Jio blames rivals for low data price, seeks TRAI help

Reliance Jio, the country’s largest telecom operator by size, said attempts to increase telecom tariffs have failed due to competitive actions by rivals, and asked TRAI to intervene to raise data prices. Traditionally, it is Jio’s rivals such as Bharti Airtel and Vodafone Idea which make such allegations.

Responding to a TRAI consultation paper on the subject of telecom tariff, Reliance Jio took the example of the price cuts implemented in December last year, when all three telecom operators agreed to raise prices by around 20%-25%.

“Such tariff hikes can increase telecom revenues to some extent only and thereafter the competitive forces again take over and start reducing the tariffs,” Jio said.

“As was seen with this hike as well, immediately after the hike, there was a downward revision by some service providers by re-introduction of free off-net voice calls leading to another cycle of action and reaction thereby belying the exercise to large extent,” it said, referring to a campaign by rivals like Airtel which highlighted that there were no limits on voice calls on their networks. Voice calls under Jio’s unlimited schemes are restricted to 1,000-3,000 minutes.

Because of the introduction of these schemes by rivals, said Jio, the increased tariffs “could not be sustained at announced levels for more than 2-3 days.

“The moment one TSP [telecom service provider] announced its revised tariffs, the other TSPs embarked on further reductions and bettering of tariffs, nullifying the increase to a large extent…

“Hence, this establishes the fact that a regulatory regime of forbearance and letting market forces determine the tariff, is not a sustainable solution for ensuring higher revenue generations for the TSPs.

“Given the current competitive environment in the sector, we recommend that the Authority should intervene and fix the floor for realized price for wireless data services,” said the firm, owned by Reliance Industries.

“For a tariff correction to be successful, it has to come through a regulatory mandate as the floor price fixed by the Authority will be oblivious to such competitive pressures,” it added.

The comments are the first instance of Jio supporting a coordinated increase in prices.

The company is widely credited with breaking the price ‘consensus’ supported by operators like Bharti Airtel, Vodafone and Idea, and driving data prices down and making data affordable to ordinary citizens of the country.

Jio was forced to drive prices down for the entire industry to attract customers, given that most Indians already had a mobile connection when Jio entered the market in 2016.

As a result, the only way for the operator to win over these subscribers from rivals was to offer much cheaper, and faster, data services than they were used to.

However, in the process, the company ended up driving overall data prices down by over 90% — from about Rs 230 per GB to about Rs 15 per GB.

Nevertheless, over the past six months, it has been working towards increasing prices again — a task that is proving to be quite not so easy as driving them down.

Given this difficulty in getting everyone to implement price increases, said Jio, TRAI should lend a hand, and set a price below which no one should be allowed to sell data.

It also suggested that it should be done in 2 or 3 steps over the next nine months, so that consumers do not react adversely.

“India is very price sensitive market. If data tariff is increased abruptly, it will dampen the usage considerably and revenue increase may not be of desired level. Therefore, it needs to be increased gradually from current level being realized from the customer to Rs 15 per GB as of now and to Rs 20 per GB after six to nine months based on the growth in data consumption,” it said in its official response to TRAI’s consultation paper.

Meanwhile, various consumer organizations, one member of Niti Ayog and Competition Commission of India opposed any such move from the part of the regulator.

Representing NITI Ayog, Archana Gulati, Joint Secretary to the Government of India, said it is not entirely correct to say that Indians are paying the lowest prices for data in the world.

“Though low in absolute terms, Indian data tariffs as a percentage of per capita income in PPP terms are higher than those of developed countries. In July 2019, India ranked 130 out of 144 countries in broadband speed. Thus, we pay a higher percentage of our per capita income per GB of data for a relatively lower quality offering. Further, given that the consultation paper indicates that data revenues are higher than costs, the justification for setting of a minimum floor price is questionable,” she said, opposing the move.

Competition Commission of India, in its response, said the government cannot enter into the business of setting prices of data, voice and so on, as different operators have different business models.

One operator may choose to give voice free, while charging for data, while another may give cheap data, while charging high for voice.

This is a decision that should be left to the operator, it added.

“In multi-sided markets it is not the price of individual service(s) that has to be determined in a market, it is the entire pricing structure of various sides of the market that operators compete on. So it is quite possible that some markets with very high elasticity may be zero priced but monetisation from inelastic market can compensate for below cost pricing.

“Therefore, certain value added services can be priced above the marginal cost and certain baseline services can be priced at or below marginal cost. Moreover, telecom operators may generate other sources of revenue other than user charges.

“Accordingly, in the new paradigm of technological convergence, bundling of services and pre-eminence of data, a pure cost-based regime in form of fixing telecom retail price would be inadequate and, indeed, undesirable,” CCI said.