Jio’s Aggressive IoT Push Could Make India the Second Largest Market for IoT Connections after China

At its Annual General Meeting (AGM) on August 12, 2019, Reliance Industries announced that Reliance Jio had crossed 340 million mobile subscribers, making it one of the fastest-growing Mobile Network Operators (MNO) in India. At the AGM, the chairman of Reliance Industries also made some significant announcements regarding Jio and its plans to target the emerging Internet of Things (IoT) market in India. Firstly, Jio will commercially launch both its Narrowband IoT (NB-IoT) networks across India and its own IoT platform, which will be commercially available starting on January 1, 2020. Secondly, Jio announced a strategic partnership with Microsoft to build a network of data centers across India that would enable Jio to integrate its connectivity with Microsoft’s compute and cloud capabilities to offer digital services. Finally, Jio will also offer vertical consumer and enterprise IoT solutions to generate new revenue streams.

Reliance Jio is a wholly-owned subsidiary of Reliance Industries that was commercially launched on September 5, 2016 and operates an LTE-only network using spectrum in 850 Mhz, 1800 Mhz, and 2300 Mhz spectrum band in India. Jio’s aggressive growth over the last three years increased competition in an already fiercely competitive market and has impacted all major incumbent telcos. In the last five years, Reliance Industries invested nearly US$42 billion into Reliance Jio Infocomm to operate national LTE networks and will now be laying fiber networks in 1600 cities. Reliance Jio has been the youngest and most disruptive telco in an already fiercely competitive Indian market. According to the Telecom Regulatory Authority of India (TRAI), by the end of June 2019, Jio surpassed Airtel to become the second largest MNO in India with over 331.2 million subscribers. In 2018, Jio’s LTE network carried 3 exabytes of data/month with an average customer using 10.9 GB of data/month. For the year ending 2018-2019, Jio reported gross revenue of US$6.7 Billion with an Average Revenue Per User (ARPU) of US$1.78/month. However, Jio’s ARPU has been steadily shrinking over the last eight quarters since its peak of US$2.21/month in 2018.

Reliance Jio’s investments so far have focused on capacity building and, as that exercise nearly comes to an end, the focus has now shifted toward developing new services that generate additional revenue streams to supplement the declining ARPU from its consumer mobile business. At the AGM, the chairman of Reliance Industries claimed that Jio will target over 1 billion IoT connections to create an additional annual revenue of US$2.8 billion over the next two years. Jio plans to execute this strategy by offering IoT services in both consumer and enterprise segments.

As part of its consumer IoT offering, Jio started offering JioFiber, its Fiber-to-the-Home (FTTH) service, which offers triple-play services including voice calls, home broadband, and Internet Protocol Television (IPTV) on September 5, 2019. Along with the triple play fixed broadband service, Jio also announced that it will offer smart home solutions. Jio’s smart home platform, currently in beta phase, will offer home security services using wired and wireless connectivity technologies and will be commercially launched by the end of 2019. The smart home service will initially include devices such as voice front-ends, smart plugs, and indoor and outdoor video cameras, but over time it will also include alarms, panic buttons, smart video doorbells, contact sensors, and sensors to detect smoke, water leaks, and gas leaks.

For the enterprise segment, Jio plans to initially focus on three main IoT vertical segments which include smart metering, vehicle telematics, and industrial condition-based monitoring applications. Jio’s parent company Reliance Industries also operates one of the world's largest petrochemical refineries, located in Jamnagar, India, and has undertaken several digital transformation initiatives. Reliance Industries has developed its own condition-monitoring solution with real-time edge analytics to assess the health of rotary equipment and aftermarket telematics applications to monitor vehicle fleets and track assets within its supply chain.

Jio has rapidly gained a significant share of the consumer mobile market with its aggressive pricing strategy, undercutting incumbent 2G/3G and even 4G service offerings. Moreover, Jio’s rapid growth in the consumer mobile network business also led to further consolidation of the Indian telco market to three major telcos. Similar to Jio’s consumer mobile service, JioFiber was launched with aggressive marketing but relatively less disruptive pricing plans starting at US$10/month going up to US$120 for 100 mbps and 1G bps broadband speeds respectively. The already low-cost broadband services were accompanied by triple-play service bundles that are packaged with free hardware and services such as a home gateway, set-up box, and subscription to Over-the-Top (OTT) apps. Some of the pre-paid monthly tariffs also reward longer-term subscribers with a monthly subscription of over US$18 with free TVs.

According to the TRAI report published in August 2019, fixed broadband penetration in India is around 18 million households. With its JioFiber, Jio plans to expand FTTH penetration to over 50 million households. Along with the planned expansion of the fixed broadband market, a managed home security application will be an important entry point for Jio to drive wider smart home adoption. Today, the smart home market in India is dominated by expensive, custom-built solutions targeting the luxury market, while the broad mass market adoption is driven by the reach of Google and Amazon on the back of voice control front-ends. Home-Security-as-a-Service will help drive broader smart home adoption, but Jio will eventually face competition from lower-cost, easier-to-install solutions from a host of Consumer Electronics (CE) and smart home Original Equipment Manufacturer (OEM) providers, as seen in more mature markets. Incumbent luxury smart home solution vendors will also be forced to reconsider their initial approaches in light of increased competition and threats to their traditional services.

In the enterprise segment, the most immediate market opportunities for Jio are likely to come from large government projects, such as the smart meter projects initiated by the Power Grid Corporation of India Limited (PGCIL). PGCIL plans to upgrade the electricity distribution grid by 2030 and has been conducting smart meter trials in 18 cities since 2016. With 300 million metering points, India is the second largest market for smart electricity meters after China. With several of the smart meter trials coming to an end in 2018, the Indian smart meter market has witnessed a sharp increase in activity over the last 18 months, with multiple tenders from at least two state-owned utilities. So far, tenders requesting bids to supply nearly 10 million smart electricity meters supporting 2G/3G connectivity have been completed. Earlier smart meter tenders have indicated, energy utilities preference for low-cost smart meters with an average selling price of less than US$35. More recent Requests for Proposals (RFPs) in Q4 2018, from Energy Efficiency Services Limited (EESL), the central procurement agency, indicated smart electricity meters should have a minimum requirement of 2G connectivity for fallback with primary connectivity using 3G/4G/NB-IoT/LTE-M. However, it is worth noting, Jio is entering the enterprise IoT segment at a time when India faces a severe economic slowdown and as industrial production contracted by 1.1% in August 2019.

Furthermore, Jio also faces significant competition in a heavily concentrated market where a few large incumbent telcos—Vodafone Idea, Airtel, and Tata Communications—have the majority share of the enterprise IoT market. Vodafone Idea and Airtel have also been trialing NB-IoT networks in major cities with plans to launch commercially by the end of 2019. Vodafone Idea has been trialing its NB-IoT network in four Indian cities since early 2019, running various Proof of Concepts (PoCs) with OEM partners such as Genus Power. Airtel, on the other hand, has been trialing NB-IoT network and developing its own IoT platform to support vertical markets through Xlabs, a business dedicated to building IoT capabilities. Apart from telcos’ NB-IoT initiatives, Tata Communications has deployed LoRaWAN in over 40 cities. Tata Communications was the first to commercially deploy an LPWA network in India and has experienced early success with smart city applications, especially with gas utilities such as Mahanagar Gas Limited and Indraprastha Gas Limited deploying smart gas meters that use its LoRaWAN technology.

However, as Jio activates its NB-IoT network across its 4G LTE infrastructure, it will be the only telco to offer nationwide NB-IoT network coverage. With nationwide coverage of NB-IoT, Jio is well-positioned to address not only utilities smart metering projects but also emerging opportunities in enterprise IoT applications such as asset tracking, aftermarket telematics, and condition monitoring of industrial equipment. On the other hand, in order to succeed in the enterprise IoT market, Jio will need to build an ecosystem of partners that can leverage Jio’s connectivity and platform services to develop, manage, and implement End-to-End Solutions (E2ES) that address specific pain points of enterprise customers.