 "Telcos' data push may fall short of promise")
But scratch the surface and the story begins to look pretty different. Let's look at 2G first. To begin with, the cuts come just six months after these telcos had raised tariffs by over 25 per cent. But with just 4 per cent of their total revenues coming from 2G data, obviously the increase hadn't gone down well with users. More important, the new tariffs, according to competitors and analysts alike, will not make data substantially cheaper to encourage higher usage. "It is a marketing gimmick, meant to give the perception that data prices have become cheap. Data usage in 2G is not picking up, and this could bring in new subscribers," says a top executive of a competing telco.
So what have the telcos really done? Customers, in the 2G space, use data in two ways. One, they buy a pack for which they pay an upfront fee to use a fixed amount of data. If they go beyond this limit, they have to pay for the additional usage at a steep rate for every 10 kilobytes of usage. Two, customers with a smartphone, or a smart-feature phone, use data on the go and pay for it accordingly. What Airtel has done is that it has kept the upfront payment for the data packs unchanged. So, for instance, on its Rs 125 pack, it offers 2G customers 1GB of data with a validity of 30 days. However, in case you spend more than 1GB of data, you have to now pay 1 paisa for 10 KB instead of 10 paisa earlier. However, telecom analysts point out that over 95 per cent of 2G subscribers do not go beyond their data pack limit. So, for most customers, the tariff reduction might not make any significant difference. Airtel did not respond to queries.
Analysts add that Airtel's revenues may not rise substantially from those who use data beyond their limit just because their tariff has fallen-data is still not cheap by any standard. In other words, prices haven't fallen to a point where data usage will take off in a big way. In fact, the average usage of 2G customers, based on industry data, is not more than 200 to 500 megabytes per second, or MBPS. Says Rajan Matthew, director general of Cellular Operators Association of India: "The average usage of 2G customers is around 500 MBPS. What the new schemes are trying to do is encourage consumers to use more beyond the limit and then understand what pack fits into their usage pattern."
There is another reason why the price cuts may not result in a huge increase in usage: existing speeds on 2G networks are pretty slow. So while you can surf the net, see your mail and access Facebook, large data downloads like streaming on YouTube are cumbersome and need frequent buffering. That is because data on 2G at an average does not give speeds beyond 15-50 kilobytes per second compared to the claim that its maximum speed is 256 kbps. Or take the example of GPRS. Experts say average utilisation of GPRS beyond the data pack limit for the industry does not comprise more than 1 per cent of their total GPRS revenue; so, neither will the operators loose much money with the drop in prices nor will usage go up dramatically. What it might do is encourage some new customers to try out the packs.
In the case of Vodafone and Idea, however, the cut in data has not been limited to tariffs for customers who go for packs but also for those who pay as they use. According to industry data, not more than 18-20 per cent of the 2G customers use data through this mode. So the impact of the change, says analysts, will be limited to this set of subscribers. Vodafone's offer, limited to the four circles of Karnataka, Uttar Pradesh West, Madhya Pradesh and Chhattisgarh, at least for the time being, is to reduce data tariff for pay-by-use customers from 10 paisa for 10 kilobytes to a 2 paisa. A Vodafone spokesperson, explaining the reason behind the cut, says: "Data is still at an early stage of category development and we expect growth momentum to only accelerate further, providing immense opportunity." Idea did not respond to a questionnaire.
Again, analysts say, the prices are still very steep: in the case of Vodafone, it comes to Rs 2,000 for 1 gigabyte, Rs 1,000 for 500 megabytes and Rs 200 for 100 megabytes. Users who increase their usage would prefer to move to a pack where the effective cost is much lower. Analysts say in the four circles where Vodafone has dropped prices, the telco was offering 3G services through the inter-circle agreement; however, the Supreme Court has now ordered that it cannot add new customers, pending a decision on the case. So, the company can offer data only through its 2G service. All the cuts have done is to bring 2G data tariff (2 paisa per 10 kilobytes) below the 3G tariff (3 paisa per 10 kilobytes). "It would be unconceivable that while its 3G subscriber paid 3 paisa for 10 KB, it's 2G customers paid over three times more. So if the company wants some data revenue, they had no option but to cut prices," says an analyst.
In the 4G space, however, Airtel's decision to drop tariffs is understandable. Last year, all 3G players had cut tariffs by 70 to 80 per cent. As a result, the gap between 4G and 3G data tariffs had become huge. And Airtel's 4G subscriber base has been very low-only 3,100 in Bangalore, Kolkata, Pune and Chandigarh. Something had to be done to push customers, especially since competition is all set to increase with the entry of Mukesh Ambani's Reliance Jio, which unlike Airtel has a pan-India network and is expected to aggressively launch services by the end of this year. Airtel's answer has been to effectively bring its tariff packages at par or even lower than those of 3G packs. With that, analysts say, it hopes to compensate for the higher entry cost for 4G services. After all, average 4G dongle price of Rs 4,999 (it's offering dongles in some packs for Rs 2,499) is more than double or three times that of a 3G dongle.
Surely, the move could bring Airtel some new customers. Yet, the reality on the ground is that the new data offerings in 2G as well as in 3G is not enough for India consumers to lap up the data revolution. Wait for further tariff cuts.