Reliance jio-telecos fight: Are incumbents spoiling their case on other issues

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Updated: September 9, 2016 7:10:25 AM

Incumbents need to fight Jio in the marketplace through tariffs and customer service. To be fair, they have begun doing so. But the focus should be purely markets rather than regulation

In 2001-03, when Reliance Infocomm entered the telecom space with its fixed-line wireless in local loop technology masquerading as full mobile services, the incumbents once again protested. (IE)In 2001-03, when Reliance Infocomm entered the telecom space with its fixed-line wireless in local loop technology masquerading as full mobile services, the incumbents once again protested. (IE)

In 1997-98, when the state-owned MTNL was starting its cellular services in Delhi and Mumbai, the then incumbent operators protested that the move was not as per law. They had a point. The Telecom Regulatory Authority of India (Trai) was established earlier during the year and the Trai Act required that before bringing in a new service or an operator the government needed to seek the recommendations of the regulator over “Need and Timing”. This wasn’t done, and, naturally, the incumbent won their case in the Trai which was then even an appellate body.

In 2001-03, when Reliance Infocomm entered the telecom space with its fixed-line wireless in local loop technology masquerading as full mobile services, the incumbents once again protested. They had a point because, once again, rules were bent and the regulator looked the other way. Once again, the case of the incumbents was proved because eventually the Supreme Court ruled in their favour and even the Trai had to legitimise the entire thing by bringing in a unified access service licence.

In 2008-09, when the then telecom minister A Raja brought in a set of new licensees, the incumbents once again protested because the entire procedure was riddled with irregularities. The case, once again, was proved when, in early-2012, the Supreme Court cancelled the licences doled out by Raja.

A new operator—Reliance Jio Infocomm—has entered the market and allegations and counter-allegations are once again flying thick. However, the case is a little different this time. The legality of the entry of Jio is well settled by the Supreme Court. Then, what is the fight about? In June, Jio started its test services where it offered its connection and services free to consumers. It became a hit and, within a couple of months, it notched up a subscriber base of 1.5 million—unprecedented till then. Naturally, it needed more points of interconnect (PoIs) with incumbent operators to make its calls successful.

It is at this point that the incumbents cried foul and through their association—Cellular Operators Association of India—started petitioning the government and the regulator that such large-scale free services were not allowed and they will not provide more PoIs as it would compromise their quality of service. One can argue that the incumbents had a valid point as, subsequently, the department of telecommunications and the Trai concurred that the scope of test services lacked clarity in the licence agreement and henceforth they will clarify it.

However, matters took a different turn. On September 1, at the company’s annual general meeting, Reliance Jio’s chairman Mukesh Ambani announced the commercial launch of the services from September 5. Since regulations permit a three-month period of free services after filing tariffs with the regulator, he announced free services till December 31. Ambani also announced that Jio will not charge for voice services and its data charges, even considering certain riders, worked out to be cheaper than that of the incumbents. One would have thought that since Jio has commenced commercial services, the matter would end here and there won’t be any further fights. The incumbents and COAI even wished their best to Jio on its entry.

However, the matter did not end. The incumbents, through COAI, have again written to the government that they cannot provide the required PoIs to Jio because they neither have the networks nor the capacity to deal with such large number of calls Jio is generating, all because of its free services.

Now, here there’s a problem. The COAI seems to be dictating to a new operator as to what its scale of commercial launch should be. In what manner and what speed should it be scaling its subscriber base. Such logic spoils the case the COAI or the incumbents had built for themselves so far. In the midst of all this debate, they had even charged the regulator with playing favourites when it brought out a consultation paper to review the termination rates ahead of its schedule. Since any reduction in termination rates always benefits a new service provider, the charge of the COAI did not lack merit. However, by now stretching its logic of not providing PoIs to Jio post the commercial launch, it is shooting itself in the foot. With the launch of commercial services, incumbents need to fight Jio in the marketplace through tariffs and customer service. To be fair, they have begun doing so. But the focus should be purely markets rather than regulation at this point of time.

By deflecting the issue and creating the PoI controversy, the incumbents are only spoiling their case on other issues built up so far. They are also giving the regulator a handle to deflect their charges by stating that they are bent on stopping the entry of a new operator which benefits the consumers. Understandably, the government has refused to intervene in the matter.

It seems that Ambani took everyone by surprise by announcing the date of the commercial launch of the services. This can be corroborated from the fact that Jio has not opened enough retail outlets, leading to huge queues outside its limited number of stores, something which is spoiling the consumer experience.

The incumbents also seem to have mishandled another aspect. The PoI fight should have been waged directly by the operators and not through the COAI. Since Jio is also a member of COAI but lacks weight as the body does not work on the principle of ‘one-man, one-vote’ but on the basis of revenue, the incumbents score over Jio. However, the dignity of the association gets lowered which gets reflected in Ambani’s statement in an interview with The Economic Times, where he states that the director-general of COAI eventually turns out to be a paid employee of the incumbents.

rishi.raj@expressindia.com

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