Incumbent operators free to counter Reliance Jio’s cheap tariff: Trai

Airtel, Idea Cellular and Vodafone are free to lower tariffs as much as they want and challenge or match Reliance Jio tariffs in circles where they have a dominant position, and such actions will not be seen as predatory pricing, says Trai

Faced by the financial challenge of low tariffs offered by Mukesh Ambani's Reliance Jio Infocomm (Reliance Jio), established players have ganged up against the newcomer and moved sector regulator Telecom Regulatory Authority of India (Trai) citing ''predatory pricing'' by Jio.

While Trai's view had cleared the air on what constitutes predatory pricing, the row over the issue of low tariffs offered by Reliance Jio has now widened the cracks with other members of the industry ganged up against Jio.

The pricing issue has spread over the entire tariff structure of telecom companies with operators sparring publicly on issues ranging from points of interconnect to interconnect usage charges since September 2016, when Reliance Jio started commercial services.

''For example, if Airtel is a significant market player (SMP) in a circle then its actions have to be watched. If Jio comes with an aggressive tariff in that circle then customers will flock to Jio. Any rational service provider will try to match it. The mere act of matching the Jio price cannot be considered predatory because it is reactive,'' one of the two Trai officials cited earlier said, requesting anonymity. ''But if you are doing it to drive out competition then it is predatory.''

Trai issued new norms on 16 February under which it will examine tariffs of a significant market player  - which is an operator holding a share of at least 30 per cent of total activity in a relevant market - to determine the existence of predatory pricing.

It will also look at whether the tariff is below the firm's average variable cost over a certain period. If the tariff is found predatory, an operator will be liable to pay a penalty of up to Rs50 lakh per tariff plan per telecom circle. The definition of ''total activity'' is based on any of two parameters - subscriber base and gross revenue.

Considering subscriber base as the parameter, as of 31 December, market leader Bharti Airtel is an SMP in nine circles and the Vodafone-Idea combine is dominant in 12 circles. In terms of gross revenue market share, Airtel is an SMP in 15 circles and the Vodafone-Idea combined in 13 circles.

There are 22 circles, or licence areas, in the country.

Incumbent operators say that the new order takes away the flexibility to compete and retain customers in a circle in which they are SMPs. However, the Trai said it will look at evidence of a specific intent to engage in predatory pricing.

Incumbent operators also say that the change in Trai's definition of ''total activity'' will result in an unfair advantage to Reliance Jio, which enjoys huge traffic on its network. The new definition of ''total activity'' is based on any of two parameters - subscriber base and gross revenue - while an earlier definition included subscriber base, revenue, switching capacity and volume of traffic.

Reliance Jio has now escalated the war against the dominant players of the telecom association COAI, saying the body was spreading patent falsity in denying that the recent press statements were directed against it.

In a strongly-worded letter to the Cellular Operators Association of India or COAI - its second such communication in a week - Jio said that the industry body's veiled references to it as being the sole beneficiary of Trai's regulations were not lost on anyone.

"RJIL strenuously denies the correctness of the assertion that the press release was not directed against any particular operator. The patent falsity of this statement is apparent on a plain reading of the press release, which is rife with references to 'one operator' said to be the sole beneficiary of TRAI's recent regulatory interventions," Jio said.

The letter addressed to COAI director general Rajan Mathews further said that the identity of the operator was also not left in any doubt in the press release, which in claiming that 'Trai has copy pasted the demands of this one operator' attempted to underscore the assertion by a comparison of the views of RJIL and the contents of the TTO (Telecom Tariff Order).

Jio said that the attempts on the part of Mathews and COAI to "belatedly claim that the press release was not intended to aggrieve any particular operator is an implicit admission of the patently false and defamatory nature of the press release. Jio claimed that this also constituted a misplaced attempt to avoid liability in regard to the same.

Jio said it reiterates contents of its legal notice dated 22 February 2018 and once again reserves its rights to initiate appropriate proceedings in accordance with the law (See: Reliance Jio screams foul, demands public apology from COAI ).

Yesterday, Mathews had ruled out an apology to Jio, over the industry body's recent allegations that indicated the orders of sector regulator TRAI have been favouring the newcomer.

"There is no question of apologising to Jio as there is no worthy reason to do so, as the COAI's differences are with Trai's order and not with any specific operator," Mathews had said.

The association last week had countered Jio's verbal offensive against it, saying that it was duty-bound as an association to raise concerns related to growth of the sector.