Trai ex-chief Rahul Khullar slams new rules on predatory pricing, terms them one-sided

Former telecom regulator Rahul Khullar has waded into the raging controversy over new rules on predatory pricing, saying they are one-sided and not fair.

The watchdog should have also stayed away from the sector’s competitive aspects, which are mostly in the domain of the Competition Commission of India, said Khullar, who was chairman of the Telecom Regulatory Authority of India from 2012 to 2015.

He criticised his successor for not taking a view on zero and near-zero tariffs since late 2016, when Reliance Jio Infocomm started services with free voice and data offerings for months, which led to a shrinking of industry revenue and thereby, a reduction in the government’s income.

“The tariff order is not at all fair. It is one-sided,” Khullar told ET.

Trai mandated a new formula last month to identify predatory pricing and changed the definition of significant market player (SMP), giving pricing flexibility only to operators with less than 30% of the market’s subscribers or revenue. India’s top three operators – Bharti Airtel, Vodafone India and Idea Cellular – contended the rules favoured Jio at their expense, allegations that Trai and Jio termed baseless.

“The way the rules have been laid down, they seem to say that Reliance Jio is not a significant market player, so it cannot be guilty of predatory pricing, but others are significant market players and therefore can be held guilty of predatory pricing. This is absurd,” Khullar said.

Vodafone Group CEO Vittorio Colao and Bharti Airtel Chairman Sunil Mittal have said they would move court against the predatory pricing order, while Trai has said the carriers are free to do so. Both telcos have suffered heavily since Jio entered the market in September 2016.

Khullar also said Trai should have stayed away from the issue of predatory pricing and let the anti-trust body decide the definition of SMP.

“Sectoral regulators, whether they are in telecom, electricity or others, are entitled to lay down rules and regulations which will influence competition,” he said. “Once the industry is functioning, whether one firm is behaving competitively vis-à-vis others or not, that is the matter for the CCI to decide. Trai should have let the CCI deal with SMP or even what is fair and unfair.”

Trai did not comment on queries seeking a response to Khullar’s statements as of Thursday evening.

The telecom regulator and CCI are currently battling out the matter of jurisdiction on predatory pricing in the Supreme Court.

In its tariff order, Trai junked norms such as volume of traffic and switching capacity that were used to define SMP. It said predatory pricing will be determined on a carrier’s average variable cost and that telcos cannot offer pricing packages to individual subscribers to retain them without offering all customers the same tariff plan.

Analysts said the rules put the older operators at a disadvantage because they can’t compete without falling foul of the new definitions. Jio has a 13-14% share of revenue and users and is several quarters away from attaining the SMP threshold, while Airtel and the proposed Vodafone-Idea Cellular combine would each have over 30% revenue market share.

Khullar flagged what he called the “partial” behaviour of the regulator over the past several quarters and said Trai “maintained a studious silence on predatory pricing” even after the telecom tribunal and the government told it last summer that industry revenue was declining and that a view should be taken on zero and near-zero tariffs.

“But Trai continued to do nothing. Now, nobody in their right minds would allow such tariffs to continue indefinitely, certainly not an independent regulator. Trai did nothing for nine months and now comes a predatory pricing order that is not balanced,” he said.
Bharti Airtel, Vodafone India and Idea Cellular had red-flagged Jio’s initial free offers, saying they were predatory. However, Trai in January 2017 and the telecom tribunal recently approved Jio’s tariff plans.