The Reliance Jio Platforms Story

Ben Thompson wrote this excellent article on the different models of the Internet, and the economic impact of those models:

1. US model of practically no regulations, that has in turn kickstarted the Internet in the US now to all the top Internet companies being American;
2. China model of maintaining tight control over content, which required locking out Google, Facebook, Amazon etc, and in turn forced China to come up with their own versions of each of those companies;
3. EU model of regulation around data privacy impacts the existing players but also means new EU based players can’t come up easily (too many regulations!), what Thompson calls the “worst of all possible outcomes”;
4. (And this was the surprise) the emerging India model.

But first, some context. India, he says, has given unfettered access to digital goods, but “kept a much tighter leash when it comes to the physical layer of tech”, ergo the ban on FDI in e-commerce and high tarriffs on electronic goods. As the US and China markets have saturated, both US and Chinese tech companies find the Indian market changing from being attractive to becoming a necessity. That has led to collisions with India’s regulators (WhatsApp’s troubles with its payment option, and now the outright banning of Tik Tok).

It is against this backdrop that Thompson wonders if (Reliance) Jio Platforms is headed to create the 4^th model of the Internet, the Indian model. When Mukesh Ambani launched Jio, it built a 4G network only. The implication?

“4G, unlike 2G and 3G, does not support traditional circuit-switched telephony services; voice calls are instead handled the same as any other data.”

Ambani rolled it all out in a way only Reliance can: $32 billion on building the all-India network, with a 3-month free voice/data offering at launch. Remember how voice is handled as data in 4G? That meant even though many of the poorest joined up only for voice, (almost) overnight, hundreds of millions of such Indians got access to the Internet as well for the first time.

 

Once the size of a market increased by that much, you can understand why there was a mad scramble to buy a piece of Jio Platforms, from KKR to UAE and Saudi sovereign funds to Intel to Facebook and Google. Thanks to all that fundraising, Jio has now paid off whatever it borrowed to build Jio in the first place.

 

But, you ask, why did those companies need to invest in Jio? Once the network was built, couldn’t they operate on top of it? Aha, because:

“What is increasingly clear, though, is that the (Jio) company’s ambitions extend far beyond being a mere telecoms provider.”

In the latest AGM, Ambani said so explicitly, announcing two pillars:

“One is digital connectivity and the other is digital platforms.”

 

Ambani is trying to do what no other telecom provider has been able to do:

“In short, Jio is determined to achieve the dream that has long eluded telecom providers in other countries: moving up the stack from fixed-cost infrastructure to high-margin services.”

Unlike the West, Jio has the most subscribers. Which frees them up to focus on other things. Like the next generation 5G, as Ambani announced:

“Jio has designed and developed a complete 5G solution from scratch. This will enable us to launch a world-class 5G service in India using 100% homegrown technology and solution. This made in India 5G solution will be ready for trials as soon as 5G spectrum is available, and can be ready for field deployment next year. And because of Jio’s converged all-IP network architecture we can easily upgrade our 4G network to 5G.”

Never a man with small ambitions, he then said that if “Jio’s 5G solution is proven at India-scale”, they could export it out globally.

 

Oh, given Ambani’s clout and connections with government, it is kind of implied that he will help “smooth over the regulatory and infrastructure hurdles” that have stymied the likes of Facebook and Google.

 

Lastly, this is where things move from economics to geopolitics:

“In a Jio-mediated market it is U.S. tech companies that make less than they would have, and not only does India collect more taxes along the way, Jio’s vision of being a national champion abroad could be a huge win for India in the long run.”

Given the US and India’s fear of China, both countries’ views may be aligned:

“It is actually a good thing to not only have a counterweight to China geographically, but also a counterweight amongst developing countries specifically.”