Teji Mandi Explains: End of price war?  New Jio plans, a welcome step to move towards usage-based pricing

In a massive shift of stance, Jio has introduced five new prepaid plans, referred to as ‘Freedom’ plans, with no daily limit for the first time in India. These new plans will offer uncapped data and unlimited free voice calls for their validity periods.

What's the New Freedom Plan?

Under these new plans, Jio will offer a monthly fixed data allowance. It is a significant shift compared to its current plans, which are based on data cap allowance.

In other words, data users will be able to enjoy seamless data usage. They won't have to worry about exhausting daily limits. Instead, these plans will offer 12GB to 365GB data allowance over 15 to 365 days and cost Rs 127 to Rs 2,397.

Interestingly, Jio has kept the price band of these plans at a premium.

The entry-level plans of Rs 127 for 15 days and Rs 247 for 30 days under this category are priced at ~21% and ~16% premium to the existing plans.

Whereas the other three 'Freedom’ plans represent ~5% premium.

What's the Significance?

With the shift in its offerings, Jio has attempted to move towards usage-based pricing. It is in sharp contrast with current plans, which have a higher daily data allowance.

Jio has launched these plans to test the market's appetite for a consumption-based model. Though they are unlikely to have any significant impact straight away, the launch is important considering the need to end the ongoing price war in the industry.

Telecom companies are caught in a never-ending price war, offering data at throw-away prices to expand their subscriber base. As per the UK-based price comparison firm Cable.co.uk, the average cost of mobile data in India is the cheapest in the world. 1GB of data costs $0.09 in India, compared to the global average cost of data stood at just over $5 per GB. The data cost per GB averages at $8 in the US and $1.4 in the UK.

An Inevitable Shift?

These plans are unlikely to scale up ARPUs for Jio in the near term as the existing plans will continue to be the major force for now. However, the industry is in dire need to move away from the cheap data plan offerings to sustain in the long term. The launch of Jio's freedom plans will go a long way in determining the potential of linking the prices with usage. These new launches are significant in that context.

Other contemporaries like Airtel and VIL are likely to observe closely any development in this regard. And, they would be keen to follow Jio's footsteps in these plans and receive encouraging responses from the subscribers.

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