Has TRAI failed the Consumer?

An active competition and rivalry in business is, undoubtedly, conducive to the public welfare, but neither the regulators nor the customers should ignore the fact that competition may be carried to such an extent as to accomplish the financial ruin of those engaged therein and thus result in a derangement of the business, an inconvenience to the consumers, and in public harm.

A price cutter is usually a financially strong player, who makes up his losses of profits on cut-prices either by the number of his sales or by extra profits on other sales to the consumer under the decoy of the cut-price upon one or a few items. The regular player cannot meet such competition and is driven out of business. That which is, properly speaking, “competition” in business, is thereby strangled and the only competition which is promoted is that of the particular branded article against itself.

Fixing and maintaining of a fair price above cost is a commercial necessity; and any other course must end in bankruptcy. When that price is so unreasonably lowered as to drive others out of the business, with a view of stifling competition, not only is that wronged competitor individually injured, but the public is prejudiced by the stifling of competition. Thereafter the market leader begins to extract the costs of buying market share and snuffing out competition from the purchasing public by unreasonably raising the price.

It is a mere truism to say that Jio is responsible for bringing call costs way down in the mobile telecom market. 21-years after the launch of mobile telephone in India, entry of Reliance Jio Infocomm Limited into the mobile telephony market as a late-entrant in 2016, and then racking-up a price-based competition has not been in overall interest of the consumer. The consumer received some price advantage through predatory pricing by Jio, but concurrently suffered falling service-quality around call-drops and service disruptions. Jio promised free unlimited calls and texts, as well as affordable data at the time of its launch in September 2016 and became India’s biggest telecom company with over 355 million subscribers at the end of September 2019.  Jio did not earn but bought market share.

On October 9, Reliance Jio announced that it would start charging users 6 paise per minute for outgoing calls to other operators. This is clearly against the operator’s promise of free unlimited calls and texts and Jio hadn’t said that the deal was subject to business dynamics.

One of the main objectives of the Telecom Regulatory Authority of India is to provide a fair and transparent policy environment which promotes a level playing field and facilitates fair competition. The strangling of competitors by price-cutting is not “competition” but TRAI doesn’t seem to know it.

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To ensure the quality of the discussion, comments may be edited for clarity, length, and relevance. Comments that are overly promotional, mean-spirited, or off-topic may be deleted.

Published by

Mukul Gupta

*Educator, researcher, author and a friendly contrarian* Professor@MDIGurgaon

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