Virtual Duopoly in Telecom Sector

3 Sep 2021  Read 308 Views

India has a huge population with only 12 telecom companies catering to its telecom sector. However, there has been a drastic decline from those 12 players to merely 4 players now, i.e. Vodafone India (Vodafone), Bharti Airtel (Airtel), Bharat Sanchar Nigam Limited (BSNL), and Reliance Jio (Jio). Gradually the Indian telecom sector is on the verge of becoming a duopoly, with only Jio and Airtel as the big players, which creates a threat to a healthy competitive market.

Background

The entrance of Jio in the telecom industry in 2016 along with its low data prices adversely affected the competitive position of then-present operators by waging a tariff war which resulted in numerous exits. All other telecom companies such as BSNL and Vodafone are going through a financial crisis, making a visible shift in the Indian telecom sector into a duopoly. While BSNL has a 10% market share in the wireless industry, Vodafone has around 25%, which is however decreasing very rapidly. BSNL is in desperate straits so much so that it cannot even make payments for salaries to its employees while Vodafone is running out of monetary resources which raises doubts about its survival. These telecom operators have been stuck in a negative loop of the absence of monetary cash flow and the inability of making sufficient network investments as well as retaining consumers. 

Competition Concerns

India once had a monopoly when only the Government was allowed to provide telecom services and has also seen hyper-competition with more than a dozen service providers. However, concerns have been increasing due to the estimated exit of Vodafone and the dire condition of BSNL leading to a duopoly and alarmingly reduced competition in the sector. This might result in higher prices, lesser technological upgrades, and low quality of services. 

The pandemic has revealed significant gaps in current access, urging even the Chief Justice of India to request intervention from the Minister of Communications. However, covering up the lacunae infrastructure and access entails large investments and competition.

The Competition Commission of India (CCI) has also expressed its concern about the increasing chances of the duopoly in the telecom sector. This has been created with a gradual non-price competition such as agreements with the Over The Top (OTT) platforms which provide content to the consumers. In its market study in January 2021, CCI stated that this agreement between the operators and OTT platforms is against Section 4 of the Competition Act, 2002, since it could lead to abuse of dominant position solely based on lock-in effect. According to the provisions of Section 4(2) of the Competition Act, a ‘dominant position' is a position of power possessed by an organisation in the relevant market that allows it to function independently of the operative powers prevalent in the market, or to influence its competitors, consumers, or market in its favour. It is also in contravention to the provision of Section 3 of the Competition Act which talks about anti-competitive agreements relating to bundled services and cartels between service providers.

In order to avoid such virtual duopoly and possible anti-competitive behavior, CCI has suggested a regulatory framework in regard to OTT platforms and telecom operators in the interest of innovation and competition. 

Initiatives by the Government

Multiple initiatives and conscious steps have been taken by the Government in order to stop the telecom industry from becoming a monopoly or a duopoly. One of these steps includes a spectrum cap on the market shares which a telecom operator can possess. This spectrum cap is set to be at 35% for the telecom industry.

Another step includes the option of spectrum moratorium which has been given to the telecom operators in order to defer Spectrum Auction Payments for two to 2 years. The aim of the Government behind the order is to create ease in the payment process which is accompanied by an increase in the number of installments that can be made by the telecom operators. 

Furthermore, the Supreme Court, in its AGR verdict of 2020, has provided telecom operators with the option of making payments regarding their Adjusted Gross Revenue (AGR) over a span of 10 years and only pay 10% of their AGR dues by the end of March 2021. 

Despite these initiatives by the Government, telecom operators such as Vodafone are in dire need of assistance from the Government for its survival, which can be provided with more aid so as to avoid a duopoly in the industry. For a boost in investment, therefore increasing network and market shares of certain telecom operators like Vodafone, the Government should permit them to forgo AGR due payments for a suitable period and make such payments on later dates. Secondly, the Government should cut down on the taxes on telecom operators. Lastly, Government should increase the credibility of the management running BSNL in order to make it more independent and give it a more dominant identity.

Conclusion

Affordable telecom providers are critical for ensuring equal and fair data access, virtual learning resources, general knowledge, medical services, consumer products, as well as other services. Over the decades, the Indian telecom industry has been fiercely competitive, guaranteeing that consumers received good tariff deals. However, the consumers now have few choices with them. It stands as the collective responsibility of the Government, the Supreme Court as well as the CCI to maintain conditions for operators like Vodafone and BSNL to stay in the relevant market in order to stop the virtual trend of duopoly and on the same hand, maintain a healthy competitive market in order to get hold of relatively low prices, advanced technological upgradations as well as good quality in the telecom services.

About the Author: Sakshi Shrivastava | 12 Post(s)

Sakshi is a 3rd year student at Hidayatullah National Law University, with a keen interest in Corporate and Competition Laws. She describes herself as an extrovert known to be quite vexing!

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