Reliance Jio: Predatory Pricing or Predatory Behaviour?

Jai Bhatia and Advait Rao Palepu in this EPW paper look at the hottest issue in India’s telecom sector.
They say pricing is not predatory but behavior is:

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.

All this reads so similar to the 2002 entry of the same company in telecom sector.


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