Cartelization, bandwidth and a Billion customers – DoT backs TRAI’s Rs 3,050 crore penalty on Airtel, Vodafone, Idea

In a recent decision in the telecom industry, the Digital Communications Commission (DCC), the highest decision-making body of the Department of Telecommunications (DoT), backed the regulator’s stand on allegations of cartelisation made by Reliance Jio Infocomm against leading telecom companies.

The cartelization issue dates back to 2016, when the TRAI recommended imposing a penalty of Rs 3,050 crore on Bharti Airtel, Vodafone and Idea Cellular for denying inter-connectivity to Jio – the year in which the new telecom player publicly launched its services in the country.

TRAI’s recommendation followed the Jio’s complaint in 2016 that over 75 per cent of calls on its network were failing as its incumbent rivals were not releasing sufficient number of points of interconnection (PoIs). Back in August 2016, Mukesh Ambani’s telco had submitted to the watchdog that it would need 12,727 PoIs for mobile services and 3,068 PoIs for STD call facility ahead of its commercial launch in the following month. PoIs allow calls to be transferred from one network to another.

The regulator’s penalty on Airtel and Vodafone amounted to about Rs 1,050 crore each, and about Rs 950 crore in the case of Idea Cellular for violating rules on service quality. The penalty, once incurred, will be a major game-changer for the still-evolving telecom industry of India, as Jio disrupts the leadership and dominance of the 3 players – and marking an end to the most heated legal dispute in telecom sector’s recent history.

That said, the notion of cartelization, if proven, is a significant worry in a nation where internet, telecommunication, and general communication is still growing in reach and potential. The penalty, thus, ought to set a precedent for future bandwidth sale, especially on a growth tangent that could see India pivoting to 5G in the coming years – a move that would require competitive services and pricing for the billion-and-a-quarter population of India.

Unleashing affordable data services in the nation, Jio initiated a price war upon its entry – foraying into rural circles with internet services. The approach has backed its growth as its subscriber base has soared to 306.7 million and has garnered revenue market share (RMS) of 31.7 per cent, which is close to Vodafone Idea’s 32.2 per cent share and ahead of Airtel’s 27.3 per cent.

According to a June report by Motilal Oswal Securities, Jio is now a leader in 16 out of 22 telecom circles and Vodafone Idea Ltd may find it difficult to retain its top position “over the next quarter or two”.