According to the Competition Commission of India (CCI), any exit from the country’s telecom sector would mean a virtual duopoly. As per CCI, the prevailing market structure validates the empirical finding expressed as the rule of three, which predicts that mature markets normally support three main competitors, others who survive, are limited to the fringes or a niche. The three major private sector operators, namely Jio, Airtel and Vodafone-Idea own almost 88.4 per cent of the market, it said.
Further, CCI said that at least two key moves by the Telecom Regulatory Authority of India (TRAI), the 2018 decision on defining a significant market power (SMP) and the 2017 downward revision of mobile termination charges, shaped the competitive landscape of the industry after the launch of Reliance Jio in 2016.
CCI highlighted that Jio’s pricing strategy did not merit regulatory attention, given that the ex-ante competition analysis by TRAI is based on the definition of a SMP, and that only an entity with SMP can engage in conduct that is anti-competitive. CCI added that a new entrant with no presence in the relevant market is thus at once precluded from such conduct. Reliance’s entry into telecom through Jio did not merit regulatory attention despite its discounted pricing strategy. Based on TRAI’s definition of SMP, Jio did not qualify as an entity with SMP and by definition ‘predatory’. Further, CCI report added, that the sharp decline in prices led to several exits, and industry revenue in 2018-19 amounted to nearly the same as the revenue from almost a decade ago.
The CCI said while overall welfare implications of such price shocks were hard to judge, it weakened competition will delay access to new technologies such as 5G. It has said creating a competitive market for 5G will be crucial to its success, and that a weak sector will dull the incentives to innovate and compete. The CCI also added that high costs of spectrum acquisition and the demands of network upgradation had increased the industry debt burden. Further, technological disruption and tariff competition triggered by the entry of Reliance Jio jointly aggravated the financial distress reflected in the unprecedented decline in revenue of the industry through the years 2017 and 2019.
Meanwhile, the body said that data privacy can take the form of non-price competition and abuse of dominance can lower privacy protection. Further, it added that privacy degradation can lead to an objective detriment to consumers. Lower data protection can also lead to the standard legal category of exclusionary behaviour which undermines the competitive process.
It also said that other non-price factors such as quality of service (QoS), data speeds and bundled offerings, are likely to be the new drivers of competitive rivalry between service providers in telecom sector in addition to just price. Other non-price factors of competition, include network coverage, tariff packaging and lower tariffs.
