customers on its fixed homeline network, accounting for a 30.6 per cent market share.

In terms of pricing, Jio’s new offering should be one of the lowest-priced broadband connections amongst the key service providers. Airtel’s cheapest bundled plan, which comes with a broadband connection and entertainment apps, is priced at Rs699 per month and offers speeds of up to 40Mbps.

“Airtel currently does not have any product at a lower price point of Rs198/month; however, we would not rule out Airtel’s launching a lower-priced plan in future to be competitive,” Morgan Stanley said in a note.

Could this be broadband’s 4G moment?

Experts believe that this could disrupt the broadband market by making it more accessible and force Jio’s competitors to launch similarly priced plans.

In a note, BofA Securities said, “In our view, Jio is looking to replicate its mobile strategy of facilitating transition at very low cost. In the mobile market, users first started using Jio as a secondary SIM and overtime, many switched to Jio given better speeds/pricing. We think Jio is expecting a similar outcome. While the broadband market is different from mobile (lethargy to switch is high), we expect impact to be largely similar”.

“We are likely to see 1) consolidation in favor of larger telcos like Jio/Bharti; 2) price-points to coming down in the interim as few peers could respond in cutting prices; and 3) penetration improvement and better uptake of fixed broadband,” BofA Securities added.

Morgan Stanley said that the move could potentially lower the barriers for broadband adoption in India to accelerate net additions; increase the penetration ratio of subscribers to home passes, improving utilisation of the existing network; and dilute average revenue per user (ARPU) which is currently around Rs 500-700 per month.