Reliance Jio may finally have to stop dropping its prices, as the Telecom Regulatory Authority of India is set to put into effect new regulations against predatory pricing. In the works since February 2018, the new regulations will penalize telecom operators for tactics deemed ‘predatory’, effectively slashing prices in order to woo customers away from their existing operators.
While such a move may come across as anti-competitive and against the interests of customers, some regulation may be necessary in order to protect the telecom space at large .While operators such as Jio may have deep enough pockets to bear losses for some time, or could have different costing factors owing to licensing and infrastructural costs, other operators may not be able to sustain continuous losses as a result of dropping prices to remain competitive.
Jio’s explosive introduction into the Indian market two years ago involved lower prices, removal of calling limits and a substantial increase in available mobile data. In order to remain competitive, other operators including Airtel, Vodafone, Idea Cellular and BSNL had to also slash prices and improve their offerings. While this has benefited customers, it’s also reduced profits for the operators, thus making the industry less viable in the long run.
This could threaten to stifle further development and network improvement, as operators struggle to invest in improving infrastructure. Indeed, while we’ve seen prices drop, we’ve also seen data speeds and coverage grow slowly or remain flat.
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According to TRAI, predatory pricing is when an operator with over 30 percent market share in any circle drops prices in order to gain an upper hand over other operators in that circle. Being found guilty of predatory pricing could lead to a penalty of up to Rs 50 lakh per circle. With pricing unlikely to drop further, Jio will have to resort to other ways to continue its phenomenal growth, while other operators will now have a chance to level the playing field while not needing to worry about the bottomline.