What does the telecom tariff hike mean for digital brands in India?

All brains behind the digital brands of today agree that their brands gained from the boom in the mobile user base in the country backed by pocket-friendly mobile data. With key players Reliance Jio, Airtel and Vodafone Idea hiking their charges by up to 40 per cent, over a billion mobile phone subscribers will have to pay more to use their mobile phones.

A Telecom Regulatory Authority of India (TRAI) report (2018) suggests that, of the subscriber base of 1066.86 million, 95.50 per cent use prepaid connections. Of the 1.3 billion people in India, 451 million were monthly active internet users at the end of March 2019, according to the Internet and Mobile Association of India (IAMAI). The IAMAI report suggests that urban India has 192 million users with almost the same number of users in rural India. The hike has been implemented on prepaid plans for now and speculations are, it would soon reflect on post-paid plans too. Global reports suggest India has so far enjoyed the cheapest mobile data in the world with a gigabyte (GB) costing just Rs18.5 against the global average of almost Rs 600 ($8.53).

While the hike comes in the light of pending dues of telecom operators - to the tune of thousands of crores of rupees, what does it mean for the digital brands in the country? Be it OTT platforms, social media, video sharing and streaming apps, smartphones, e-commerce; the entire lot of digital brands stand to be affected by the move.

We ask experts.

Prashan Agarwal, CEO - Gaana

The rapid penetration of better internet services at lower tariffs and ready availability of affordable smartphones has heralded a new era of internet usage over the last couple of years. This has triggered a cascading effect on the entire digital ecosystem in India, including a considerable surge in traffic, distribution and production for digital media companies like ours. While the recent increase in data tariffs may slow down user-acquisition in the short term, we believe these corrective measures would improve the overall financial health of the telecom sector and lay the foundation for a healthier and more sustainable digital roadmap for India’s future.

Mahesh Uppal, telecommunications consultant and owner, ComFirst, (a telecom consulting firm)

I don't expect a major fallout due to the higher prices. The reason is, the data prices in India have been exceptionally low. And even after the hike, these would still be low in relative terms. The low prices enabled people to sample data based services – whether it was e-commerce like Amazon or others. It has given people a taste of the potential of data services. It would include issues like savings, convenience, etc. For example, a discounted flight on MakeMyTrip or a good deal on Amazon, or quickly checking the status of one's flight. But the economic value that it represents is far greater than the extra money paid for it.

There is always a greater incentive in case of free services like content platforms etc. However, having sampled the services, there will be users who won't mind paying a little bit more. Take the example of WhatsApp, a major free communication service. It will cost a minimal amount of money for a service like that.

It is likely that there will be some dampening of demand as something that was free would now have a cost. There will be downward impact but I don't think that it will be so great that people stop using it. It may have been the case when people had not yet sampled the digital products and services.

K Vaitheeswaran, e-commerce consultant and founder of Again Drinks and Indiaplaza, India's first e-commerce website

The reality is, when rates go up, people accessing content and services will naturally go down. But at the commerce level, say on platforms like Amazon, Swiggy, etc, the change may not make a difference because there is a transaction (involving convenience, discounts, etc) where the consumer is benefiting from it.

It will make a difference where content is consumed virtually for free, say on platforms like YouTube and TikTok. In cases like these, where there is no other cost involved other than the data cost, if that cost goes up (40 per cent is a significant jump), consumption will go down. The principle holds true in cases of both urban and rural consumers.

Sanjay Tripathy, co-founder and CEO Agilio Labs, and Advisor - IAMAI (Internet And Mobile Association of India)

Telecom tariffs in India are the lowest in the world, which helped rapid growth of the digital ecosystem in India. Hence, tariff hike is not good news. It will impact millions of existing users while also having negative impact on new user addition. It's a chicken and egg situation as mobile operators are facing mounting losses and they see no other option other than increasing tariffs to survive. More importantly, operators are focusing on high ARPU customers and making prepaid expensive by 40-50 per cent.

Any hike should be accompanied with an increase in quality. With call quality going down month on month and a corresponding increase in tariff, it will definitely have an impact on the entire digital ecosystem.

N Chandramouli, CEO, Trust Research Advisory

A digital brand in whichever category it might be, depends on data and access. The reach/availability of data has happened, now it is only going to be a bit costly. There are two parts to it. One, the telecom industry has to survive and so, they have to increase the charges. And then, when it comes to digital, people are not using it only because of the low cost but also the service benefit (like e-commerce, transactions, etc) that it has brought along. Because people are accustomed to these services, usage of these now essential services will continue.

The telecom sector cannot collapse. If that happens, there will be no 'Digital India'. In case of free platforms like YouTube, etc. - primarily free entertainment, where free data has almost become a birthright, usage will definitely go down. The 'free' consumption will change in both urban and rural areas.