Wikipedia defines disruptive innovation as an innovation that improves a product or service in ways that the market does not expect, typically by being lower priced or designed for a different set of consumers.
Indian Telecom space may not remain the same in the near future. Tata DoCoMo is the latest player in the industry to change the way it works. They are offering a ‘1 paisa per second’ tariff.
Tata DoCoMo is a joint venture between Tata Teleservices, an Indian mobile operator and NTT Docomo, a Japanese mobile operator. The joint venture was initiated when NTT Docomo bought a 26% stake in Tata Teleservices in November 2008.
We’ve earlier seen how Reliance India Mobile changed the mobile industry by coming up with the lowest tariff in the beginning of this decade. The call charges were around Rs 2-3 per minute and because of Reliance this was brought down to around Re 1 per minute.
Tata DoCoMo may be the next one to employ disruptive innovation in the Indian mobile industry. Currently the game is not played on the price front but Value added services front, which is evident from the advertisements of Airtel (Madhavan and Vidya Balan) and Vodafone (Zoozoos).
Check out Tata DoCoMo’s launch video, the theme of which is disruptive innovation, breaking the rules etc.
Currently the industry works on a 60s pulse, which means that even for a 1 second call, the user is charged for the entire minute. Tata DoCoMo is set to change all that. With a 1 second pulse and a 1p per second tariff, the Industry can potentially shift to a completely variable tariff rather than a step tariff which is being implemented now.
One of the three following things will happen.
1. Tata DoCoMo will gather significant market share, which is the best for the subscribers.
2. Existing mobile operators will just match the price essentially closing the gates on Tata DoCoMo, which might lead to a temporary drop in prices but not necessarily permanent. ( Similar to Coke shutting out local drinks by way of lower prices )
3. Tata DoCoMo will get initial subscribers but may not be able to retain them because they may not be able to scale up due to inadequate infrastructure. This will set a very bad precedent in the industry for a new player who tries to compete in price terms.
Only time will tell.