New TDSAT Overthrows Previous Order by Trai on Predatory and Competitive Pricing by Airtel and Vodafone Idea
According to a new report, Bharti Airtel and Vodafone Idea, the two of the top three telecom operators will now be able to take a sigh of a relief thanks to the new the order passed by Telecom Disputes Settlement and Appellate Tribunal (TDSAT). This new order by TDSAT quashes the provisions pertaining to predatory pricing and discounted tariffs which were enforced earlier by the Telecom Regulatory Authority of India in February this year. As per a mint report, the TDSAT had remarked that the regulator cannot impose a penalty and had urged the regulator to reconsider its decision within six months.
Previous Order by Trai Over-ridden by TDSAT
Previously, the order which was passed by Trai had mandated that Airtel and Vodafone Idea disclose segmented offers or discounted tariffs to the regulator. While Trai had given this order, the incumbents had argued that revealing the segmented offers would mean helping the rivals as most of the times these offers are trade secrets of the company. The telcos had urged the regulator into the direction of not forcing them to disclose these segmented offerings.
TDSAT, in an order dated December 13, said, “Segmented offers and discounts offered in the ordinary course of business to existing customers without any discrimination within the targeted segment do not amount to a tariff plan and therefore need no reporting in the manner prescribed for regular tariff plan.”
TDSAT in its order said that instead of reporting all segmented discounts or tariffs within the set cap of 25, Trai would be able to call for details about any segment discount which it receives complaints about. Back in February, the regulator had mandated that the telecom operators list the segmented discounts or tariffs on their website which are aimed at retaining customers. The Trai had set a penalty of Rs 5,000 for each day of delay with the max cap of the penalty being Rs 2 lakh.
Following this order, Vodafone Idea and Bharti Airtel had moved court complaining that listing the segment tariffs would lend an unfair advantage to Reliance Jio Infocomm and it would be also devoid the telecom operator of their flexibility to roll out offers targeted towards retaining their customers in the circles in which they are key market players.
TDSAT Redefines Significant Market Player
After the new order by TDSAT, however, Trai will examine tariffs of significant market player (SMP) which holds more than 30% of total activity share in a particular circle to decide predatory pricing. The new definition of “total activity” will be based on any of two parameters including subscriber base and gross revenue. This is in contrast to the previous interpretation of the phrase which considered subscriber base, revenue, switching capacity and volume of traffic.
Another parameter which the Trai will consider will be the firm’s average variable cost over a specified period. The regulator will see whether there is evidence of a specific intent to engage in predatory pricing. In case the regulator finds the pricing to be predatory, then the telco will be slapped with fine of Rs 50 lakh per tariff plan per telecom circle.
The TDSAT, however, said that Trai has ventured out of its jurisdiction to craft a complex meaning of SMP. The Tribunal noted, “The concept that only an SMP is capable of predation and therefore fit to be subjected to scrutiny for purposes of Clause 7 and penalty is over-theoretical and divorced from all practical considerations well-known to competition laws,” the telecom tribunal also added, “The penalty provision was not even made a subject matter of consultation and hence it is bad in law.”