The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) set aside Telecom Regulatory Authority of India's (TRAI) predatory pricing rule, which arguably favoured Reliance Jio.
It was a big win for Bharti Airtel and Vodafone-Idea and a huge setback for Reliance Jio on Thursday. The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has set aside Telecom Regulatory Authority of India’s (TRAI) predatory pricing rule, which arguably favoured Reliance Jio.
The TDSAT observed that TRAI’s predatory pricing rules provided artificial protection to the new telecom player (Reliance Jio, in this case) which had the muscle to disrupt the telecom industry. The ruling allowed even bigger telecom players to offer cheaper services in the cut-throat market.
The tale is more twisted than it looks.
In June 2017, Airtel, Vodafone and Idea (now Vodafone-Idea) accused Mukesh Ambani’s Reliance Jio of predatory pricing in telecom tariffs. Reliance Jio entered the telecom market with free voice and data services in 2016, which generated massive traffic on its network. Later, Reliance Jio started charging a nominal rate for the services, which was still dirt cheap.
However, In February 2018, TRAI tweaked the predatory pricing rule. The new rules allowed Reliance Jio to continue with cheaper call and data services, while at the same time, prevented Airtel, Vodafone and Idea from offering below-cost tariffs.
TRAI’s new predatory pricing rules said that such segmented discount offers by incumbents with substantial revenue and subscriber base amounted to market abuse, while below-cost tariffs by newer entrants, such as Jio, were not predatory in nature.
TRAI also junked traffic volume as a parameter to define a telco’s market power. This took Reliance Jio out of the ambit of predatory pricing prohibition on large companies.
The incumbent players then challenged TRAI’s rule in TDSAT. The tribunal observed what Airtel and Vodafone-Idea had been alleging that the rules provided “artificial protection” to a telecom operator which have had the “capability and intent” to destabilise the sector through predatory pricing before it attains ‘significant market power (SMP)’
SMP means a service provider holding a share of at least 30% of total activity in a relevant market, according to TRAI rules.
In a strongly-worded order, the TDSAT said that TRAI could not impose financial disincentives and ordered it to rework the predatory pricing rules within six months.
“The impugned tariff amendment order is set aside in so far as it changes the concept of SMP (significant market power), non-predation and the related provisions,” TDSAT Bench comprising Justice SK Singh and member AK Bhargava said in an order dated December 13, 2018.