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According to a new report by India Ratings, JioGigaFiber, a fiber-based broadband service for homes and businesses, by Reliance Industries Limited ('IND AAA'/Stable) has the potential to disrupt the retail broadband segment and open up new digital avenues for the enterprise broadband segment.
The firm said that Reliance Jio Infocomm Limited is well positioned to capitalize on its wide fiber optic network across India, subject to it addressing last-mile connectivity challenges.
It said India has a fixed broadband subscriber base of about 18 million, representing about 7 percent of the total household base of nearly 290 million and a 10 percent TV household penetration. The penetration levels are low compared with global averages.
RJio's aggressive marketing could lead to an expansion in the broadband market, somewhat similar to the one that took place in the wireless mobile data market.
Ind-Ra also estimates that at the current monthly broadband tariff of Rs. 500-600 per household, the potential market size for 50 million households could be Rs.300 billion-360 billion, a significant portion of which could be tapped by RJio. New service offerings in the enterprise broadband segment could provide additional market opportunities.
RJio will allow users to register for availing JioGigaFiber services through its website or MyJio app from 15 August 2018. The roll-out is likely to be in a phased manner, with the first phase in cities/localities with the highest registrations. This will enable RJio to identify potential demand areas and execute optical fiber roll-out in the most efficient way (with regard to CapEx/opex) across 1,100 cities.
It said nevertheless, any aggressive market penetration strategies by RJio (such as free offerings, partnering with/acquiring local cable operators) could pose challenges to extant players.
Even at the same price point, consumers may shift to RJio as its service offerings (e.g. content library and video calling) would be superior to basic cable services that are being offered by extant players. Also, the majority of MSOs are currently incurring large capex to expand their optical fiber networks. This puts their credit profiles at risk.