Telcos are Free to Match Reliance Jio’s Aggressive Tariff Plans in their Dominant Circles: Trai

By February 28th, 2018 AT 5:44 PM

Facing a threat from Mukesh Ambani-led Reliance Jio, established players like Airtel and Vodafone recently complained to Telecom Regulatory Authority of India citing “predatory pricing” by Jio. Trai, however, says they are not stopping anyone from competing from with Jio. Airtel, Idea and Vodafone are free to lower tariffs as much as they want to match or challenge Jio’s aggressive pricing in their dominant circles, a couple of officials two to Livemint requesting anonymity.

trai-predatory-pricing-jio

Besides, Trai added if anyone has a problem with their predatory pricing definition, they are free to approach the court. The latest tirade against Jio began after Trai issued a new notification on February 16 as to what constitutes predatory pricing.

Under these new rules, a tariff will be considered predatory in a “relevant market”, if any dominant player or SMP (Significant Market Player) offers services at a price which is below the average “variable cost” with a view to reduce competition or eliminate competition in the “relevant market”.

If the tariff is found predatory, an operator will be liable to pay a penalty of up to Rs 50 lakh per tariff plan per telecom circle.

Trai defined SMP as a telecom operator holding a share of at least 30 percent of total activity in a particular market. For example, Vodafone-Idea is SMP in 12 circles, and Airtel is in 9 according to the subscriber base, while based on revenues, Vodafone is SMP in 13 circles, and Airtel is in 15.

Incumbent operators Bharti Airtel, Vodafone India and Idea Cellular, through COAI, said that the new order takes away their flexibility to compete and retain customers in a circle where they are SMPs. This is because as of right now Airtel and Vodafone-Idea are SMPs in most telecom circles.

The Cellular Operators Association of India (COAI) accused Trai of being partial towards Jio as the new orders appeared “to be strengthening the ambitions of one particular operator with deep pockets and monopolistic designs at the expense of other operators.”

Trai and Jio, in turn, have rubbished COAI’s charges, and the regulatory body clarified that the operators are free to challenge Jio.

“The SMP is free to match a price as long as it can justify it to Trai, that is make a business case with the reasons for bringing down the price. Being an SMP and offering below average variable cost alone would not make your pricing predatory,” said a TRAI official, requesting anonymity to the publication.

Whatever way this goes, this means that a new tariff war is upcoming in the country, as incumbent players rigorously attempt to match Jio’s cheap data prices.

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