Is Reliance Jio Infocomm Ltd’s pricing strategy predatory and anti-competitive? Multiple agencies—Telecom Regulatory Authority of India (Trai), Telecom Disputes Settlement and Appellate Tribunal (TDSAT), the Competition Commission of India (CCI)—and even the Delhi high court are simultaneously seized of the matter. No one seems to be anywhere close to ruling on the issue, although Trai asked Jio last week to withdraw one of its offers which entailed complimentary services for three months.
Jio complied, but added that it would do so when it was “operationally feasible”. Its competitors alleged that in the two-three days it took to close the offer, the company and its agents continued to promote it. Those who managed to subscribe before this window closed, availed of the complimentary services. And when Reliance Jio launched new plans this week, competitors such as Bharti Airtel Ltd were quick to point out that the new plans weren’t very different from the one Trai had frowned upon.
In this backdrop, a moot question is if Trai is a competent authority to rule on Jio’s alleged predatory pricing; or, to put it bluntly, competent enough to handle the issue.
For perspective, Jio’s services were launched free of cost last September, with customers being allowed unlimited voice calls and data usage. Services remained free between January and March, with the difference being that data usage was capped at 1GB/day. The company said it would start charging customers from 1 April, but later changed its mind and said services between April and June would remain free for those who pay in advance for services in July.
This offer, called Summer Surprise, is what prompted Trai to finally act. But in what has been a terrible example of regulation, Trai hasn’t made its communication to Jio public. As such, we can only guess what reasons it gave for disapproving of the Summer Surprise offer.
Presumably, Trai has come to the conclusion that Jio must stop free/complimentary services and start charging customers. Jio’s new plans avoid the use of the terms free or complimentary. But if one were to use the tariffs it announced earlier this year as a yardstick, the new plan effectively offers three months’ services for the price of one. One way of looking at the Summer Surprise offer is that it offered four months’ services for the price of one.
This is the reason incumbents have been crying foul about the new plans, stating that it is essentially a similar plan “masquerading under a different name”. But, it can also be argued that the days of free offers are over and that Trai has been successful in getting Jio to start charging something for its services.
Whether the new charges of around Rs97 per month (net of service tax) are higher than the company’s variable cost, and are predatory, is a complex question. As pointed out in this newspaper earlier, this is a question best answered by CCI. Besides, with a sector regulator, there are typically concerns and/or allegations about regulatory capture, and a sector-neutral agency such as CCI is generally recognized as one that doesn’t have any such entrapments.
Having said that, the role of a sector regulator such as Trai cannot be underestimated. CCI typically takes two-three years to complete its investigations and hearings before finally passing an order. At best, its measures are remedial; although in some cases the damage in market structure may be too high to rectify.
A sector regulator can move much quicker and take preventive steps to ensure that a market’s structure isn’t damaged beyond repair. It has become amply evident, even to Trai itself, that its regulations are woefully inadequate to address issues related to anti-competitive behaviour.
While its laws state that pricing of telecom companies must be non-predatory, there are no clear definitions on what this entails. Neither is there clarity about other related issues such as what amounts to market dominance, and what the relevant market is when it comes to ruling on predatory pricing. For instance, Jio’s critics will argue that it has a dominant share in the market for mobile broadband services, while its supporters will say its share in overall mobile services is still small.
Earlier this year, Trai issued a consultation paper to help it frame regulations that address these questions. It may be a while before it arrives at a conclusion and frames new regulations. If Trai had been a more nimble regulator and framed regulations in advance, it would have been able to address the Jio situation far better.
Still, this is an important exercise, and Trai will do well to complete it sooner than later. Likewise, the example in the telecom market should be a wake-up call for other sector regulators who don’t have clearly defined rules on anti-competitive behaviour. In addition, Trai must also consult CCI while framing its new guidelines and while responding to charges of anti-competitive behaviour. Policy makers must realize such co-operation will be necessary for our regulators to respond reasonably as well as quickly enough to the threat of anti-competitive behaviour.
And last, but not the least, Trai should realize that a healthy dose of transparency will do wonders in gaining the trust of regulated entities and customers.