Right call

The Telecom Regulatory Authority of India has done the right thing by disallowing any operator with more than 30 per cent of the subscribers or revenue share to indulge in predatory pricing but it should have extended the definition to include players that are dominant in a specific category of service or traffic volume. For example, an operator with over 30 per cent share of the data market in the country can be considered a significant market power and should be barred from adopting predatory pricing tactics. Disruptive pricing is not new to the telecom sector. In 2003, Reliance Infocomm, hungry to get subscribers for its newly launched CDMA network, brought down tariffs for voice calls to just 40 paise a minute from the then existing rate of ₹2 a minute. In 2008, Tata DoCoMo entered the GSM market with 1 paisa per second offer at a time when consumers had to pay for calls on a per minute basis even if the calls were of shorter duration. These initiatives were seen as trend setters as they made mobile telephony extremely affordable. However, for the operators, this meant lower profits leading to a financial crisis from which the sector is yet to revive.

Ironically, the biggest impact of this financial trouble has been on the disruptors themselves. Both Tata DoCoMo and Reliance Infocomm (now Reliance Communications) are now out of business. While the others including Airtel, Vodafone and Idea also suffered, they not only survived the onslaught but also gained market share. In India’s telecom sector, an incumbent operator has rarely taken the initiative to drop prices. They have almost always reacted to a new entrant’s disruptive pricing and still ended up on the winning side, albeit with some pain. Therefore, the incumbent operators’ concerns over the regulatory action against predatory pricing goes against historical evidence of how the market has played out so far. One may argue that this time things are different because the new player — Reliance Jio — happens to be one with deep pockets.

This is where the telecom regulator could have perhaps taken a more balanced approach. Globally, regulators have adopted asymmetrical approach to ensure that operators with significant market power do not bully new entrants. But in India, consolidation in telecom sector has ensured that there are no small players left in the market that need regulatory protection. The ongoing legal wrangle over what constitutes predatory pricing in the telecom sector has also thrown open a paradoxical situation. On one hand lower tariffs are beneficial for consumers but on the other hand below cost pricing is detrimental to the overall health of the industry. The telecom appellate tribunal should now take these aspects into consideration when it gives a final ruling.

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