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India’s Predatory Pricing Rules Trigger Telco Slugfest | Light Reading

The methodology is important because the TRAI considers any operator with a market share of more than 30% (in a particular circle, or service area) to have SMP. The TRAI’s changes seem to favor Reliance Jio, which carries huge volumes of data traffic on its networks but serves fewer customers than Airtel, Idea Cellular Ltd. and Vodafone. Under the new definition, those longer-established operators all have SMP, while Reliance Jio does not.

Any operator with SMP will not be able to engage in predatory pricing, or pricing aimed at driving competitors out of the market. The TRAI says it will consider a tariff to be predatory if in a given circle it is priced below the “average variable cost” — a measure used by economists that divides variable costs, such as labor and electricity expenses, by output — and designed to hurt competition. However, there is some uncertainty over the TRAI’s exact definition of average variable cost, including which cost elements it regards as variable. Nor is it clear how authorities will decide that pricing moves are designed to hurt competition.

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Airtel, Idea and Vodafone are, not surprisingly, upset. While their pricing activities will be restricted, Reliance Jio, as a player without SMP, will be free to do what it likes. That is a troubling prospect for companies that have already lost customers and seen profits dwindle because of Reliance Jio’s aggressive tactics. Alleging government favoritism, the incumbents are contesting the TRAI’s order in India’s High Court.

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India’s Predatory Pricing Rules Trigger Telco Slugfest | Light Reading.

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