| Introduction: Give the context and definition of predatory pricing. Body: Give its implications on the telecom industry. Conclusion: Way forward. |
Recently, Bharti Airtel has alleged that Reliance Jio was indulging in predatory pricing. When a company sells goods or services at artificially cheap prices that their rivals can’t match, usually at a loss, this is known as predatory pricing. The intention is to eventually cause those rivals to lose enough revenue to be forced out of the market, granting the predatory enterprise a monopoly.
What are its implications for the telecom industry?
- Disruption in the telecom market: The entry of JIO into telecom has disrupted the telecom sector market with Jio’s aggressive pricing mechanism. Companies like Airtel and Vodaphone have been unable to compete with low tariffs which led to loss of market share and revenues.
- Merger and Acquisition: The predatory pricing from Jio has forced small telecom players like Idea, and Tata to merge with existing telecom companies or force themselves out of the sector altogether.
- The decline in service quality: The pricing mechanism has diverted companies’ attention from improving their infrastructure towards the maximization of their revenues. It has led to a decline in call quality with issues like call drops, and poor customer service increasing continuously.
- Fiscal burden: Companies like Vodaphone, Idea, and BSNL are facing fiscal stress on account of low revenue and reduced market share. This has led to reduced network expansion and slow technology upgradation in terms of switching from 4G to 5G.
- Role of regulators: The policy of predatory pricing has highlighted concerns regarding the role of regulators like the Telecom Regulatory Authority of India (TRAI) and the Competition Commission of India (CCI) in enabling fair and competitive competition.
- Long-term implication: The predatory pricing policy will affect the telecom industry negatively in the long term. It will drive out future investment from the market because of low competition which will finally lead to an increase in tariff rates impacting the consumer.
Conclusion:
The Indian government and regulatory bodies Telecom Regulatory Authority of India (TRAI) and the Competition Commission of India (CCI) implemented several measures, including tariff restrictions, spectrum auctions, and predatory pricing norms. These initiatives sought to find a balance between encouraging healthy competition and guaranteeing the telecom sector’s financial survival.
