Competition Issues Relating to Telecommunication Sector in India:

A Critical Analysis
Rupal Marwah

Introduction

Telecommunications is a very dynamic, complex, capex intensive industry. The times when that
competitive struggle was won by an operator with the largest network are gone for good. What
counts today is efficient network management and fast launch of new services rather than having
kilometers of cables and hundreds of staff. The battle is not won by those who possess the most
but by those who know how to manage their infrastructure more effectively. The convergence of
applications, networks or content in this new-age information super highway has become the
next path-breaking move in core mass-market technology providing single connectivity and
integrated user experience.

In the Indian Context telecom sector has come up as one of the leading potential markets in the
global perspective and has witnessed high-paced growth over the past 25 years. Technological
innovations and regulatory changes have been the two major factors responsible for setting the
stage right for the evolution in this space. However the telecom industry in India has seen its
worst phase as debts were increasing, customer spend were falling and profit margins were
extremely less. Vodafone Idea was threatening to quit the market. But the Covid-19 pandemic
has brought more favorable developments for the telecom industry in India. Telecom industry
has been key to keeping people and enterprises connected ensuring that the wheels of the
economy continue to turn during lockdown.

During the crisis, it was important for the telecom industry to ensure minimum disruption to
networks, and a committed effort was required to preserve the health and wellbeing of the
people. While mobile networks provided direct connectivity for millions of subscribers to keep
in touch, satellite technology plugged the gaps and strengthened critical networks, providing
network operators, governments, and establishments much-needed support for remote work
practices and extending essential services to the remotest corners of the country.
In wake of all these new developments the telecom sector in India have to deal with various
challenges like abuse of dominant position, anti-competitive agreements, mergers and
acquisitions taking place, data privacy etc.

Challenges Encompassing Indian Telecommunication Sector

This research paper attempts to give an insight into various issues faced by the telecom industry
in India. These issues have been discussed at length below.

1. Anti Competitive Agreements: RCOMM files case against Bharti Airtel Ltd, Vodafone
India and Idea Cellular Ltd. alleging them of forming cartel.
The competition regulatory bodies across the globe are worried about anti-competitive
agreements that have appreciable adverse affect on the competition. The presence of cartels has
agitated public outrage world over. Cartels are agreements between enterprises (including a
person, a government department and association of persons / enterprises) not to compete on
price, product (including goods and services) or customers. The objective of a cartel is to raise
price above competitive levels, resulting in injury to consumers and to the economy. Cartel is
defined in section 2, clause (c) of the Competition Act, 2002 (herein referred to as ‘Act’).
In bidding for ventures rumours of players colluding with each other is quite common especially
in remote area. This open dislike with arrangement brings an unconventional issue up in telecom
sector.

If there are numerous operators in the telecom sector then some amount of coordination between
them is essential otherwise there would be a state of chaos. It becomes important to discuss here
the issue of interconnection. Different operators must allow calls to be terminated on their
competitor’s networks. But an important question arises here concerning the exchange price
between the service providers. At present the norm is that the parties reach at an agreement
themselves. Parties normally fix high interconnection rates in order to sustain in the market and
at the same time gain some monetary benefit out of it. Thus the end result is that calls made on
the same network are cheaper than calls to another network. Ultimately the consumers suffer
because they have to pay higher charges to the operators. Telecom Regulatory Authority of India
(TRAI) has framed the Telecommunication Interconnection Usage Charges (Thirteenth
Amendment) Regulations, 2017 with respect to IUC in order to save the consumers from
exploitation at the hands of service providers by way of charging high prices. Under the
Regulations TRAI has fixed the amount of IUC to be paid by one telecom service provider to
another telecom service provider.1

At present the situation demands that the service providers in the telecom sector share their
infrastructure particularly their towers. The rationale for these claims is cost and other imperative
considerations. The thought has its conspicuous merits however it could lead to collusions
between the operators. The regulatory authorities in the telecom sector are the best judges to
decide which agreements are detrimental to the promotion of healthy completion in the industry
and which are advantageous for the industry.

As of late Reliance Jio Infocomm Ltd. filed a complaint with the Competition Commission of
India (CCI) against Bharti Airtel Ltd, Vodafone India and Idea Cellular Ltd. contending that
these telecom companies have indulged in cartelisation to create hurdles in its entry into the
telecom segment.2 The Reliance Jio and the telecom companies namely Airtel, Vodafone and
Idea have been fighting over POIS (points of interconnection) — the intersections at which calls
are transmitted starting with one network then onto the next. Reliance Jio has alleged that these
telecom companies have not supplied it sufficient POIS. On the other hand the companies
contended that Reliance Jio in order to hide deficiencies in its own service is exaggerating the
issue. Recently TRAI has recommended that a penalty of whooping Rs. 3050 crores be levied on
Bharti Airtel Ltd, Vodafone India and Idea Cellular Ltd for intentionally barring calls from
Reliance Jio network.3 The Supreme Court (SC) dismissed CCI and Reliance Jio’s pleas to probe
cartelisation charges levelled by the Mukesh Ambani-owned 4G entrant against Bharti Airtel
NSE 0.27 %, Vodafone India and Idea Cellular NSE -0.99 % — the latter two have recently
merged to form Vodafone Idea — providing relief to the older incumbent carriers.

1
TELECOM REGULATORY AUTHORITY OF INDIA,
https://trai.gov.in/sites/default/files/Regulations_17042020.pdf (last visited Nov. 5, 2020).
2
Competition Commission of India v. Bharti Airtel Ltd. and Ors. (2019) 2 SCC 521
3
PTI, TRAI asks Department of Telecom to impose Rs 3,050 cr fine on Airtel, Vodafone, Idea, THE INDIAN
EXPRESS (Nov. 8, 2020, 2:58 PM), http://indianexpress.com/article/technology/tech-news-technology/trai-asks-
department-of-telecom-to-impose-rs-3050-cr-fine-on-airtel-vodafone-idea-3095616/.
A SC bench, headed by Justice A K Sikri, said “we are upholding the order of the (Bombay)
High Court on the aspect that the CCI could exercise jurisdiction only after proceedings under
the Trai Act had concluded/attained finality i.e. only after TRAI returns its findings on the
jurisdictional aspects”.

2. Issue of Predatory Pricing

In the current scenario where Reliance Jio entered the Indian telecom market with its welcome
offer and took the market by storm with free data and call services offered by it, the issue of
predatory pricing has grabbed the attention of the government authorities as well as the sectoral
regulatory body and the CCI.

The Competition Act, 2002 outlaws predatory pricing, treating it as an abuse of dominant
position, prohibited under Section 4. Under predatory pricing companies first lure customers to
choose its data and call services plan by falling into the trap of exceptionally low prices offered
and later on bearing the brunt of high prices and deteriorating quality when these companies gain
monopoly in the market.

Going into backdrop of recent Reliance Jio case in November 2016 when Reliance Jio disrupted
the Indian telecom industry by introducing its free voice and data plans under Jio Welcome offer,
all other operators cried foul citing predatory pricing. On the other hand Reliance Jio also
accused incumbents of high IUC prices. In the case of Bharti Airtel Ltd. & Reliance Industries
Ltd. Reliance Jio Infocomm Ltd.4 the Informant Bharti Airtel filed a complaint with CCI alleging
that Reliance indulged in predatory pricing and thereby contravened the provisions of section 3
& 4 of the Competition Act, 2002. CCI passed its order under section 26(3) of the Act dismissing
the case. Commission opined that Reliance has not indulged in predatory pricing since it is not a
dominant player in the relevant product market which is market for provision of wireless
telecommunication services to the end users. Informant leads market with market share of
23.5%. For an entrant like Reliance Jio in telecommunication sector which has big players
already operating it would not be anti-competitive for it to launch promotional schemes to attract
consumers. This scheme is a short-term business strategy.5
4
Case No. 03 of 2017
5
COMPETITION COMMISSION OF INDIA CASE NO. 03 OF 2017 IN RE ...,
http://www.cci.gov.in/sites/default/files/3%20of%202017.pdf (last visited Nov. 8, 2020).
TRAI has been buried with similar complaints from almost operators with no clear resolution to
any matter. This clearly needs a more mature telecom policy with provisions to address all these
concerns.

3. Mergers and Acquisitions

Sections 4 and 5 of the Act govern combinations, mergers and acquisitions which have adverse
effect on the competition. The section provides such mergers and acquisitions having harmful
effect on the competition are void.

In the last few years Indian telecommunication sector has witnessed some of the major mergers
namely Idea-Spice Telecom, Hutchison-Vodafone. With mounting debts in the Indian telecom
industry, merger and acquisition is a way out to reduce debt and leverage synergies. However,
many companies face extinction waiting for merger to finally realize. One of the most grieving
examples of this is the recent Aircel and Reliance Communication (RCOMM). While talks of
merger had been going on since an year, objections from National Company Law Tribunal
(NCLT), Original Equipment Manufacturers (OEMs) like Ericsson and legal troubles due to
RCOMM’s bankruptcy had not allowed the merger to take place. The market regulator the
Securities and Exchange Board of India (SEBI) under the SEBI Act, 1996 and anti-trust body
CCI under section 6 of the Act had already given their approval for the merger.

The Mumbai bench of NCLT on 15 May, 2018, admitted the insolvency petition filed by
Ericsson against RCom and two of its subsidiaries. In the instant case Ericsson India Pvt. Ltd. v.
1. Reliance Infratel Ltd. - CP 1385 2 Reliance Telecom Ltd. - CP 1386 3 Reliance
Communications Ltd. - CP 1387 the order was delivered by NCLT on 17 May, 2018.6 The
tribunal appointed an interim resolution professional to run the company. Thereafter RCom in
May 2018 filed a petition before the National Company Law Appellate Tribunal (NCLAT)
against the NCLT order on a plea by global telecom gear maker Ericsson. The NCLAT on 30
May, 2018 stayed the operations of NCLT orders.

6
ERICSSON INDIA PVT LTD CP 1385,1386,1387-2017 NCLT ON 17.5.2018 FINAL.pdf,
https://nclt.gov.in/sites/default/files/final-orders-pdf/ERICSSON%20%20INDIA%20PVT%20LTD%20CP
%201385%2C1386%2C1387- 2017%20NCLT%20ON%2017.5.2018%20FINAL.pdf (last visited Nov. 8, 2020).
In the wake of these recent developments the merger proceedings between these companies was
stalled. Eventually, both the companies in this course lost precious time and resources in getting
the approvals from respective statutory authorities and the final outcome was Reliance
Communications calling off its merger with Aircel in October 2017. Later on both these
companies declared insolvency. An NCLAT bench headed by Chairman Justice SJ
Mukhopadhaya allowed RCom to withdraw its appeal.7

4. Data Privacy and Security

In the Indian legal framework the issue of data privacy, security and ownership in telecom sector
finds place under Sections 43A & 72A of the IT Act, 2000 and the Information Technology
(Reasonable security practices and procedures and sensitive personal data or information) Rules,
2011 (IT Rules) established in accordance with Section 43A of the IT Act, 2000 . But we do not
have any exhaustive law on data ownership and security issues in telecom sector in India.
Keeping this in mind the legislature has framed the Personal Data Protection Bill, 2018. 8 The bill
has given a broad definition of ‘Sensitive Personal Data’ 9 and has discussed the issue of data
localization and the duties of data fiduciary.10
Recently TRAI published its consultation paper in the year 2017 relating to the emerging issue of
privacy security and ownership of data in the telecom sector in India. TRAI in its paper has
highlighted the importance of protecting the personal data of consumers from any kind of
tampering or misuse by the entities in the digital environment for achieving maximum profits.

7
15TH FEB 2019 IN THE MATTER OF PUNIT GARG & ORS. VS. ERICSSON INDIA PVT. LTD. & ANR. I.A.
NO. 637, 638 & 642-2019
https://ibbi.gov.in/webadmin/pdf/order/2019/Mar/15th%20Feb%202019%20in%20the%20matter%20of%20Punit
%20Garg%20&%20Ors.%20Vs.%20Ericsson%20India%20Pvt.%20Ltd.%20&%20Anr.%20I.A.%20No.
%20637,%20638%20&%20642-2019%20In%20CA%20(AT)%20Insolvency)%20No.%20255-260%20of
%202018_2019-03-18%2015:02:31.pdf (last visited Nov. 10, 2020).
8
PERSONAL DATA PROTECTION BILL, 2018,
https://meity.gov.in/writereaddata/files/Personal_Data_Protection_Bill,2018.pdf (last visited on Nov. 10, 2020).
9
Section 35(3) of the Personal Data Protection Bill, 2018 states that “Sensitive Personal Data means personal data
revealing, related to, or constituting, as may be applicable— (i) passwords; (ii) financial data; (iii) health data; (iv)
official identifier; (v) sex life; (vi) sexual orientation; (vii) biometric data; (viii) genetic data; (ix) transgender status;
(x) intersex status; (xi) caste or tribe; (xii) religious or political belief or affiliation; or (xiii) any other category of
data specified by the Authority under section 22.”
10
Section 3(13) of the Personal Data Protection Bill, 2018 defines data fiduciary as “any person, including the State,
a company, any juristic entity or any individual who alone or in conjunction with others determines the purpose and
means of processing of personal data”.
The SC also addressed the issue of privacy in its recent judgment Justice K.S. Puttuswamy
(Retd.) and Anr. v. Union of India 11. Judgment was pronounced by nine-judge bench of the
Supreme Court led by Chief Justice J.S. Khehar. SC unanimously upheld the right to privacy
to be a fundamental right under Article 21 of the Constitution of India and therefore to be
enjoyed by every person. Both the cases M.P. Sharma and Others v. Satish Chandra,
District Magistrate, Delhi and Others 12 and Kharak Singh v. The State of UP and Others 13
were overruled by the SC in this case. The SC in both these cases said that right to privacy
is not a fundamental right and therefore needs no protection under Article 21 of the Indian
Constitution.

The Way Forward

After having an extensive research on issues encompassing Indian telecom industry it can be
rightly said that the Indian telecom market has gained recognition as one of the most lucrative
markets globally. The vast rural market holds a huge potential to drive the future growth of the
telecom companies.

The growth of India as a knowledge based economy will not be possible without the growth and
expansion of the Indian telecommunications and IT sectors. This symbiotic relationship is not
lost on the government which has attempted to back the telecommunications sector by fostering
an encouraging regulatory scenario. This has not only helped the telecommunications sector to
evolve in a dynamic manner but has enabled it to attract foreign investments. Despite all the
hiccups, the future is fresh with promise as each day; the mobile is finding more acceptances and
becoming an inevitable part of our lives. The area which needs immediate attention is the need
for flexibility in the regulatory mechanism. The telecom legislation at present seems to be
archaic laws and the need of the industry right now is a mechanism that can continuously adapt
itself to the changing needs of the industry. The COVID-19 pandemic, which hurled humanity
into an unprecedented situation and brought economic activity to a near standstill, has for sure
given a much needed boost to the Indian telecom industry.

11
(2017) 10 SCC 1
12
1954 SCR 1077
13
1964 SCR (1) 332