TDSAT asks Trai to file reply on predatory pricing rules in three weeks

Telecom tribunal TDSAT has asked sectoral regulator Trai to file a reply in three weeks regarding its recently released regulations on predatory pricing. The tribunal, which was hearing pleas by Bharti Airtel and Idea Cellular, however, did not grant a stay on the regulations.

The next hearing on the case is scheduled for April 17.

As per people aware of the development, Airtel and Idea sought a stay, particularly on the banning of segmented offers. However, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) felt it may not be necessary to grant a stay at this time and asked Trai to file a reply in three weeks. After receiving Trai's reply, Airtel and Idea will get another two weeks to file their responses.

Sources in Trai said the regulator can still issue notices to telecom operators if it feels they are offering predatory tariffs as TDSAT has not granted a stay on the regulations.

As per Airtel's petition, the Trai "order is vicious and is aimed at strangulations and annihilation" of its reach to acquire new subscribers or retain existing ones. Incumbent telcos feel that segmented offers are additional benefits to a customer and forms part of the essential business strategy.

Older telecom operators including Bharti Airtel and Idea Cellular feel that the regulations favour Reliance Jio as Telecom Regulatory Authority of India (Trai) has removed two factors from the definition of significant market power (SMP) just to benefit Jio. In the latest regulations, Trai has defined SMP based on any of these two parameters -- subscriber base and gross revenue wherever earlier, there were four factors: subscriber base, turnover or gross revenue, network capacity and traffic volume.

The regulator has linked predatory pricing with SMPs, limiting the incumbents' flexibility in offering tariffs below Jio's whereas there is not such limiting factor for the latest entrant.

The orders issued by Trai are "illegal, arbitrary and void and infringes the rights of the telecom players" under Article 19(1) (g)of the constitution of India, said the petition. The petition also said that the order is designed to further the "sinister intent of one player which wants to drive competition out" by ensuring that other operators are unable to retain its customers and do business that it is entitled to do under the constitution of India.

The telcos also say the regulations have been framed on issues which were never raised during the consultation process also and were not part of the consultation paper.

Also, as per incumbents, the regulations are against consumer interest as it takes away the service providers freedom to provide individual discounts to customers and deprives them of the ability to get offers and benefits from the service provider.

As per Trai, a tariff can be considered predatory if an SMP offers services at a price that is below the average variable cost in a "relevant market", with a view to reducing competition or eliminating competitors.

Analysts, however, feel that average variable cost is a weak metric to be used as the floor price for identifying predatory pricing in a sector like telecom, which has a very high component of fixed costs such as spectrum, network, employee and advertisements, with minimum linkage to volumes.

The analysts further said even if Jio becomes an SMP in certain circles, its low-priced offers can continue as its variable cost per minute or per GB is likely to be very low, thus making this proposal redundant and incapable of providing any long-term solution to the sector's problems.

New Regulations of TRAI

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