Trai’s reply sought on predatory pricing rules
The appellate tribunal has asked the Telecom Regulatory Authority of India to file a reply in 3 weeks regarding objections to its recently issued rules on predatory pricing. The tribunal was hearing pleas from Bharti Airtel and Idea Cellular.
The appellate tribunal for telecom regulation has asked the sectoral regulator to file a reply in three weeks regarding objections to its recently issued rules on predatory pricing.
The tribunal was hearing pleas in this regard from Bharti Airtel and Idea Cellular, which also wanted a stay on the new regulations, particularly on segmented offers. This request was not granted. The next hearing is on April 17.
After the reply from the Telecom Regulatory Authority of India (Trai), the two companies will get another two weeks for their responses.
According to Airtel’s petition, the Trai “order is vicious and is aimed at strangulations and annihilation” of its capacity to acquire subscribers or retain these. These two and other older companies feel the new regulations favour newcomer Reliance Jio.
For, they have argued, Trai has removed two measures from the earlier definition of significant market power (SMP) to benefit Jio. In the latest regulation, Trai has defined SMP as based on either subscriber base or gross revenue. Earlier, there were four factors — subscriber base, turnover or gross revenue, network capacity and traffic volume.
The regulator has also linked predatory pricing with SMPs, limiting incumbents’ flexibility in offering rates below Jio’s. Whereas, argue the older ones, there is no such limiting factor for the latest entrant.
Hence, goes the argument before the Telecom Disputes Settlement and Arbitration Tribunal, the order issued by Trai are “illegal, arbitrary and void, and infringe the rights of telecom players” under the country’s Constitution. Also, that the order is designed to further the “sinister intent of one player which wants to drive competition out” by ensuring other operators are unable to retain customers.
The companies also say the regulations have been framed on issues never raised during the earlier consultation process and were not part of the consultation paper. And, against consumer interest, for taking away service providers’ freedom to provide individual discounts for customers.
The new Trai rule says a rate offer may be considered predatory if a company with SMP offers services at a price below the average variable cost in a “relevant market”, with a view to reducing competition or eliminating competitors.
Critics say this is a weak metric to be used as floor price for identifying predatory pricing in a sector like this, which has a very high component of fixed cost such as on spectrum, network, employees and advertisements, with minimum linkage to volumes.
Also, that even if Jio becomes an SMP in some of the country’s 22 telecom circles, its low-priced offers could continue, as its variable cost per minute or GB is likely to be very low.