Reliance Jio eyes 100 mn homes through its 5G fixed wireless access

Will be one of the world's largest players in this space once live

Reliance Jio’s aggressive target to reach 100 million households through the launch of the 5G fixed wireless access (FWA) could make it one of the world’s largest players in this space.

But this also marks a change from its earlier strategy of offering fibre-to-the home (FTTH) broadband to households. Despite its best efforts, in two years Jio has been able to connect only 7 million households with FTTH, as permission for right of way for the last mile became a major impediment and the process of laying ducts for the roll-out was slow and cumbersome.

The last mile FTTH will now be replaced by 5G wireless access, making it far quicker to scale up the roll-out. It is also in sync with what consumers want from 5G globally. A survey of smartphone users in 10 countries, including India, China, the US and the UK, by GSMA Intelligence last year stated that 42 per cent found the FWA service the most appealing.

The 100-million household target set by Reliance Jio is an ambitious one, since it accounts for a third of the 300 million households in the country with TV (paid and free). The number also corresponds to the entire universe of pay TV subscribers in the country (just over 100 million). Of course, there are 100 million households who do not even have a TV. 

According to the GSMA Intelligence report of June 2022, 5G FWA connections across 52 countries are projected to reach only 40 million households by 2025. In fact, FWA penetration as a percentage of total households in 2021 was a mere 1 per cent in the US, with Poland reporting the highest, at 16 per cent. Clearly, Mukesh Ambani is looking at a much bigger share of the pie for 5G FWA in India.   

If Jio achieves the target, it could see a substantial increase in its blended (mobile and broadband) average revenue per user (ARPU), which, according to analysts, could go up from Rs 170 currently to anything between Rs 250-300 (without any increase in ARPU from mobile customers). This is because the ARPUs of direct-to-home customers is three-to-four times the average ARPU of mobile customers.

The strategy makes sense. Though Jio has announced that it is going for a standalone 5G network, big, monetisable use cases will take some time to develop. Until then, it does not expect any discernible bump-up in the ARPUs of mobile users. But by acquiring FWA customers, blended ARPU would get a big fillip.

A study done by Vodafone Idea Limited (VIL) shows that 23 countries that have launched 5G saw their weighted ARPU in the first 6-10 quarters go up by a mere 1 per cent. In India, telecom firms have said that they are not looking at any substantial tariff increase from 4G to 5G. They see ARPUs going up due to the increasing usage of data.         

The reason for Jio’s decision to take the FTTH route was simple: Laying fibre is a one-time investment and hence is more economical, unlike last-mile wireless connectivity, where the telecom firm have to buy additional spectrum as the number of customers increase. However, GSMA points out that rolling out 5G FWA could lead to a cost saving of anything between 30 and 60 per cent, depending on which 5G band is used.

PUTTING INTO CONTEXT

1. 100 mn households is equivalent to country’s entire paid TV subscriber base
2. 5G fixed wireless access (FWA) projected to reach only 40 mn households across 52 countries, according to GSMA Intelligence report
3. Household penetration of FWA in the 52 countries would be over 4% by 2025, GSMA projects
4. Jio says its penetration will be double that in India
5. If Jio achieves the target, its blended (mobile and broadband) ARPU may go up from Rs 170 currently to Rs 250-300 (without any change in ARPU from mobile customers)
6. ARPU from direct-to-home customers is 3-4 times average ARPU of mobile customers