Business, Finance, Marketing, Strategy

Disruptive Innovation in the Indian Telecom Industry by Tata DoCoMo

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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.

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17 thoughts on “Disruptive Innovation in the Indian Telecom Industry by Tata DoCoMo

  1. Is this really disruptive innovation? I believe this is just a different pricing strategy. Disruptive innovation is when there are fundamental differences in your basic product offering which completely catches everybody unawares. And even this pricing strategy is not really new in the Indian market – BPL mobile had a similar tariff plan a few years ago.

    And I also feel that the Indian telecom market is not as price sensitive as it was before – definitely not till number portability comes in. Tata will probably have to wait for that to happen soon for them to become formidable players.

  2. BPL Mobile (now Loop Mobile) in Mumbai had 1p/1sec pricing quite some time back. They were forced to change to the current format of 60sec pulse by the other players.

    There is nothing really new in this, and this is hardly disruptive innovation.

    Also kind of agree to Harshad here, because Virgin Mobile has been offering great schemes such as credit to account for incoming calls and dirt cheap rates, but it hasn’t really broken into the youth market that it is targeting. Maybe this has to do with the adoption on CDMA instead of GSM, which limits handset choices, but then DoCoMo will probably be on CDMA as well.

    And I still quite hate your breaking of RSS updates by publishing only teasers instead of the full article.

  3. You could do with some research – talk to the guys at tata maybe!

    I don’t think this is something you can call ‘disruptive’ really!

    Point 3, to me seems unlikely, coz tata is a seasoned player in telecom.. and with docomo onboard, they would know what they’re getting into.. to sustain it.

    And tata is unlikely to be forced into revising its terms by other players..

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  5. @ harshad

    Undercutting in price terms can definitely be classified as disruptive innovation. And as I said I believe that changing pulse from 60s to 1s is a rather disruptive one as it is going to change how the system works. I see the rural market latching on to this more than the urban market as the rural market is extremely price sensitive.

    One issue which I failed to mention was how this 1s pulse rate can compete with messaging. A lot of SMSs will now be converted into voice calls now that one is not charged for the entire minute.

    BPL Mobile did try the plan but only in Mumbai, that’s why it failed. The idea has a better scope in the rural market. A pan-India launch of this idea may not go unnoticed.

    @Hrishikesh

    I agree with you on the Virgin Mobile issue as CDMA is still a great deterrent in India since it limits hanset choices. But FYI, Tata DoCoMo is a GSM player and not a CDMA player.

    @ Ankur

    That point seemed unlikely to me too, I just mentioned it for the sake of completeness in outcomes.

  6. Theodore says:

    For an average person I think the 1 second pulse thing really doesn’t make a difference. How much saving per month do you think it will lead to… 2-3%? That it costs just 60 paise per minute is a more important feature, but, the question is… will it be sustainable? As for SMS, I don’t think saving money plays a big role in deciding whether you call or send an SMS. Apart from being cheaper-per-minute, i think the only other benefit of this system is the extra hype.

  7. Srikrishna says:

    Leaving out the factual intricacies, i think this is more of the industry maturing slowly in a developing market. Formidable firms enter the market to try out their luck and bring out innovations in pricing, service and technology to woo customers. Slowly 2-4 players will emerge as leaders (Those who can sustain good prices, great infra, and services). But one thing why did TATA enter so late, with this kind of a tie up??

  8. Aditya says:

    Tata Indicom came up with this offer long time back for pre-paid mobiles. God know’s why they have stopped it then.

    I don’t really think it is a disruptive innovation, and I barely think it’s going to succeed as a huge market player with this Idea.

  9. Rajesh says:

    @Natrajan

    The BPL plan was put up not just in mumbai but also in the maharashtra-goa circle and I do agree that if the plan is launched on a nationwide scale it wont go unnoticed. Infact in 2005-06 when this plan was introduced by BPL i remember they were definitely able to have a landgrab. TATA has not been able to make much news in the Indian markets, even the Virgin card which they played has not been able to pull in many users.

    Well the main problem with the scheme seems to me is that telecom prices in India are already the lowest in the world such schemes might not be able to pull them further down and TATA might end up similar to BPL. But yes it can definately build up a good customer base and the scheme can turn out to be a good launch strategy for them. The main thing to be observed is whether they are able to keep the customers to themselves or they might face a good churn if the services don turn out to be upto the mark…

  10. amit says:

    guys i to had the same question that whether tata docomo wil sutain for longer period or is it just a marketing strategy..bt i got their wonderful website (http://www.tatadocomo.com/)which made all my doubts clear..its not their marketing strategy tata is comin up with 1paisa/sec concept for long term run..also the VAS like free voice mail where other mobile operators charge you 75paise..which is bit more..so which 1 will u prefer the one that is chargin u more or the 1 who doesn’t charge you at all??the decision is yours bt i must say m very much impressed with tata docomo and with their amazing plan..

  11. Tata Docomo says:

    Hi Guys,

    Great to see such a great discussion taking place on Tata Docomo. However should you have any further queries, complaints, or words of encouragement, do let us know. We are also there on twitter and we believe in responsding ASAP. We do admit that there are certain ‘chinks in our armour’ right now, as there are with any newly launched telecom operator. However we guarantee that these problems will be rectified in due time. Your feedback is priceless, and it keeps us going!

  12. rishi says:

    nice to c tata docomo here..looks like they are here to solve problem jus like in twitter n facebook..this shows tata wants to help thr customer using any means..a honest brand indeed!

  13. rishi says:

    guys docomo is getin a new plan cald diet sms..personally i liked the plan a lot..send the shortest msg n u get charged for each character like say
    “Hapy B’day ” you wil b chargd 9p! m a fan of docomo nw..

  14. I don’t know what strategy it is…their only intention seems to be fooling people…behind the catchy TVCs there lies one of worst network coverage that even beats the 90’s…& not 2 mention the (lack of ) customer service…having fallen prey 2 their promotions, I tried them…now I am changing my seem hardly after 2 weeks of taking it…I would advice others also 2 avoid it like plague…

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