On 1 September 2016, Reliance Jio launched as the latest entrant in India’s mature, super-competitive telecom industry. And yet in a mere five months, it was able to cross 100 million subscribers in spite of close to 90% mobile penetration, globally competitive tariffs for both voice and data, efficiently run operations and over a dozen firms.
How? Because Jio’s services—unlimited voice calls and data—were available free of cost. What might have been an open and shut case of predatory pricing in other countries was overlooked by the telecom regulator, TRAI, which bought Reliance’s explanation that Jio’s services were only ‘promotional’ in nature.
Now imagine for a second, Uber offering cab rides free of cost for six months. Or Samsung offering its phones free of cost. You’ll find this hard to imagine because that’s how absurd it is. Ironically, this is a time in our country where a lot of things are going for free; not just restricted to the private sector.
On 1 January 2017, Prime Minister Narendra Modi launched ‘BHIM’, a mobile app that allowed people to transfer money to each other or make payments for services. In less than two months, BHIM has had over 17 million downloads and proven to be a serious competitor to several other competing apps.
How? Because BHIM was free too.
On 4 March 2017, the TRAI chairman RS Sharma published a signed, 1200-word column in the Indian Express, saying “the cost of digital transactions should be almost zero, if not negative, compared to cash.” He also rubbished the practice of service providers charging a ‘convenience fee’ for digital transactions, after acknowledging that it formed a revenue stream for many websites. Instead of a fee, the sites ought to provide a discount on online transactions, said Sharma.
‘Free’ is the hammer. And suddenly every profitable business is potentially a nail.
Fee is now free
How do you disrupt functioning, competitive markets with multiple strong companies? By taking away their pricing power.
Multiple sources within the banking and fintech sectors say that they are all bracing for a major and imminent disruption: the merchant fee (MDR) on payments under Rs 2000 being made entirely free. One major firm is said to be lobbying for it. The Ken was unable to conclusively verify either of these.