TDSAT stays Trai's predatory pricing order: What it means for the industry

The stay by Telecom Disputes Settlement and Appellate Tribunal (TDSAT) on the changes made by the Trai on what constitutes significant market power (SMP) and predatory pricing provides a big relief to incumbent operators but is a setback to Reliance Jio.

Under the older definition, a telco which has SMP could not offer a tariff, which is lower than the IUC which was at 14 paisa-which included both fixed as well as variable cost. The regulator, however, changed the definition by excluding fixed costs from the calculation. In simple term, this meant that telcos could now offer tariffs at a much lower price than 14 paisa.

However, experts say that this gave Reliance Jio an undue advantage as they could now drop prices at rock-bottom rates, which the incumbents also had to match even if it was below their cost.

Under the earlier definition, a telco was considered to have  SMP if it had over 30 per cent subscribers and revenue market share as well as network capacity and volume of traffic in any circle. In the new definition, the necessity to not have more than 30 per cent network capacity and volume of traffic in any circle was removed.

Analysts say that the regulator's order was advantageous to Jio as because of the sheer volume of traffic and high use of data by their customers, these two conditions  - the volume of traffic and network volume-would have been breached in many circles.

Under the new rules individual and segmented discounts (basically various different kinds of tariffs for different market segments) were no longer allowed though it was a prevailing practice in the industry. Instead every concession or discount was to be treated as a separate tariff plan requiring reporting and since the number of permitted plans was capped at 25 it was bound to invite penalty for alleged violation. And the penalty was pretty stiff: A fine of Rs 50 lakh as penalty if there was any violation of these new rules, which was not there in the previous rules.  However, while TRAI can still ask for details of the segmented tariffs there will no longer be any fine.