Keeping competition alive

CCI’S suggestions on telecom are timely

The Competition Commission of India (CCI), in a recent study, assessed the level of competition in the telecom sector and came up with recommendations to ensure growth in an industry that has faced significant financial stress. While such a study may not be a core mandate for the anti-trust body, which looks at “dominance” benchmarks to determine if there is any violation of the Competition Act, it is part of its advocacy objective. From that perspective, the CCI study is timely as it comes ahead of the telecom auction process, which is starting in March. In an encouraging sign, the study has recommended better communication between various stakeholders, including the industry, the regulators — the Telecom Regulatory Authority of India (Trai) and the CCI — and the government. A follow-up interaction has been scheduled for February 5 with the industry on the subject of competition, giving hope to the bruised telecom sector, which has had a stormy relationship with Trai over predatory pricing allegations levelled by incumbent telcos Bharti Airtel and Vodafone Idea against the newest player, Reliance Jio.

The exercise, meant to examine policies and regulations, was launched in January 2020 and the study findings were issued one year later. The CCI observations are based on a market study by the Indian Council for Research on International Economic Relations. One of the key observations of the CCI is that providing adequate 5G spectrum to the telecom sector at reasonable rates will help ensure a competitive market for the technology. This advice should be taken seriously by Trai as well as the Department of Telecom. The steep reserve price for 5G spectrum recommended by Trai has been opposed by telecom service providers and should be reviewed by the regulator. In case the regulator refuses to rationalise the reserve price, the government should take steps to do that. Only if the 5G spectrum cost is not exorbitant can telcos price their services at affordable rates for cutting-edge technology. The amount of spectrum allocation will determine the quality of 5G offers as scarcity of airwaves raises costs and makes operations inefficient, according to the CCI. It believes that for the success of 5G technology in India, it is imperative to create a competitive market. That’s true for an industry that has spent more than ~3.5 trillion in six auctions from 2010 to 2016.

Even as the CCI has recognised the entry of Jio and its deep discount among the reasons for telcos losing their financial muscle and landing in a high-debt situation, it has noted that Jio’s pricing strategy did not merit regulatory attention. Only an entity with significant market power can engage in conduct that is anticompetitive, the fair trade regulator has said. There’s hardly any argument against its observation that based on Trai’s definition of significant market power, Jio cannot be classified as predatory. Even so, the CCI engaging on predatory pricing in the telecom sector is a welcome development. The CCI has already indicated it would study sectors that it has stayed away from so far. That’s a positive for industry, though a little late in the day. Last year, it had done a study on another technology-heavy sector, e-commerce, sending out the right signals. This initiative should carry on to keep competition alive and provide a level-playing field for the welfare of consumers, as stated in the CCI goal.