Dial 1 for Disruption—BSNL's 1-rupee comeback plan rattles rivals

The dispute revives memories of Reliance Jio’s 2016 entry, when free offers upended the market and triggered years of tariff wars. Now, as Jio and Bharti Airtel dominate India’s telecom landscape, BSNL’s new plan has reopened questions on pricing fairness, regulatory oversight, and the role of a state-owned operator trying to regain ground with ultra-low priced offers.

Private operators have approached the telecom regulator, saying such near-free offers need prior regulatory approval, as directed in a past order by the Telecom Disputes Settlement and Appellate Tribunal (TDSAT).

As part of the Diwali Bonanza Plan, BSNL, on 15 October, relaunched its ₹1 recharge plan that offers complimentary 4G mobile services, including unlimited voice calls, 2 GB data per day and 100 SMS per day for 30 days at no extra cost to new users and those who port-in to BSNL from other operators.

On 1 August, BSNL had for the first time launched the ₹1 promotional recharge pack as Freedom Plan. The offer was originally available for activations up to 31 August, which was later extended to 15 September.

“In a communication to the Telecom Regulatory Authority of India (Trai) in August, private telecom operators represented by the Cellular Operators Association of India (COAI) alleged that BSNL's ₹1 plan was in violation of the TDSAT judgment dated 1 February 2018," the first person cited above said.

The private operators also alleged that BSNL's tariff plan was specifically designed for customers to port-in to the operator, and the same was in violation of various TRAI instructions that prohibit offering promotional tariffs for MNP (mobile number portability) port-ins by any means, direct or indirect, the first person said, adding that private telcos had asked the regulator to step in cancel the offer and direct BSNL to withdraw all such plans without delay.

A few private operators, in their individual capacity, have now again expressed concerns on BSNL's ₹1 plan to the telecom regulator, two of the three people cited above said, without naming the companies.

Issue of ‘significant market power’

The development brings to the fore the issue of predatory pricing in the sector. Predatory pricing, according to Trai, is when a telecom company offers a service at a price lower than what it costs to provide the service, with the intention of undercutting or pushing out its competitors from the market.

“Because BSNL is not a significant market power (SMP), its tariff offer of ₹1, even if priced below its average variable cost, cannot be found predatory by Trai. Besides, Trai allows promotional offers for a period of 90 days," said Satya N. Gupta, former principal advisor at Trai. Gupta, however, pointed out that all the new recharge plans and tariffs have to be mandatorily reported to Trai within seven days by all the operators after they get notified.

According to Trai’s 63rd tariff order in 2018, to be a significant market power, a service provider must hold a share of at least 30% of the total activity–subscriber base or gross revenue–in a relevant market. In the order, Trai said it may, on reference from any person or suo motu, examine the tariffs of an SMP to determine the existence of predatory pricing. The regulator may, after providing detailed reasons, disallow the relevant tariffs if they are found to be predatory.

Queries emailed to Trai, COAI and BSNL did not elicit any response till press time.

“The telecom sector has already become a duopoly with Jio and Airtel. Had these operators indulged in predatory pricing, the same would have definitely counted for a case of examination by the regulator. However, BSNL is currently not seen from the lens of cutting the competition with such a low market share," said the second person cited above.

The predatory pricing context

The tribunal's judgment, which telcos cited in their communications to Trai, alleging BSNL’s violation was delivered on 1 February, 2018. This related to appeals filed by Bharti Airtel and Idea Cellular against Reliance Jio, which was the new entrant in the market and had launched two promotional tariff offers in 2016. The two telecom operators had filed the appeal after Trai had given Jio a clean chit that it did not indulge in any predatory pricing and any violation of directives on promotional offers.

TDSAT had then directed Trai to issue suitable direction and regulation regarding benchmarks and guidelines that could be applied to ascertain consistency with the principles of non-predation.

“Till TRAI issues the required benchmark/guidelines, as an interim measure, we further direct that no ‘all services free’ offer in any manner will be launched by R2 (Jio) (or any similarly placed TSP) without making written submissions to TRAI related to self-check for consistency with regulatory principles of non-predation," TDSAT had said in the order.

Later, in 2018, Trai had issued the 63rd tariff order, wherein there was no mention that telcos needed to make written submission to Trai and seek approval before launching promotional offers.

“Trai’s order will get priority over TDSAT’s judgment, which was an interim measure at that time," Gupta said.

BSNL - fighting for a comeback

Lately, the government has increased its focus on BSNL. Private operators' concerns over BSNL’s ₹1 plan also come at a time when the state-owned telecom operator, with its lower tariffs, has been slowly acquiring customers. In August, the company pipped Bharti Airtel in monthly subscriber addition, according to data by the Trai. During the month, BSNL added 1.38 million subscribers taking its base to 91.75 million, compared to 91 million in the year-ago period. In comparison, Bharti Airtel added nearly 0.5 million subscribers in August, taking its user count to 391.9 million as of August end.

In July 2024, when private operators had hiked their tariffs, BSNL gained subscribers due to its lower-priced schemes. However, in the absence of 4G at that time and low service quality, the company saw a churn of subscribers later.

Concerns over BSNL’s service quality persist. On 28 July, Union communications minister Jyotiraditya Scindia, along with minister of state for communications Chandra Sekhar Pemmasani, met the chief general managers of all the circles of BSNL. Quality of services and plans to improve the same, growth targets—including average revenue per user (Arpu) increase—expense reduction, customer grievances and enterprise business focus were among the key issues discussed.

BSNL currently has a 7.9% market share of mobile subscribers in the country. After being in testing phase for a long time, the company formally launched its 4G services on India-made technology on 26 September with over 92,000 towers. Of its total subscriber base of 91.7 million as of August end, the company serves more than 20 million 4G users across the country.

“The Diwali Bonanza Plan—absolutely free of service charges for the first 30 days—gives customers a proud opportunity to experience our indigenously developed 4G network. We’re confident that the service quality, coverage and the trust associated with the BSNL brand will encourage customers to stay with us well beyond the period of free 30 days," said A. Robert J. Ravi, chairman and managing director of BSNL in a release dated 15 October.

In addition to expanding its mobile services, BSNL is also targeting significant business opportunities in deploying private 5G networks for enterprises.