New Delhi: By the time Mukesh Ambani finished speaking at Reliance Industries’ annual general meeting (AGM) on Thursday, where he kicked-off his company’s audacious telecom and 4G venture, Bharti Airtel’s market cap plunged by nearly Rs 12,000 crore while smaller competitor Idea Cellular’s market value dipped by a cool Rs 3,000 crore.

At the end of the day, the market had also driven down Reliance stock by 3%, in a sign that the bloodbath the company unleashed could very well backfire.

Much of the AGM saw Ambani take a page out of India’s political class and Apple’s Steve Jobs’ books, in a performance that was marked both by a new vision of the way India should consume data as well as a number of pandering statements. The announcements themselves were surprising: free voice calls, cheap 4G data rates, dirt-cheap 4G devices and the promise of unrestricted Internet access. Although the details of Jio’s commercial launch, which were announced today, were largely known throughout the industry, the AGM was met with stunned silence at Reliance’s biggest rival’s office in New Delhi, according to industry executives The Wire spoke with.

What should we expect on September 5, when Reliance Jio launches for free for a period of three months? The Wire looks at the good, the potentially bad and the potentially ugly of how Jio impacts consumers, India’s telecom industry and the larger Internet ecosystem.

The good – data abundance and fresh competition

India has always been a country of poor Internet connectivity and data scarcity. Data is prohibitively expensive for a vast majority of rural India, and even amongst the urban elite who can afford to purchase 4G data packs, connectivity issues prevent one from taking full advantage of the service.

The symptoms of high call rates and data scarcity, both in urban and rural India, are extremely visible. Users switch off their mobile data to prevent accidental usage or switch it on only after 10 PM when rates are lower. Owning more than one SIM is the norm as you want to be able to take advantage of the best offers from different telecom operators. On festival days such as Diwali, on government holidays such as Independence Day, and on made-up celebratory days such as Friendship Day, Indians rarely send out SMS-es or use too much data; all rates are hiked in the name of congestion.

Other existing practices are equally off-putting. Airtel and Vodafone’s per GB rate could equal Jio’s current rates, but their rates come into effect only after users pay a monthly/upfront fee of Rs 1200+.

The launch of Jio signals an important shift from scrounging for data and data-scarcity to potentially an era of data abundance. The most obvious indicator of this are Reliance’s free voice calls, cheap data packages (4GB of 4G data for Rs. 499), the elimination of national roaming and its corresponding effect on competition (which has supposedly resulted in an industry-wide reduction of data rates). Slightly cheaper rates, however, are only one piece of the puzzle.

More important signs of data abundance are the separate categories for Wi-Fi (Jionet Hotspot) that Reliance allots for each of its 4G voice and data packages. Consider the ‘M’ (medium) offer. For Rs 499, a user gets free voice, 4GB of data (unlimited 4G data during the night) and 8 GB of data if you connect to a public Wi-Fi hotspot that Reliance plans on setting up across the country. This essentially means, at the very minimum, if a user forks over Rs 499, she gets 4GB of data for herself and 4 GB-8 GB (depending on how one interprets the tariff chart) of data if she manages to connect to an Internet hotspot.

There are other indications that Reliance has taken a page out of India’s FMCG companies: In his speech, Ambani pointed out that the company’s data packages would start from Rs 19 (Airtel’s lowest 4G data plan starts at Rs 44). A number of telecom experts The Wire spoke to pointed out that if implemented properly, this could be the “data sachet” that rural India is currently waiting for; although a large number of industry experts equally emphasised that it would be difficult for people to actually do anything with such a small amount of data.

Equally important, if only as a superficial signal, is Ambani’s insistence that the company will not hike call and data rates on blackout days such as Independence Day or Friendship Day; Reliance is ensuring that data is no longer seen as a restricted resource to be doled out or used only sparingly.

The positive consequences of Reliance Jio’s launch will ripple across the technology and Internet ecosystem as well. “Leaving aside the consumer angle for one second, however, this is going to be an absolute bonanza for India’s Internet companies, many of which have been struggling in the last year as they restructure and resize. These companies have started hitting initial barriers to unrestricted growth. Data usage for e-commerce services like Flipkart, streaming services like Gaana and of course Facebook and Google is going to burst through the roof for the next three months,” a senior partner at Sequoia Capital India, who declined to be identified, told The Wire.

In short, anything that could gain from greater Internet penetration will indeed gain. This includes everything from India’s Internet unicorns to the Modi government’s e-governance applications (which haven’t really taken off), and the numerous projects aimed at boosting rural e-health and e-agriculture.

Ultimately, the most positive consequence (even if the company isn’t able to execute perfectly as we will address below) of Reliance Jio will be a fresh dose of competition and an extremely valuable shift away from the penny-pinching and tight-fisted perspective we take when it comes to call rates and data usagee.

The potentially bad and potentially ugly

It is difficult to separate the potentially bad from the potentially ugly. In some cases, the potentially bad when it comes to Reliance Jio is merely the potentially overstated. Many of Ambani’s claims during the AGM need a harder look. In earlier portions of his speech, the Reliance chief stated that by March next year the company would touch 90% of India’s population. This seems a little ridiculous as even the most optimistic estimates give Reliance Jio around 40 million users by the end of next fiscal. While this shouldn’t, and doesn’t, take away from Reliance’s ambitious plans, it underscores the many challenges that remain in connecting India’s unconnected.

The question it does raise is how Reliance plans on recouping its investment. One of the pillars Ambani expanded on today was the Jio app ecosystem. There’s a JioTV app, a JioCinema app, a Jio Music app, a personal digital wallet, and a Jio Magazine and Newspaper application. This whole suite, Reliance claims, will eventually be charged as a Rs 15,000-per-year subscription. With an app ecosystem, Reliance is echoing a strategy that stretches as far back as the days of AOL; the only thing missing is a Reliance Jio e-mail application. Closer home and in the recent past, it is remarkably similar to the telecom operator VAS ecosystem that largely failed. It is possible that a closed off app-telecom ecosystem could work; although history suggests that an open ecosystem and better third-party applications (Paytm, Netflix, Amazon Prime, Hotstar) usually win.

At least three media content executives The Wire spoke to expressed caution over the success of Reliance Jio’s app foray. “They approached us with a content deal for their JioCinema application but did not offer anything better than what we are seeing from Hotstar or even Amazon Prime video. This is also a difficult game for people who don’t really have their heart in it or willing to devote a great deal of resources,” said a senior executive of an Indian movie production company.

As other analysts and commentators have pointed out, Reliance’s push for its own applications shouldn’t force it to exploit loopholes in India’s net neutrality laws and give itself an unfair advantage over other third-party services.

Ensuring fair competition – even as we view Reliance Jio as an important competitive force – becomes absolutely vital. The smaller details of Jio’s launch already seem a little off. Although the company does away with many artificially imposed limits barriers, it sticks to other equally deplorable practices such as billing and setting the validity of data packages on a 28 day cycle. This effectively ensures that customers are billed for 13 months out of a 12-month year. Although this may appear to be an insignificant concern in light of the larger data revolution that Reliance Jio promises, these small details add up.

For other smaller telecom operators to effectively compete against the Jio juggernaut, spectrum needs to be handed out in a manner that doesn’t bankrupt the company bidding for it.

This brings us back to the potentially ugly, and the larger bloodbath that awaits the telecom industry. Reliance Jio’s loss-leader strategy is simple and is one being played out in other markets such as online taxi aggregation and e-commerce: sacrifice short-term (even if its as long as 3-4 years) profitability, have more Indians come online/use data, hike prices slowly and reap the rewards of the larger addressable market. A loss-leader strategy like this is an almost tried-and-tested approach for a company like Reliance, even though the market, which drove Reliance’s shares down 3% today, seems nervous about its blood-shed approach. If its value-added approach (app ecosystem) doesn’t work out, its data roll-out and fibre implementation has to be absolutely on point.

This loss-leader strategy does come, however, with its own consequences for competition and consumer protection. Rival companies may need more spectrum to compete with Reliance Jio and yet the upcoming spectrum auctions have already been deemed by analysts as a probable flop show. Will telecom companies risk aggressive bidding to counter Jio’s commercial launch – even though paying larger spectrum acquisition costs usually translates to higher call and data rates (which is something they cannot afford)? In the run-up to Reliance Jio’s commercial launch, there have been a number of unusual developments that appear to have favoured Jio – this cannot be allowed to continue.

It appears that the inevitable blood-shedding that Reliance has forcefully pushed the telecom industry towards will digitally empower India, even if it makes things very ugly for the sector’s fortunes over the next few years.