Cheap calls: Predatory pricing by telcos junked by TDSAT

The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) on Thursday set aside a regulation brought by the Telecom Regulatory Authority of India in February which prohibited incumbent operators from providing segmented offers (discounts which are not part of tariff package) to their high-Arpu subscribers. The tribunal also struck down the definition of predatory pricing, which the regulator had brought through the same regulation which prevented operators having 30% or more subscriber and revenue market share from providing below-cost tariffs but newer operators were free to offer such tariffs till they reached the threshold mark.

While striking down both the components of the regulation, the TDSAT said Trai had overstepped its jurisdiction and did not carry out proper, transparent consultations with stakeholders before drawing up the regulations. It has asked Trai to come out with new regulations within six months.

While the development is a huge embarrassment for Trai as TDSAT said that the regulation lacked “application of mind”, it comes as a big relief for incumbent operators like Bharti Airtel and Vodafone Idea. The striking down of the regulation though is negative for Reliance Jio as the tariffs offered by it can now be challenged as predatory as it has lost the less than 30% subscriber, market share cover.

In a hard-hitting order, the TDSAT said, “If a new entrant needs to be protected from the rigours of non-predation, it can be done through provisions like “Welcome Offer” and “Promotional Offer” as availed by Reliance Jio, but to allow freedom from requirements of non-predation till acquisition of 30% of total activity in a given market, prima facie appears an extreme step by Trai, the tribunal said in its 43-page order.

Now, incumbents like Bharti and Vodafone Idea can freely bring out any tariff scheme irrespective of their revenue and subscriber market share without being penalised as predatory. They can continue providing segmented offers to their high Arpu customers without violating any regulation.

On segmented offers, the tribunal cited past regulatory orders of Trai to prove that they were always in force and could not be clubbed with regular tariff schemes which need to be reported to the regulator. The TDSAT said that segmented offers are not discriminatory as made out by Trai as they are offered to a class or segment of subscribers, over and above a tariff scheme. A discrimination comes into effect if a same class of subscribers are provided different treatment and there’s a complain. However, it allowed Trai to ask operators to submit it any segmented offers if it wanted to examine whether they were discriminatory or not but the same has to be kept confidential.

On predatory pricing, TDSAT said that Trai’s powers are limited to examining whether a tariff is predatory or not. It has no jurisdiction to define predatory norms which fall under the ambit of competition laws overseen by the Competition Commission of India. The tribunal highlighted that non-predatory pricing in Trai’s various past regulations was only in the context of examining interconnection issues. Here, an operator was considered dominant if it crossed the 30% threshold by number of subscribers, revenue market share, volume of traffic and network capacity in circles. However, in its new regulation Trai removed the network capacity and volume of traffic and kept only the subscriber and revenue market share as the determinant. This impacted incumbents because in most circles either they have 30% market share or close to it while Jio is only around 13-15%. This meant that incumbents could not come with any innovative tariff package but could only be reactive by matching Jio’s tariffs.