Introduction
On December 23, 2024, the Telecom Regulatory Authority of India (TRAI) issued the 12th Amendment to the Telecom Consumer Protection Regulations (08 of 2024). This amendment directed telecom service providers to offer voice and SMS-only packs as an option, aimed at benefiting millions of feature phone users across the country. These users, unable to utilize data due to device limitations, have often found current bundled plans unsuitable. Despite TRAI’s intent to address this digital divide, telecom service providers strongly opposed the proposal during the consultation process. In this note, we will explore the challenges operators are likely to face in complying with TRAI’s directive. Additionally, we will analyze who stands to benefit, under what conditions, and by how much, providing a holistic view of the regulation’s potential impact.
The Structure of Existing Plans
With the entry of Reliance Jio (RJIO) into the telecom market, the industry has undergone a significant shift. Telecom players have largely abandoned traditional voice plans and now predominantly offer data packs that include unlimited calling as a bundled feature. This transition aligns with the technological evolution of 4G and 5G networks, where even voice calls are transmitted as data packets.
For smartphone users, the ability to make voice calls is contingent on the validity of their data packs. Once these packs expire, users must recharge their phones to retain access to voice and SMS services. This structural shift has also changed the affordability metrics of telecom services. Pricing is no longer evaluated based on call rates (e.g., ₹ per minute) but instead on data costs (₹ per MB). As data consumption increases, the cost per MB has consistently decreased, incentivizing users to migrate to higher data consumption plans.
Declining Data Costs and Rising Usage
The aggregate pricing of data has seen a dramatic decline over recent years. According to TRAI’s latest report for FY25-Q1, the average cost of data has dropped to ₹8.31 per GB, a significant reduction from earlier periods. Concurrently, monthly data usage per subscriber has risen steadily, reaching an average of 21.30 GB per month. This trend underscores the increasing reliance on data-driven services and the growing affordability of high-data plans.See accompanying figure for data trends and the interactive dashboard here.
Changing ARPU Composition
The shift in tariff structures has profoundly transformed the Average Revenue Per User (ARPU) composition for telecom operators. Historically, ARPU was heavily reliant on voice services, which constituted the bulk of revenue streams. However, this has changed dramatically, with data now becoming the primary contributor to ARPU. As illustrated in the figure below, the share of ARPU from data has skyrocketed from 12.87% in FY14 to an impressive 87.2% in FY25. Conversely, the combined ARPU from calls, SMS, and rental services has plummeted from 75.89% in FY14 to just 9.48% in FY25.
This transformation has rendered voice services effectively “free,” with consumers increasingly perceiving them as a standard feature included in all plans. The pricing focus has shifted entirely to data, and customers now evaluate the value of their plans based on the cost per GB rather than per minute of calls. This shift has further reinforced the perception that the primary service being purchased is data, with voice and SMS as supplementary benefits. See figure below and follow the link to the dynamic chart for more insights.
Forced Evolution of Business Models
Not all operators embraced this shift willingly. The then-incumbents—Bharti Airtel, Vodafone, and Idea—resisted this transformation, as it significantly altered the competitive landscape. The market shifted from voice-centric networks like 2G and 3G to data-focused 4G networks, which proved to be more efficient and effective for rolling out and monetizing data services.
At the time, the incumbents had made substantial investments in acquiring 3G spectrum during the 2010 auctions and began rolling out 3G networks in 2012. These networks had limited time to yield returns before being overshadowed by 4G. Additionally, a large portion of their existing infrastructure was built on 2G GSM technology, which further constrained their ability to compete. These operators had little incentive to expedite 4G deployments, as their focus remained on maximizing returns from 2G and 3G networks.
The game-changer came with Reliance Jio’s entry into the market, offering a pan-India 4G network that made voice-centric 2G networks a bottleneck for growth. The imbalance was exacerbated by the interconnect usage charges (IUC) regime, under which incumbent operators could levy fees on voice calls originating from other networks. While this was designed to ensure fair compensation for network investments, it inadvertently slowed innovation by reinforcing dependence on 2G networks.
Reliance Jio’s aggressive push for a data-centric model motivated TRAI to dismantle the IUC regime, which previously charged fees on a per-minute basis for incoming voice calls. The removal of IUC eliminated the incentive to maintain voice-based networks, forcing incumbents to pivot towards 4G deployment. This shift aligned their tariff structures with Jio’s data-focused business model, ultimately accelerating the industry’s transition to data-centric plans.
In summary, the entry of Reliance Jio, coupled with TRAI’s dismantling of IUC, compelled incumbents to overhaul their business strategies. This marked a decisive move away from voice-based networks to data-driven models, redefining the competitive dynamics of the telecom sector. Reader who are interested to go deeper into history can refer to my previous articles – “The Economies of JIO Phone” , “How “Unlimited Voice” Impact Indian Operators” and “Analysis of TRAI’s IUC consultation“.
Impact on Consumers: Transformation in Usage Patterns
The changed business strategy of mobile operators had a transformational impact on consumers, fundamentally altering their usage patterns and preferences. Users began gravitating toward devices that made data usage seamless, leading to a surge in smartphone adoption. This shift unlocked access to a plethora of applications and services, with video calling becoming a mainstream communication tool, often preferred over traditional voice calls. Additionally, WhatsApp-based calling gained popularity due to its higher quality, enabled by better codecs and higher data consumption compared to conventional voice calls, which often suffered from poor quality due to low-bitrate codecs.
The affordability of feature phones has also evolved. While the average selling price of smartphones has seen modest growth, feature phones with only basic voice capabilities are now available at highly affordable prices. A new feature phone can cost as low as ₹1,500, while second-hand models are available for ₹500-600. Despite these trends, India still has approximately 150 million feature phone users who remain disconnected from data services, either due to affordability constraints or a lack of need.
In terms of ARPU, there has been a steady recovery after an initial dip during Reliance Jio’s introductory free service phase. ARPU has risen from ₹113.44 in FY14 to ₹162.41 in FY25. However, this shift has also had a cost implication for low-usage consumers. Those relying on voice and SMS services with blended MOUs of less than 500 minutes per month are now paying effective rates of ₹0.40 to ₹0.80 per minute, significantly higher than the ₹0.16 per minute average during the high-volume growth years. This reflects how the focus on data-centric pricing has shifted the cost burden onto low-data users, creating affordability challenges for a significant segment of the population.
Persistent Affordability Challenges: The Economic Divide
Despite the growing adoption of smartphones and the falling cost of data, affordability remains a significant barrier for many Indians. While per capita GDP figures have risen over the years, the economic divide is stark: over 60% of Indian households earn less than ₹18,000 per month, with rural household incomes being particularly constrained. This disparity limits the ability of millions to afford even basic telecom services, especially data-centric plans.
For the estimated 150 million feature phone users in India, most of whom are from economically weaker sections, the problem is compounded. These consumers either cannot afford data plans or have no use for them, given their reliance on voice and SMS. The affordability gap highlights the critical need for low-cost, voice-focused solutions tailored to the realities of India’s economic diversity. The economic divide and its implications for telecom strategies are further explored in this detailed analysis. Additionally, trends such as SIM consolidation and the rise of BSNL—gaining 6.8 million subscribers within four months (July to October 2024)—serve as testimony to the affordability challenges faced by millions of consumers. For further deep dive you can refer to my earlier article on this topic – Analyzing Tariff Sustainability in India’s Telecom Sector: A Deep Dive into Rural and Urban Consumer Expenditures.
Tariff Hikes and Their Impact on Low-End Users
Though recent tariff hikes have helped both Bharti Airtel and Reliance Jio improve revenues, a significant portion of this growth has come from increased prices on low-end data plans. These plans, particularly those targeted at voice-centric users, have seen price hikes ranging from 11% to 22%. As illustrated in the charts below, the cost of data and voice plans with 28-day validity has risen sharply, with many voice plans now priced around ₹200 or higher. When GST is included, this cost increases further.
The tariff hikes disproportionately affect low-end users, especially feature phone users who consume minimal data. These users pay significantly higher rates for the limited data bundled with voice plans, as the price per MB of data in these plans is substantially higher than that in standard data-centric plans. For feature phone users who cannot fully utilize the data included in these plans, the benefits are neither proportional nor practical.
The following charts compare the impact of tariff hikes across different plan categories:
- Voice Plans with Extended Validity: Showing how data prices remain disproportionately high for voice-centric users with limited data needs.
- 28-Day Validity Plans: Highlighting the increase in plan prices and corresponding changes in data rates per GB.
These dynamics illustrate the challenges TRAI’s order seeks to address. By mandating voice and SMS-only packs, the order aims to provide affordable alternatives for low-end users who are currently underserved by the existing tariff structures. This move will compel operators to rethink their pricing strategies to accommodate a broader range of consumer needs, ensuring that connectivity remains accessible for all.
Operator Strategy and the Challenges Ahead
In response to TRAI’s directive, operators are likely to adopt a straightforward strategy: removing data bundles from voice plans and offering strictly voice-centric packs. While this approach aligns with the letter of TRAI’s order, it introduces a new set of challenges. For instance, maintaining the current pricing of ₹200 for a 28-day voice-only plan, without including data, would result in disproportionately high voice call rates for low-usage consumers.
Consider the example of a ₹200, 28-day validity plan. For a user consuming only 200 minutes of usage (MOU), the effective call rate would be ₹1 per minute. For users with higher usage—such as 500 or 1,000 MOU—the rates would decrease to ₹0.40 and ₹0.20 per minute, respectively. This pricing structure disproportionately benefits heavy users while penalizing low-usage consumers, undermining the intent of TRAI’s amendment to promote affordability.
If operators are compelled to introduce low-cost voice-only plans tailored for low-usage consumers, it could erode the financial gains achieved through recent tariff hikes. This poses a significant business challenge for operators, as catering to this segment would require a delicate balance between compliance with TRAI’s order and safeguarding revenue from low-end segments.
Conclusion
TRAI’s 12th Amendment presents a classic catch-22 situation for Indian telecom operators. While operators can theoretically comply with the directive by rebranding existing voice plans and removing data bundles, this strategy risks creating a perception issue among consumers. Low-end users, already burdened by rising tariffs, may question the fairness of being charged for MOUs they neither need nor can afford to use. This mirrors the earlier criticism of bundling data into plans for feature phone users who could not fully leverage its benefits.
Moreover, failing to offer affordable, low-usage voice packs tailored for price-sensitive consumers risks violating the spirit of TRAI’s directive. International examples, such as Bangladesh’s discounted voice plans compared to data packs, further highlight the disparity in addressing affordability challenges. For operators like Vodafone Idea (VI), whose survival hinges on revenue growth and tariff increases, this regulatory compliance challenge could have far-reaching business implications.
Ultimately, how Indian telecom operators navigate this complex scenario will determine not only their compliance with regulatory mandates but also their ability to sustain growth while ensuring connectivity for millions of underserved consumers.
