CHANGING TIMES OF TELECOM INDUSTRY: THE RISE OF RELIANCE JIO

-Anushka Kadiresan[1] & Sakshi Malhotra[2]

The Indian Telecom sector has witnessed tremendous change after the entry of Reliance Jio (RJio) in the market. On September 1, 2016, Reliance Industries Limited (RIL) chairman and managing director Mr. Mukesh Ambani announced that Reliance Jio (RJio) customers will never be charged for mobile telephony and they will have access to mobile 4G internet at dirt cheap prices.[3] It is also important to note that RJio’s primary source of revenue is data rather than voice.[4] Currently RJio’s competitors such as Bharti Airtel, Idea Cellular and Vodafone, together control close to three-fourths of the total market for telecom services in the country, earn the bulk (around three-fourths ) of their revenues through voice services.[5]

Whether RJio’s behaviour, in form and in substance, has been predatory, a close examination is required of the telecom industry’s market structure.[6]Predatory pricing means pricing the goods or services at such a low level that other firms cannot compete and are forced to leave the market.[7] Predatory pricing often implies a “bait and switch” approach—bait consumers with low prices and after some time when the consumer is switched on to, and dependent on, the service, prices are hiked.[8] In the case of MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd., DotEx International Ltd. and Omnesys Technologies Pvt. Ltd, CCI,[9] laid down two prong test- 1) claimant must demonstrate that the scheme could drive the competitors out of the market. 2) there must be evidence that the surviving monopolist could then raise prices to consumers long enough to recoup his costs without drawing new entrants to the market.

According to the data provided by Telecom Regulatory Authority of India in 2016, Bharti, Idea and Vodafone together account for 75.2% of the market in terms of revenue and 61% in terms of subscribers.[10] Therefore, Jio cannot be termed as a dominant player in the market and cannot be accused of predatory pricing.[11]

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.[12]

  • It acquired the BWA/4G spectrum in 2010 and benefitted as the government changed its rules retrospectively. Thus, enabling RJio to provide both voice calls and data services on the same spectrum.
  • RJio is data centric and works only on 4G mobile handset. Therefore, consumers may end up paying more for RJio services under the guise of free voice calling than other providers.
  • RJio’s free services of the trial period were supposed to be till December 30, 2016. However, they have been constantly extending deadlines. Even after the expiry of the trial period, RJio is providing additional complimentary period for their customers.

The situation is not same as it was during its inception i.e. September 1, 2016. Now, Jio has garnered around 72 million subscribers and is considered one of the top telecom players in the country.[13] Its competitor Airtel has reported a fall in net profit by 54% last year. Further, Idea-Vodafone are planning to merge in order to compete effectively.

Since, RJio has garnered a significant share, and continued to price services below its cost price, charges of predatory pricing may be relevant at this point.[14] Earlier the matter was dealt by Telecom Regulatory Authority of India and RJio was given a clean chit. Therefore, a fresh assessment of the charges should be made by Competition Commission of India (CCI) as the consumers will be largely affected by constant fluctuations in telecom industry. In furtherance of this Airtel has recently filed a complaint with the CCI against Jio alleging abuse of dominant position and predatory pricing.[15] The decision of CCI is awaited which will decide the fate of telecom industry.

[1] 3rd year student, B.B.A LL.B (Hons), National Law University, Jodhpur, (Rajasthan, India).

[2] 3rd year student, B.A LL.B (Hons), National Law University, Jodhpur, (Rajasthan, India).

[3]Agencies, “Mukesh Ambani unveils Mega Jio Plans,” 1 September 2016, The Hindu, <http://www.thehindu.com/business/Industry/reliance-industries-limited-forays-into-4g-network-announced-at-the-annual-general-meeting-in-mumbai/article9059678.ece>.

[4] Jai Bhatia, Reliance Jio: Predatory Pricing or Predatory Behaviour?, EPW Journal, Vol. 51, Issue No. 39, 24 Sep, 2016.

[5] Ibid.

[6] 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-%20- Full%200109.PDF>

[7] Himanshu Sharma & Martand Nemana, “Predatory Pricing: A Synopsis on The Indian Telecom Sector”, available at   <http://www.mondaq.com/india/x/576894/Antitrust+Competition/Predatory+Pricing+A+Synopsis+on+the+Indian+Telecom+Sector&gt;

[8] Supra note 2.

[9] MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd., DotEx International Ltd. and Omnesys Technologies Pvt. Ltd, CCI, 2011CompLR129(CCI), para. 8.4.3.8.

[10] Proceedings of the International Conference on ICT Management for Global Competitiveness and Economic Growth  in Emerging Economies, ISBN: 978-83-64389-62-7, page 110, available at

< http://ictm2016.edukacja.wroc.pl/docs/Proceedings%20ICTM2016.pdf&gt;

[11] Do Reliance Jio’s free offers amount to predatory pricing?, last modified September 22, 2016, available at

<http://www.livemint.com/Money/s5ntYNvq43ltcwpxEVY9iO/Do-Reliance-Jios-free-offers-amount-to-predatory-pricing.html&gt;

[12] Supra note 8, page 114.

[13] Reliance Jio subscribers hit 72.4 million, but congestion issues continue, The Indian Express, updated on January 17, 2017, available at

<http://indianexpress.com/article/technology/tech-news-technology/reliance-jio-subscribers-hit-72-4-million-but-congestion-issues-continue-4477918/&gt;

[14] Will Reliance Jio’s latest free offer salvo force Competition Commission’s hand?, updated on April 3, 2017, available at

<http://www.livemint.com/Companies/cD87baoZA1SZgGQGsLXd6J/Will-Reliance-Jios-latest-salvo-force-competition-watchdog.html&gt;

[15] Now, Airtel moves CCI against RJio; alleges predatory pricing, updated on Feb 9, 2017, available at

<http://timesofindia.indiatimes.com/business/india-business/now-airtel-moves-cci-against-rjio-alleges-predatory-pricing/articleshow/57063101.cms&gt;

Disclaimer: This article has been written by a member of Centre for Competition Law and Policy. The article is just an opinion of the Author and no legal consequences follow from the same

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s