The recent new rules by Telecom Regulatory Authority of India (TRAI) on predatory pricing have become the new grounds for fight between Reliance Jio, incumbent operators and the administration.The TRAI started it all by altering the definition of Significant Market Player (SMP) earlier this year while coming up with new rules for predatory pricing. Incumbent telcos allege that the new rules favor Reliance Jio, the newest Indian operator while making the going tough for them. Cellular Operators Association of India (COAI) along with Bharti Airtel, Idea Cellular and Vodafone India are raging a war against the new rules.
Sunil Bharti Mittal, Chairman, Bharti Enterprises, and Vittorio Colao, Group CEO, Vodafone, have both spoken against these rules at the recently concluded Mobile World Congress 2018, the biggest telecom event in the world. The older telcos like Airtel and Idea have also approached the Telecom Dispute Settlement Tribunal (TDSAT), which has given three weeks to TRAI to respond.
The new rules for predatory pricing stipulate that SMP is now defined on the basis of two factors instead of previous four. Earlier the SMP was decided on subscriber base, turnover, network capacity and traffic volume, but now it will be decided only on subscriber base and revenue.
So, any telco with more than 30% market share either on the basis of subscriber base or gross revenue of that market will be considered SMP and will be restricted from offering predatory pricing. The incumbents, including Airtel, Vodafone and Idea (combined) have more than 30% market share in most of the circles, making it impossible for them to meet the pricing offered by players with less than 30% market share. Jio has less than 30% market share and the new rule makes it easy for the company to provide services at any price without any competition, till it acquires 30% market share.
The new rules further say that TRAI will consider pricing to be predatory if it is below average variable cost, a measure that divides variable cost with output. It is not clear which components will be included as variable.In case a service provider is found to be indulging in predatory pricing it will be charged Rs 5 lakh per market. The TRAI’s order says that a tariff will be considered predatory if SMP offers services at a price below the average variable cost in a circle/market with a view to reduce or eliminate competition. It is not clear how it will decide that a telco is offering a particular price with a view to eliminate competition.
TRAI later clarified that SMP will be able to retaliate to meet the pricing of a rival, but it is still up to the regulator to decide if it is to eliminate competition or not. The incumbents also allege that Jio’s data volumes are much more than those of the incumbents, but TRAI has not included data traffic as a metric for assessing SMP, which is again advantage Jio.
This is not the only point of contention. As per the new rules, the service providers will need to publicly disclose all their tariff plans. The new rules mean that telcos will not be able to send special offers to select subscribers through SMSes, which is a fairly accepted practice telcos adopt to prevent customers from porting out. In a way, this again benefits the Jio because, unlike the incumbents, it has single pricing for the entire subscriber base.
Jio and incumbents are involved in a fierce battle for market share of the country’s booming mobile broadband market. The rivalry has led to many slugfests since the time Jio launched operations in 2016. The predatory pricing controversy is yet another chapter in the series of allegations between the two groups. The legal battle is unlikely to end anytime soon. Never a dull moment in Indian telecom industry!
(The author is an independent journalist)