Well, reliance jeo's 4g has fallen to 3g or even 2g in speed with increase in 
customer volume and when it rains, it is...
 oops!


-----Original Message-----
From: Mobile.accessindia [mailto:mobile.accessindia-boun...@accessindia.org.in] 
On Behalf Of avinash shahi
Sent: Thursday, October 06, 2016 6:46 PM
To: mobile.accessindia; jnuvision
Subject: [Mobile.AI] This should help all of us: Reliance Jio: Predatory 
Pricing or Predatory Behaviour?

EPW Vol. 51, Issue No. 41, 08 Oct, 2016

Jai Bhatia (jai.bha...@soas.ac.uk) is a PhD student at the School of
Oriental and African Studies, University of London. Advait Rao Palepu
(advait.pal...@gmail.com) is an intern with the EPW.
http://www.epw.in/journal/2016/41/insight/reliance-jio.html
Reliance Jio is disrupting the working of India's telecommunications
industry by taking on incumbents like Bharti Airtel, Idea Cellular and
Vodafone which together control almost three-fourths of the market for
mobile voice and data services. Although some of its services are
"free," RJio's pricing may not be considered predatory even if its
behaviour certainly is.

An earlier version of this article appeared as a Web Exclusives in the
EPW digital edition.

The writers would like to acknowledge Aditi Roy Ghatak and an
anonymous reviewer for their comments and suggestions.

On 1 September 2016, Reliance Jio Infocomm (RJio), which is part of
Reliance Industries Limited (RIL), India’s biggest private company
headed by the country’s richest man Mukesh Ambani, commercially
launched services to transfer voice and data through the internet
using fourth-generation (4G) telecommunications technology. RJio has
stated that it hopes to have 100 million subscribers in the “shortest
amount of time.” Said to be the biggest “start-up” in the world with
an investment of ₹1,50,000 crore the new entrant comes with
substantial financial clout (Khanna and Pathak 2016).

RJio is expecting data rather than voice to be its primary source of
revenue. This represents an important shift in the structure of an
Indian telecom operator. Currently RJio’s competitors such as Bharti
Airtel, Idea Cellular and Vodafone earn the bulk (around
three-fourths) of their revenues through voice services.

To what extent will RJio disrupt the telecom market in the country
which is dominated by the top three incumbent players? Bharti, Idea
and Vodafone together control close to three-fourths of the total
market for telecom services in the country. The three have invested
heavily in older second-generation (2G) and third-generation (3G)
technological platforms (TRAI 2016a). At present, RJio is the only
telecom operator in India with fully data-centric services, entirely
based on voice over long-term evolution (VoLTE) technology, which
allows voice to be transferred over an internet protocol (IP) network
at much faster speeds in comparison to traditional networks using 2G
and 3G technologies.

RJio’s advertisements had Prime Minister Narendra Modi endorsing its
offerings. RJio’s products and services were called “revolutionary.”
Its competitors claimed that RJio was deploying what its competitors
call “predatory pricing.” Even if this may not be a legally accurate
description, what is certain is that RJio’s behaviour can be described
as predatory—in keeping with practices followed by the Reliance Group
over the decades.

RJio’s Welcome Offer

RJio’s most attractive offering is “unlimited voice calling” for all
its subscribers. This offer comes with a selection of 10 data plans
ranging from ₹149 for 300 megabytes (MB) of data to ₹4,999 for 75
gigabytes (GB) of data (Reliance Jio 2016). The cost of data to the
consumer comes down progressively as tariffs go up. For example, the
₹1,499 tariff carries 20 GB of data making the average price of the
package ₹74.95 per GB. With its ₹4,999 tariff, the average cost falls
to ₹66.68 per GB. RJio is offering data in various forms, including at
public WiFi hotspots or specific areas where computers and mobile
phones can wirelessly connect to the internet through a facility
called JioNet, which is expected to become operational in mid-2017.

During RIL’s annual general meeting on 1 September, Ambani stated that
while there is a digital revolution underway across the planet, this
country was lagging behind others in terms of mobile broadband
internet access. He claimed that RJio will be offering data to its
customers at a low price of ₹50 per GB and that his new venture would
put an end to voice call charges in India (RIL 2016).

Public perception of RJio’s products and its pricing strategy is that
these are “affordable” and “better” than those of its rivals. People
across cities in India have waited in serpentine queues to buy a RJio
SIM (subscriber identity module) card. Application forms which are
supposed to be free have reportedly been sold in the black market,
each for ₹100 (Zacharia 2016a). RJio has been able to reach out to
over 1.5 million subscribers during its trial phase alone—a
substantial portion of these subscribers are RIL employees, their
family members and friends who began availing these services since
December 2015.

Competitors React

In their first reactions to RJio’s entry, its competitors sharply
reduced the prices at which they were offering data services.
State-run Bharat Sanchar Nigam Ltd (BSNL) decided to match RJio’s
offering “tariff by tariff” with the chairman of the public sector
corporation, Anupam Shrivastava, stating that RJio’s entrance posed an
existential challenge (“a question of survival”) for other telecom
operators.

The entry of RJio will accelerate market consolidation and strategic
alliances. Such alliances have already taken place and more are
expected. Airtel and Aircel struck a 4G spectrum trading deal in July
worth ₹3,500 crore (PTI 2016a). Reliance Communications (RComm) headed
by Mukesh Ambani’s younger brother Anil Ambani, and RJio arrived at an
agreement in January to allow the latter to share the former’s mobile
towers by paying ₹12,000 per tower (Arun 2016) in addition to a
spectrum sharing deal across 17 telecom circles (or geographical
areas) (Reuters 2016). More recently, RComm and Aircel announced that
they would merge—the merged entity would have assets worth ₹65,000
crore and an active subscriber base of 120 million, making it the
fourth largest telecom operator in India (Gupta and Barman 2016). On
13 September, BSNL and RJio announced an agreement whereby BSNL
customers with 4G-enabled handsets could use RJio’s network while
roaming outside their circles while RJio customers could use BSNL’s 2G
network to make voice calls (Sathe 2016). On 27 September, RComm
announced that it had “virtually” merged with RJio (Mint 2016a).

RJio’s competitors who dominate the lobbying group, the Cellular
Operators Association of India (COAI), wrote to the Department of
Telecommunications (DoT) alleging that existing licence agreements do
not allow any operator to conduct prelaunch trials at the scale at
which RJio conducted its trial. The COAI claimed that RJio had
violated the terms of its licence agreement with the DoT and the
principles enshrined therein which are meant to ensure fair
competition and non-predatory pricing behaviour (Hindu Business Line
2016).

Anti-competitive Practices

What is meant by predatory pricing and predatory behaviour? When a
firm cuts the price of its goods or services, it forces its
competitors to lower their prices. This results in the profits of the
competitors falling and they may even have to incur losses. If the
competitor does not cut prices, it loses market share and if it does
cut prices to below its average cost of production, it runs the risk
of insolvency. The act of reducing prices to curb competition and then
increase prices to earn monopoly profits is considered
anti-competitive.

Competition laws in various national jurisdictions aim at safeguarding
long-term consumer interests from overt and disguised predatory
tactics of market actors. These laws seek to instil a competitive
market environment by regulating, monitoring and assessing competitive
practices between and among firms. In the United States, the Sherman
Act protects firms from “unreasonably exclusionary conduct that is
dangerous and is likely to create or maintain monopoly rents” (Mehta
2008). When a firm not only intends to harm its competitors but also
harm its consumers, its pricing behaviour is considered “predatory.”

In India, the Competition Act 2002 defines predatory pricing as the
“sale of goods or provision of services, at a price which is below the
cost … of production of the goods or provision of services, with a
view to reduce competition or eliminate competitors” (The Competition
Act 2002). Section 4 of the act has stated that predatory pricing is a
form of abuse of dominance. The section also provides a set of
procedures to understand predatory pricing by first analysing whether
a firm in question is dominant in a particular market and whether that
firm has abused its dominant position. The act makes clear that only
firms with dominant market positions can be considered predatory in
the eyes of the law.

The Competition Commission of India (CCI), an independent market
regulator responsible for regulating market behaviour and competition,
has investigated a number of instances of unfair competition. For
example, the CCI has investigated complaints of “predatory pricing”
against transport-technology companies, Uber and Ola, as well as
allegations made against e-commerce websites, Flipkart and Amazon.
These complaints were made after these companies started offering
large discounts to consumers. Each of these companies have since been
exonerated of any charge of “predatory pricing” as none of them had a
“dominant position” in their respective markets (Singh 2016). While
investigating these cases, the CCI considered a firm’s market share as
the sole determinant of dominant position. The CCI is, however,
expected to consider a range of factors while ascertaining market
dominance.

Anti-competitive Behaviour?

In order to determine whether RJio’s behaviour (in form and in
substance) has been predatory and/or anti-competitive, a close
examination is required of the telecom industry’s market structure,
spectrum auctions and regulatory changes, besides the pricing of
RJio’s products and services and issues related to interconnection
charges and points of interconnection.

Table 1 shows that Bharti, Idea and Vodafone together account for
75.2% of the market in terms of revenue and 61% in terms of
subscribers. There are 220 million active unique smartphone users in
India (Hindu 2016), making the country the second largest smartphone
market. Analysts forecast that by 2019 there will be around 651
million smart-phone users in the country (Mint 2016b).

Financial leverage ratios are used to determine how much of a
company’s capital comes from debt and are used to find out the ability
of a firm to meet its financial obligations. For the incumbent telecom
firms, financial leverage ratios are as follows: Bharti 4.96, Idea
2.63, Reliance Communications 2.77 and Vodafone 2.03. For the new
entrant, RJio, its financial leverage ratio stood at 2.48, according
to the Financials.Morningstar.com website. In 2009, RIL had
insignificant levels of debt but this had increased dramatically to
over ₹1,80,000 crore by the end of March (Kumar and Mulgaonkar 2016).
With the industry likely to consolidate further, the main telecom
operators will be investing to expand and modernise their
infrastructure and also on spectrum. The high capital expenditure will
drive up financial leverage ratios of the incumbent firms and the new
entrant.

The top three telecom companies (Airtel, Idea and Vodafone) occupy
most of the market. They each offer a variety of products and services
(2G, 3G, 4G and basic calling/texting). While RMS and subscription
base figures are a robust industrial measure to ascertain market
dominance, in order to make a comparative assessment of the impact of
the “aggressive competition” initiated by RJio using 4G VoLTE only,
one would require detailed product-specific revenue and subscription
base data from each telecom operator.

Telecom operators provide consumers with voice services over circuit
switched (CS) networks as well as packet switched (PS) networks. The
purpose of CS networks is to provide the caller with a dedicated
circuit for the session of the call where the communications flowing
between phones always follow the same path with no other network
traffic interfering. These networks provide dedicated point-to-point
connections for the caller and receiver. PS networks, on the other
hand, are used to send data—in separate blocks or packets—across a
network where the data is broken up, transferred through an IP network
and then reassembled to deliver the message. Unlike RJio which is a
fully IP-based network, incumbent operators like Airtel, Idea,
Vodafone, RComm and BSNL use both CS and PS networks and offer
services across these networks.

The basic difference between 2G and 3G cellular technology is the rate
at which voice and data is transferred through a network. The first
sends and receives data at speeds slightly below 50,000 bits per
second whereas 3G sends and receives data at a rate a little more than
four million bits per second; 2G was primarily designed to provide
mobile users with a faster method of transmitting information via
voice signals whereas 3G was designed to transfer information via data
signals. The 4G technology brings to the consumer the speed as well as
the transmission efficiency of broadband internet on a handset.

As the battle among the telecom operators will be fought hard over the
coming years, two phenomena will become evident. One, incumbent firms
will continue providing 2G and 3G services and non-internet telephony
voice services on CS networks for the majority of subscribers. Two,
there will also be a greater attempt by these operators to not only
replace their older technology platforms—2G, 3G and voice
services—with 4G platforms but also make the market for 4G services as
attractive as possible for the average consumer in the country. The
two are not contradictory since voice services account for
three-fourths of the total revenue earned by the incumbent operators.
The transition from a technologically-fragmented industry with
different types of networks, to one which is wholly based on IP
connections, will be a long and arduous process.

RJio is competing with existing operators directly in the 4G market
and hopes to dominate the market because of its “early mover”
advantage. However, if its major rivals invest substantially in
infrastructure for expanding their 4G services and until the average
price of cellular hardware falls, the disruption that RJio will cause
could end up being a relatively short-lived phenomenon, even
ephemeral. The socio-economic inequalities in India inhibit the
majority of people from being able to afford expensive mobile
handsets. Therefore, incumbent firms will perforce have to continue to
maintain their existing voice-based services. However, since internet
telephony and the transfer of voice through IP networks is the future
of telecom the world over and also in India, an important question
arises: How long will it take the industry to make the transition from
its present hybrid state to one which is entirely internet based? This
is not an easy question to answer as it depends on many imponderable
social and economic factors.

Auctions and Regulatory Changes

The manner in which Reliance Jio acquired spectrum in the 2,300 MHz
band during the broadband wireless access (BWA)/4G auctions in 2010
through Infotel Broadband Services Private Limited (IBSPL) was
controversial. A “draft” report of the Comptroller and Auditor General
(CAG) of India leaked to the media in 2014 noted that IBSPL had
submitted an allegedly forged bank guarantee to the DoT as part of the
company’s commitment to bidding in the auction (Guha Thakurta 2016).
The draft CAG report questioned the transparency of the auction
process as IBSPL failed to inform the Telecom Regulatory Authority of
India (TRAI) and the DoT of the ongoing talks it was having with RIL
for RIL to acquire IBSPL.

The lack of disclosure by IBSPL of an ongoing relationship with RIL
during the course of the BWA/4G auction process which ended that day
after 117 rounds of bidding, impaired the competitive environment as
other participants in the auction were unaware of the complete
financial status of the bidder, IBSPL.

At the end of the auction process, IBSPL had won one block in each of
the 22 telecom circles in the country with a total bid amount of
₹12,847.44 crore. On 17 June 2010, less than a week after the auction
ended, IBSPL’s board of directors authorised the allotment of 4.75
billion equity shares of 10 each to RIL allowing it to own 95% of the
company. On 22 January 2013, IBSPL was renamed Reliance Jio Infocomm
Limited. Another contentious issue raised by several observers is that
the Notice Inviting Applications (NIA) for the BWA/4G auctions had
clearly stated that the winning bid did “not confer the right to
provide any telecom services” on the winner and specifically stated
that the BWA spectrum was not to be used for carrying voice traffic.

A committee of the DoT was set up in 2012 to look into issues related
to the creation of a unified licence (UL) regime which also examined
the fact that the BWA/4G spectrum was not “liberalised” spectrum—that
is, the specific purpose for which the spectrum could and could not be
used is not mentioned. The committee held that the bidders during the
auction process could not take an informed decision as their bidding
patterns would have been different if they had known that the spectrum
could have been used for both data and voice services. In 2013, an
expanded version of the same DoT committee decided that internet
service providers (ISP) could convert their licences under the new UL
regime, so that they could use their spectrum to provide both voice
and data services. This meant that the precondition fixed on the
BWA/4G spectrum resource at the time of the auction, namely, to
provide only data and internet services as the NIA stated, was
overturned in 2013 after IBSPL had won the auction in 2010.

Not surprisingly, Reliance was the first beneficiary of this scheme as
it converted its ISP licence to provide voice and data services under
the UL. RJio was granted the UL to provide voice and data services in
October 2013 and had paid an entry and migration fee only. The “draft”
CAG report noted that the total loss to the exchequer was estimated at
₹22,842 crore as Reliance had acquired the BWA/4G spectrum at a price
far lower than what its competitors had paid for during the 3G
auctions conducted in 2010.

According to Mahesh Uppal, director, Com First, a consultancy firm
specialising in telecom regulatory issues, the analysis in the draft
CAG report can be contested. An important reason why BWA and 3G
spectrum are not strictly comparable is on account of the fact that a
robust infrastructure to support BWA/4G services did not exist at the
time the auctions took place. BWA spectrum was meant for internet
services whereas 3G spectrum was available for both voice and data and
had a good ecosystem in place in terms of infrastructure and
availability of affordable devices which BWA services did not have.
There were, thus, different valuations for the respective spectrum
bands.

The final report of the CAG submitted in Parliament on 8 May 2015 did
not mention the calculations made in the draft report but merely
stated that the DoT failed to plug loopholes in the rules. In
addition, as per the liberal roll-out conditions stated in the NIA, 4G
services were to be operationalised within five years of the effective
date of the grant of the spectrum. The deadline of five years for the
roll-out of services on the BWA/4G platform ended on 31 August 2015.
The final CAG report stated that the failure to roll out services had
led to a “lack of efficient use of spectrum and hoarding of spectrum
in view of absence of roll out of BWA services” (Comptroller and
Auditor General of India 2015). Uppal added that since the winners of
3G and 4G spectrum had to make upfront payments, the delay in rolling
out services also hurt the spectrum-holders given that the tenure of
their holdings has been fixed for 20 years.

According to Uppal and others, a more substantive issue pertains to
the spectrum usage charge (SUC). Since the BWA/4G spectrum was
originally only meant for data services, the SUC for the BWA spectrum
was fixed at 1%. Despite the 2013 change by the DoT giving the
spectrum winner (RJio/IBSPL) the opportunity to use the spectrum for
voice services as well, the SUC was not revised thereby giving RJio a
significant advantage over its competitors since telecom operators who
were offering voice services through various other technologies were
having to pay between 5% and 8% of their revenues as SUC (Sridhar
2016a).

Lawyer Prashant Bhushan has accused both the Congress and the
Bharatiya Janata Party (BJP) of being culpable in rigging the auction
process as the Reliance bid took place through a benami bidder. He
added that since the motive for the spectrum block was initially meant
for data which was later revised to include voice traffic as well, the
fact that the Supreme Court overlooked these facts in its 8 April 2016
judgment was unfortunate. He remarked:

It is not a question of regulatory capture; it is more a case of the
government selling out to Reliance. It allowed Reliance to have an
advantage by enabling it to allow spectrum, which was only meant for
data traffic, to carry voice. The terms of the auction were tweaked by
the government, not the regulator, the Telecom Regulatory Authority of
India [TRAI], in this case. (Sridhar 2016b)

‘Free’ Voice Calls an Illusion?

As mentioned, RJio offers its 4G services on a pan-India basis through
a new technological platform called LTE or long-term evolution. As
mobile phones cannot run 2G and 4G services at the same time, that is,
a voice and data call cannot take place simultaneously, RJio’s network
uses VoLTE to ensure that the voice call continues simultaneously with
data transfers (Sridhar 2016b). RJio treats voice as data—VoIP (Voice
Over Internet Protocol)—and sends the voice communications through the
networks as packets. For incumbent operators, on the other hand, only
a small part of their voice traffic is transmitted as data.

When an incumbent firm offers its 4G service, it transmits voice calls
via 2G or 3G technological platforms when a consumer makes a VoIP
call; RJio can only transmit such information via 4G. Airtel, Idea and
Vodafone, as users of earlier spectrum technologies, are able to
ensure that consumers who make IP-based communications are charged
less, as they consume data using 2G and 3G services. On the other
hand, RJio being a wholly IP-based VoLTE service cannot afford to give
its consumers the option or the ability to use 2G/3G technology for
making internet-based communications.

In order to avail RJio’s “free” voice services there are many caveats
that consumers may not be aware of. First, to truly get the best
service, that is, RJio’s calling service that aims to provide HD
(high-definition) calls, both the caller and receiver need to have
VoLTE-enabled handsets and both need to be connected to a 4G network.
Second, when a RJio customer calls using a VoLTE handset and the
receiver is on another network, the call will not be HD as RJio has to
convert the call from a packet-switched to a circuit-switched network.
Third, if a particular customer does not have a VoLTE phone then she
or he would have to use the Jio4GVoice application (voice, text,
photos and video conference), earlier called Jio Join, to ensure that
the call is free and ensure that the data used to make such calls is
not debited from a customer’s account (Banerjee 2016).

Most mobile handsets in the country at present are not 4G/VoLTE
enabled although the majority of phones released in the market in 2016
do have this capability. If a consumer decides not to buy a VoLTE
handset, she must use the Jio4GVoice app to make calls. Those with
2G/3G handsets can still use RJio’s network but must connect to a
personal and portable WiFi device called JioNet. However, users are
not debited for the data used for calls made via the Jio4GVoice app if
they choose to use another over the top (OTT) service like WhatsApp,
Facebook or Skype to make the same VoIP call—in which case, the data
consumed would be charged for. RJio is evidently discriminating in
favour of voice data only and not against all other types of
information (data) sent via their network.

We believe that unsuspecting consumers may not be fully aware of the
technological intricacies behind RJio’s service, as the “free” voice
service essentially means that the voice traffic is carried through
data packets (VoIP calls) whereas traditionally, voice traffic
(non-VoIP) takes place through CS networks.

The intricacies of RJio’s service and the manner in which its
offerings have been promoted and propagated might not legally
constitute predatory pricing. However, the fact that its customers
will have to fulfil specific conditions to avail the full range of the
“free” and “high quality services,” can certainly be termed as
predatory behaviour, according to us. Uppal disagreed with this
interpretation of what constitutes predatory behaviour. He added that
one should make a distinction between issues of public policy and
sharp business practices indulged in by “cut-throat competitors” in
the marketplace.

While Prime Minister Modi’s Digital India dream is to connect 1.2
billion Indians with mobile broadband connectivity, RJio’s “free”
voice call service comes with real costs. The true price that the
average consumer would have to pay goes beyond the data tariffs quoted
by RJio and requires the aam aadmi to not only upgrade his or her
existing handset to one which is 4G/VoLTE enabled but also use a
specific application. This clearly makes the claims of reaching out to
a billion-plus people not just difficult and daunting, but highly
exaggerated and arguably even spurious. RJio’s behaviour can, hence,
be called predatory because it is boasting about providing free calls
to its consumers without explaining the technological intricacies and
not highlighting the fact that by merely shifting allegiance from an
incumbent operator to the new entrant a customer will not naturally
and automatically get the free service. There is also a likelihood
that by the time a customer gets a 4G/VoLTE-enabled handset and is
able to make HD calls, RJio would have revised its tariff rates.

IUCs and PoI Issues

The extant interconnect usage charges (IUC) regime in India’s telecom
sector is one of the most important factors that ensure fair
competition, consumer welfare, growth of users and the equitable
distribution of revenues and costs among various service providers and
their networks. In order to connect a call, operator A must pay an IUC
to operator B, when A’s customer wishes to call B’s customer. From
February 2015 till now, the IUC has been fixed at 14 paise per call
terminated and total IUC charges comprise around ₹20,000 crore of
revenues by all telecoms operators put together (Rathee 2016).

In August 2016, TRAI published two separate documents, a consultation
“note” on IP-based interconnection and a consultation “paper” on IUC
which considers a change in the payments regime and potentially, a
reduction or a complete doing away with the IUC on both traditional
and IP-based networks. The COAI termed this development as indicative
of a “bias” in favour of RJio. Since RJio consumers do not “pay” for
voice calls, it is likely that its consumers would make more outgoing
calls than receive incoming calls. This, in turn, would result in
large cash outflows for RJio. A Bank of America–Merrill Lynch estimate
is that in its first year operations and assuming a subscriber base of
30 million, RJio would incur an IUC bill worth ₹2,400 crore (Parbat
2016). If the IUC is brought down to zero, it could potentially shrink
the annual revenues of the top three operators (Airtel, Idea and
Vodafone) by about ₹5,000 crore and provide a distinct cost and
competitive advantage to RJio (Rathe 2016). Since RJio customers will
be calling relatively more people on other networks, it will have to
convert the VoIP/PS signals for a CS network, thereby incurring
interconnection charges.

The incumbents have argued that RJio’s free voice calls have led to a
“tsunami” of voice traffic, congestion on their networks and an
increase in the cost of managing interconnections. An Idea Cellular
executive was quoted in the Economic Times as saying that the traffic
between Idea and Jio was 14.5 times higher than normal resulting in an
increase in the cost of providing the interconnections over its
network (Khan 2016).

J S Deepak, secretary, DoT, in an interview with the Economic Times,
stated that the interconnection issue was hardly new. Fifteen years
earlier when operators such as Airtel and Idea entered the sector,
they had accused BSNL, then the only incumbent operator, of not giving
them enough POIs (points of interconnection). “Today, these incumbents
are on the other side of the table,” he added (Mankotia 2016).

RJio has accused Bharti Airtel of not releasing as many POIs as had
been agreed upon. In response to RJio statements, Airtel in turn
accused RJio of trying to mask the technical problems in RJio’s VoLTE
network by raking up the POI issue. In addition, Airtel stated that it
had released a large number of POIs, which are “sufficient to serve
over 15 million customers, which is much more than ... (RJio’s)
present subscriber base and ... (its) demand for 10 million projected
customers.”

The interconnection issue is leading to around 10 crore call failures
per day between RJio customers and customers of other operators,
claimed RJio in a public statement. It hit out at the incumbent
operators for not providing enough POIs, accusing them of not
“demonstrating any real intent to resolve the issue” and of violating
licence conditions and TRAI regulations on quality of service. “The
deliberate move to not provide sufficient interconnection points is
aimed at hindering RJio’s entry into the sector and depriving
customers from enjoying the superior HD services offered by RJio,” the
statement by RJio noted (PTI 2016b).

TRAI chairman R S Sharma has said that one of the key mandates of the
regulator is to ensure that there is high quality of services and that
consumers are “protected” (Doval 2016). However, since the
arrangements for POIs are a “bilateral issue” between operators,
TRAI’s abilities to investigate, intervene and resolve disputes are
limited, he stated, adding that if regulations are violated “then we
will have to take action against the party concerned” (PTI 2016c).
Sharma added that operators are being asked why they are not providing
quality services to consumers (Rathee 2016).

Sunil Bharti Mittal, chairman of Bharti Airtel, gave a resounding
response to RJio’s accusation and also commented on the mud-slinging
discourse among telecom operators that has ensued since RJio’s launch.
“Just because you have been successful in one or the other industry…
doesn’t give you the right to be on top. You have to earn that…,”
Mittal said in an interview to the Economic Times. He added that he
had told RJio’s chairman Ambani that POIs could not be an issue
obstructing the launch of Jio and was at best a “temporary issue” that
would be resolved in weeks. Moreover, talking about IUC, Mittal said:
“When you go below that cost, that is a very straightforward situation
of predatory pricing” (Mankotia and Guha 2016).

An enlightening and sober view was put forward by Mittal when he said:

… rural, suburban people are still on to feature phones where they
want to make calls and do a little bit of 2G. So the curve may be
accelerating toward 4G but it is not going to happen that we wake up
tomorrow morning and everything is 4G … In the last 16 quarters there
is less voice growth and in some cases voice de-growth … Jio has
accelerated that path now. (Mankotia and Guha 2016)

The war of words between RJio and the COAI escalated to unprecedented
levels. On 26 September, RJio dubbed its competitors, Airtel, Idea and
Vodafone, as incumbent dominant operators (IDOs). It said the COAI was
heavily biased in favour of the top three operators and called for a
“comprehensive overhaul” of the association’s rules, regulations and
procedures in a letter sent to the director-general of the COAI Rajan
Mathews and the chairman of the lobby group, Gopal Vittal, who also
happens to be the CEO of Bharti Airtel. RJio’s letter hoped that a
committee comprising three retired Supreme Court judges would be set
up to ensure that COAI’s governance mechanisms become “more in line
with democratic principles” (ET Bureau 2016).

The COAI hit back immediately late on a Sunday evening. In a letter
made public, COAI’s Mathews described RJio’s conduct “unbecoming of a
member,” claimed it had misinterpreted specific rules and countered
RJio’s IDO acronym calling the new entrant a BDO or a “backdoor
operator.” The letter by the COAI further went on to allege that
despite its “skullduggery” and “repeated and grave provocations,” RJio
had been “welcomed” into the association. Mathews then recounted the
history of how RJio acquired its licence through a “front entity” and
how it was prospectively allowed to offer “full” voice and data
services, despite objections from the CAG and others.

After various stakeholders submit their views on the interconnection
issue in response to TRAI’s consultation papers on IUC, the authority
will have to ensure that the future policy regime is balanced and does
not consciously or unconsciously benefit any particular operator, be
it RJio or its rivals. This would check predatory behaviour and the
possibility of predatory pricing in the future.

Conclusions

Using revenue market share and subscription base figures as a method
to understand market dominance, RJio cannot at present be classified
as a dominant operator. As per the provisions of the Competition Act,
RJio cannot be said to be indulging in predatory pricing. However,
RJio’s behaviour and the manner of its entry into country’s
telecommunications industry may certainly be considered as predatory
for a few specific reasons.

One, the manner in which it acquired the BWA/4G spectrum in 2010 and
the fact that it doubly benefited when the government changed its
rules retrospectively to allow operators to provide both voice calls
and data services on the same spectrum.

Two, RJio has also benefited from an unfair cost advantage as the
spectrum usage charges (SUC) have remained unchanged and are not in
line with the SUC paid by incumbent operators who offer similar
services on their respective 2G, 3G and 4G technology platforms.

Three, the propagation of “free” voice calling may mislead consumers
who might end up paying more for RJio’s services than they would pay
for similar services provided by other operators given the fact that
RJio is entirely data centric and only works on 4G LTE and 4G-VoLTE
mobile handsets.

Four, the timing and sequence of events relating to probable
regulatory changes in the IUC regime indicates that RJio is at the
right place at the right time—the regulator has been publicly
considering changes in specific regulations nearly a month before the
commercial launch of RJio and the Reliance Group has in the past
displayed an uncanny ability to take advantage of regulatory changes
resulting in the playing field becoming far from level.

Mukesh Ambani might believe that RJio has consciously or unconsciously
jump-started the inevitable internet revolution in telecommunications
in India. A recent survey has indicated that RJio SIMs are being used
as a secondary SIM by over half those surveyed (Mint 2016b).

However, the larger internet revolution in telecom is a long way away.
What matters now is the manner in which regulatory changes and
spectrum auctions take place, as well as how operators interact with
one another operationally and politically so that consumer welfare and
quality of services are not undermined. As Ambani’s biggest competitor
Sunil Mittal has pointed out, predatory pricing will ensue if the IUC
regime is made to change fundamentally to give RJio distinct cost and
revenue advantages over its rivals. RJio has deployed effective
marketing and propaganda techniques to acquire unsuspecting consumers.
It has been able to take advantage of ambiguous and lax regulatory
processes and systems of oversight. It has arguably not provided
technical and operational information with clarity to its customers.
RJio’s entry has certainly taken place through predatory behaviour.
Whether its pricing is predatory, which could hurt incumbents and
consumers in the future, depends on the steps that are taken by the
regulatory authority.

REFERENCES

Anand, N (2016): “Aircel Bets Big on Data Plans for Growth,” 28 June,
Hindu, 
http://www.thehindu.com/business/Industry/aircel-bets-big-on-data-plans-for-growth/article8784551.ece.

Arun, M G (2016): “Mukesh Ambani’s Jio Gamble: Telcos’ Headache,
Consumers’ Benefit,” 8 September, India Today,
http://indiatoday.intoday.in/story/ambani-jio-reliance-airtel-telecom-4g/1/759330.html.

Banerjee, Prasit (2016): “Understanding How Calling Works on Reliance
Jio, Here’s the Answer to All Your Questions on How Calling Will Work
on Reliance Jio,” 5 September, Digit,
http://www.digit.in/telecom/understanding-how-calling-works-on-reliance-jio-31607.html.

Comptroller and Auditor General of India (2015): “Report No 20 of
2015—Union Government, Communications and IT Sector,” 8 May,
http://www.cag.gov.in/sites/default/files/audit_report_files/Union_Compliance_Communication_IT_20_2015.pdf.

Doval, Pankaj (2016): “Trai to Take Action for Call Failures on Rel
Jio Network,” 20 September, Times of India,
http://timesofindia.indiatimes.com/business/india-business/Trai-to-take-action-for-call-failures-on-Rel-Jio-network/articleshow/54415814.cms?from=mdr.

ET Bureau (2016): “Jio to COAI: Reform Yourself; COAI Calls It a
Backdoor Entrant,” 26 September, Economic Times,
http://economictimes.indiatimes.com/articleshow/54516360.cms?

Gupta, Deepali and Barman Arijit (2016): “Reliance Communications,
Aircel Merger Gives Birth to ₹65,000 Crore Giant; Talks on with
Sistema for 25% Stake,” 15 September, Economic Times,
http://economictimes.indiatimes.com/articleshow/54332073.cms.

Guha Thakurta, Paranjoy (2016): “A Call for Review: Supreme Court’s
Decision on Reliance Jio,” 11 June, Economic & Political Weekly,
http://www.epw.in/journal/2016/24/perspectives/call-review.html#sthash.8KVBMWrV.dpuf.

Hindu (2016): “With 220 mn Users, India Is Now World’s Second-biggest
Smartphone Market,” 3 February,
http://www.thehindu.com/news/cities/mumbai/business/with-220mn-users-india-is-now-worlds-secondbiggest-smartphone-market/article8186543.ece.

Hindu Business Line (2016): “Telcos Cry Foul Over RJio’s Test
Services,” 9 August,
http://www.thehindubusinessline.com/info-tech/telcos-cry-foul-over-rjios-test-services/article8965019.ece.

ICRA (2016): “Reliance Communications Limited,” June 2016,
http://www.icra.in/Files/Reports/Rationale/Reliance%20Com-R-22062016.pdf.

Khanna, Sundeep and Pathak Kalpana (2016): “Reliance Jio Sends a
Message to Rivals: It’s War,” 2 September, LiveMint,
http://www.livemint.com/Companies/D4leWGTopPio6OYUQg2CEP/Mukesh-Ambani-kicks-off-Reliance-Jio-services-at-company-AGM.html.

Khan (2016): “Idea to Expand Interconnect Points to Jio, Says
Asymmetry of Traffic Causing Higher Costs,” 12 September, Economic
Times, 
http://economictimes.indiatimes.com/tech/internet/idea-to-expand-interconnect-points-to-jio-says-asymmetry-of-traffic-causing-higher-costs/articleshow/54295207.cms.

Kumar, Abhineet and Mulgaonkar Sameer (2016): “Reliance Industries
Prefers Using Debt to Cash for Capex,” 6 August, Business Standard,
http://www.business-standard.com/article/companies/reliance-industries-prefers-using-debt-to-cash-for-capex-116080501886_1.html.

Mankotia, Anandita Singh (2016): “Reliance Jio’s Presence will
Increase Demand, Make Auctions More Competitive: JS Deepak, Telecom
Secretary,” 19 September, Economic Times,
http://economictimes.indiatimes.com/articleshow/54399675.cms?

Mankotia, Anandita Singh and Guha Romit (2016): “Points of
Interconnect Won’t Be an Obstacle in Jio Launch: Sunil Bharti Mittal,”
21 September, Economic Times,
http://economictimes.indiatimes.com/tech/internet/points-of-interconnect-wont-be-an-obstacle-in-jio-launch-sunil-bharti-mittal/articleshow/54435471.cms.

Mehta, Uday Singh (2008): “Predatory Pricing: Lessons for Developing
Countries,” Briefing Paper for CUTS Centre for Competition, Investment
& Economic Regulation (CUTS C-CIER), No 3.

Mint (2016a): “Reliance Jio Preferred as Secondary SIM, Finds Mobile
User Survey,” 28 September,
http://www.livemint.com/Industry/ihSoNtmspHU0qcmh9l1Z4O/Reliance-Jio-cou...

— (2016b): “News in Numbers—India to Have 651 Million Smartphone Users
by 2019, Says Report,” 28 March,
http://www.livemint.com/Politics/TPCtIaJodlX0SQs6ZLbWjJ/News-in-numbers--India-to-have-651-million-smartphone-users.html.

Parbat, Kalyan (2016): “Reliance Jio Interconnect Bill May Hit ₹2,400
crore in Its First Year,” 27 August, Economic Times,
http://economictimes.indiatimes.com/articleshow/53880460.cms.

PTI (2016a): “Airtel, Aircel Spectrum Trading Deal Cleared,” 11 July,
Press Trust of India, Business Standard,
http://www.business-standard.com/article/companies/airtel-aircel-spectrum-trading-deal-cleared-116071000091_1.html.

— (2016b): “Jio Hits Out at Airtel, Says 10 cr Calls Failing a Day,”
20 September, Press Trust of India, Times of India,
http://timesofindia.indiatimes.com/business/india-business/Jio-hits-out-at-Airtel-says-10-cr-calls-failing-a-day/articleshow/54432209.cms?from=mdr.

— (2016c): “Trai Seeks Details from Telcos on Congestion Levels,” 19
September, Press Trust of India, Business Standard,
http://www.business-standard.com/article/pti-stories/trai-seeks-details-from-telcos-on-congestion-levels-116091901336_1.html.

Rathee, Kiran (2016): “Trai Extends Date for Receiving Comments on
Interconnect Charges,” 3 September, Business Standard,
http://www.business-standard.com/article/economy-policy/trai-extends-date-for-receiving-comments-on-interconnect-charges-116090201192_1.html.

Reliance Jio (2016): “Reliance Jio Infocomm Limited; Affordable and
Simple Tariffs,” https://www.jio.com/en-in/plans.

Reliance Industries Limited Chairman’s Statement (2016):
“Operationalising High Growth Platforms of New Value Creation for a
Prosperous and Inclusive India,” 39th Annual General Meeting Post-IPO,
42nd Annual General Meeting Since Incorporation, 1 September, Mumbai,
http://www.ril.com/DownloadFiles/ChairmanCommunications/AGM%20SPEECH%2-%20Full%200109.PDF.

Reuters (2016): “Reliance Communications to Share Spectrum with
Reliance Jio for 4G,” 18 January, Indian Express,
http://indianexpress.com/article/technology/tech-news-technology/reliance-communications-to-share-spectrum-with-reliance-jio-for-4g/.

Sathe, Gopal (2016): “Reliance Jio Signs Deal with BSNL to Address One
of Its Potential Pain Points,” 13 September, NDTV,
http://gadgets.ndtv.com/telecom/news/reliance-jio-signs-deal-with-bsnl-to-address-one-of-its-potential-pain-points-1458089.

Singh, Prabhat (2016): “The Price of Unfair Competition,” 6 September,
Hindu, http://www.thehindu.com/thread/economy/article9075873.ece, Web
14 September 2016.

Srivastava, Moulishree (2016): “Top 3 Telcos Grab 75.2% Revenue Market
Share in Q1,” 26 August, Business Standard,
http://www.business-standard.com/article/companies/top-3-telcos-grab-75-2-revenue-market-share-in-q1-116082601001_1.html.

Sridhar, V (2016a): “Spectrum Grab,” 14 September, Frontline,
http://www.frontline.in/cover-story/spectrum-grab/article9103427.ece.

— (2016b): “The Spectrum Auction Was Rigged,” 14 September, Frontline,
http://www.frontline.in/cover-story/the-spectrum-auction-was-rigged/article9103445.ece.

TRAI (2016a): “Consultation Paper on Review of Interconnection Usage
Charges,” Consultation Paper No 17/2016, Telecom Regulatory Authority
of India, New Delhi.

— (2016b): “Highlights of Telecom Subscription Data as on 30th June
2016,” Press Release No 90/2016, Telecom Regulatory Authority of
India, New Delhi.

The Competition Act of 2002, Ministry of Law and Justice:
http://lawmin.nic.in/ld/P-ACT/2003/The%20Competition%20Act,%202002.pdf.

Zachariah, Reeba (2016a): “Reliance Jio Sim Being Sold in Black,” 4
September, ET Telecom,
http://telecom.economictimes.indiatimes.com/news/reliance-jio-sim-being-sold-in-black/54006977.

— (2016b): “Jio Effect: Vodafone Gets ₹48,000 cr Infusion,” 23
September, Times of India,
http://timesofindia.indiatimes.com/business/india-business/Jio-effect-Vodafone-gets-Rs-48000cr-infusion/articleshow/54472925.cms.

--
Avinash Shahi
Doctoral student at Centre for Law and Governance JNU



Search for previous postings at:
http://www.mail-archive.com/mobile.accessindia@accessindia.org.in



_______________________________________________
Mobile.accessindia mailing list
Mobile.accessindia@accessindia.org.in
http://accessindia.org.in/mailman/listinfo/mobile.accessindia_accessindia.org.in

to post send mail to: mobile.accessindia@accessindia.org.in

Disclaimer:
1. Contents of the mails, factual, or otherwise, reflect the thinking of the 
person sending the mail and AI in no way relates itself to its veracity;

2. AI cannot be held liable for any commission/omission based on the mails sent 
through this mailing list..

________________________________

Caution: The Reserve Bank of India never sends mails, SMSs or makes calls 
asking for personal information such as your bank account details, passwords, 
etc. It never keeps or offers funds to anyone. Please do not respond in any 
manner to such offers, however official or attractive they may look.


Notice: This email and any files transmitted with it are confidential and 
intended solely for the use of the individual or entity to whom they are 
addressed. If you are not the intended recipient, any dissemination, use, 
review, distribution, printing or copying of the information contained in this 
e-mail message and/or attachments to it are strictly prohibited. If you have 
received this email by error, please notify us by return e-mail or telephone 
and immediately and permanently delete the message and any attachments. The 
recipient should check this email and any attachments for the presence of 
viruses. The Reserve Bank of India accepts no liability for any damage caused 
by any virus transmitted by this email.


Search for previous postings at:
http://www.mail-archive.com/mobile.accessindia@accessindia.org.in



_______________________________________________
Mobile.accessindia mailing list
Mobile.accessindia@accessindia.org.in
http://accessindia.org.in/mailman/listinfo/mobile.accessindia_accessindia.org.in

to post send mail to: mobile.accessindia@accessindia.org.in

Disclaimer:
1. Contents of the mails, factual, or otherwise, reflect the thinking of the 
person sending the mail and AI in no way relates itself to its veracity;

2. AI cannot be held liable for any commission/omission based on the mails sent 
through this mailing list..

Reply via email to