TRAI regulations have warped the competitive market in favour of one operator, alleges COAI

The Cellular Operators Association of India (COAI) have launched allegations against the Telecom Regulatory Authority of India (TRAI) that its regulations over the last 12-18 months have distorted the market. 

Without mentioning Jio explicitly, COAI called on the government to intervene with respect to the most recent tariff order issued by TRAI. They claim that the order on predatory pricing violates the ‘fundamental right’ of other operators to carry on with their business. 

Placing the entire industry at a ‘serious disadvantage’ except for Jio, COAI statement asserted that TRAI’s regulations “seem to be strengthening the ambitions of one particular operator with deep pockets and monopolistic designs at the expense of other operators”.

COAI, a industry association of various mobile operators including Reliance Jio, stated that the distortion of the competitive landscape was destroying the financials of the industry with thousands of jobs and billions of dollars of investment on the line. 

The association also asserted that a bulk of its members agreed with the assessment of TRAI’s regulations, except for Reliance Jio, who had a divergent view on the matter.

 The Telecom Tariff Order (TTO) 

On the 16 February, TRAI amended the TTO to say that ‘predatory pricing’ will be determined on the basis of average variable cost and on whether or not there is a specific intention by the carrier to reduce or eliminate the competition. 

It went a step further to change the definition of significant market power (SMP) to operators with more than 30% market share in terms of either subscriber base or gross revenue. 

Why does the definition of SMP matter? Because, a telco needs to be SMP for any of its plans to be accused of predatory pricing. Earlier, SMP was calculated on the basis of volume of traffic which included data and switching capacities. 

BNP Paribas, one of the largest banks in the world, asserted that the TTO - “Restricts predatory pricing by players with more than 30% subscriber/revenue market share but puts no restrictions on promotions of Jio, which is the dominant player in data with four times more volumes than Bharti or Idea-Vodafone”. 

Rajan S Mathews, COAI Director General, said, “Victims have now been made the perpetrators… One operator, who by its own admission, is the world’s largest data network may be free to offer any sort of predatory tariffs while older operators are now subject to regulation and cannot compete without falling foul of a new definition of what constitutes predatory pricing.”

Mandating that telcos do away with segregated offers or schemes to retain existing subscribers has taken away the flexibility of older operators to implement any counter measures to prevent subscriber poaching attempts. Mathews states that is done under the garb of transparency and non-discrimination.

“In effect, older operators will now be challenged on the basis of revised definition of SMP so as to be prevented from responding to what may be actual ‘predatory tariff plans’. Even more strangely, they will find it practically difficult to offer any discounts/provide benefits to retain their customers if a competitor chooses to poach them, effectively taking away their ability to compete and conduct business,” COAI expressed. 

According to them, this violates the fundamental right to carry out “any occupation, trade or business as enshrined in Article 14 and 19(1) (g)” of its members.

COAI also stated, “In fact, it appears the Trai has copy pasted the demands of this one operator across a range of definitions in the new TTO,” adding examples to back up its claims.

 Jio, the Mukesh Ambani-owned telco that was launched in 2016, entered into a price war with the existing telcos in the industry leading to major revenue and profit losses for major players like Airtel, Vodafone and Idea Cellular. 

Prabhjote Gill is the Senior Journalist at Business Insider India. She covering everything space, tech and defence at Business Insider India. She is also in-charge of allocating stories to junior writers.

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