By Categories: Polity

Background :-  The digital era is marked by its potentials and disruptions. The new children on the block such as Artificial Intelligence , nano-technology, 3d printing are still beyond the reach of our imagination. In this ever changing and ever evolving era, it is only natural that the rule books had to be taken a deeper revisit and restructuring. And it is more so true for regulators and regulations. For starters, it is a good idea because we should not be  left with “Analog” regulators in this “digital” age.

Details:-

Telecommunications is one sector where the changes have been disruptive and innovative, covering a wide range of services far removed from the traditional fixed-line telephones—the natural monopoly segment associated with the sector.

The telecommunication sector now includes networks, internet services, virtual markets, the Internet of Things, cloud computing and the entire gamut of services using the information highway with innovative approaches to combining voice and data. It is the digital space of virtual markets that promises growth to Indian start-ups and multifold benefits to consumers.

Should this sector come under the purview of the Telecom Regulatory Authority of India (Trai) or the Competition Commission of India (CCI)? Or should it be left to the market, with regulation limited to safety and dispute resolution mechanisms for consumers? After all, inappropriate intervention by any regulator can sound the death knell for the sector.

Trai’s attempts at repositioning itself in the new dynamism of markets has seen it come out with consultation papers, most recently on fixing retail tariffs. These are positive developments that should provoke wider discussion. Unfortunately, Trai, like all regulators, is caught between an archaic legislation and a sector that defies legal confines.

“Forbearance”, or distancing from fixing retail tariffs, is the new principle that Trai plans to follow. Under the suggested dispensation, telecommunications service providers (TSPs) will be free to fix their retail tariffs and are only required to comply with a list of conditions that emphasize transparency, consistency and clarity.

However, Trai seems compelled by Section 11(2) of the Trai Act to bring in two principles of tariff fixation. Even more surprising is the choice of non-discrimination and predation as principles of tariff fixation.

As ex-post facto outcomes, the two principles, fixed on an ex-ante basis, will fail to capture the benefits of a nuanced dynamic pricing policy that the sector is currently witnessing. Instead, TSPs such as Bharti Airtel Ltd, Vodafone India Ltd, Reliance Jio Infocomm Ltd, Mahanagar Telephone Nigam Ltd (MTNL), Bharat Sanchar Nigam Ltd (BSNL) and other service providers may prefer to revert to the traditional staid pricing schemes, if only to avoid regulatory intervention.

Discriminatory pricing between consumer groups can be consumer-welfare enhancing while zero pricing need not necessarily be predatory, especially if the marginal costs are zero. Pricing decisions taken by firms are based on several factors, which include information of consumer consumption patterns and “willingness-to-pay”; their own long-run cost structures and the pricing strategies of competitors. Under competitive conditions, price discovery is by the market. The Trai Act structured in the economics of natural monopoly set within the framework of “principal agent” may not be able to appreciate dynamic pricing schemes.

As a licensed activity, the tail-end activity of TSPs also comes under the domain of Trai. Section 11(2) mandates Trai to fix tariffs for all licensed activity. Unease stems from the fact that Trai lacks both the expertise and the legal backing.

Meanwhile, CCI, under the Competition Act, has no powers to fix tariffs. It can only investigate allegations of abuse using the economic analysis of monopolistic competition facilitated by the right to private action (Section 19) unique to the Competition Act. This right vested with CCI provides access to private consumer information that is so essential in understanding discrimination or defining predation.

Further, the commission has the right to levy fines but Trai doesn’t. If Trai seeks powers for damage claims by way of subordinate legislation, it will only encourage firms to indulge in forum shopping to the disadvantage of new entrants and consumers.

If expertise and legal backing indicate that predatory pricing and discriminatory pricing are in the realm of CCI, it is equally important to see if the Competition Act constrains the CCI from assessing competition on the information highway.

The digital space of this highway has no boundaries between products and services and between nations at odds with traditional price-cost parameters of competition. Antitrust authorities are currently grappling with the following questions :

i) how to define the relevant product market when the product is free;

ii) how to demarcate geographic boundaries for viral networks that do not follow national boundaries;

iii) what constitutes predatory pricing or discrimination when prices are not charged purely on account of the fact that marginal costs are negligible within the framework of legal structures.

Emergent new metrics of competition fail to establish unequivocally the dominance of large entities and of abuse. The recent dismissal of the allegation of predatory pricing by CCI in the Bharti Airtel versus Reliance Jio case was on traditional measures of dominance. As in the case of the consultation paper, CCI’s decision is a welcome one. But does it provide comfort for intervening in future information markets? That said, it does provoke a rethink on prevailing regulatory Acts if regulators are to be effective in the markets of the future.


 

Share is Caring, Choose Your Platform!

Recent Posts

  • Darknet

    Definition:

    Darknet, also known as dark web or darknet market, refers to the part of the internet that is not indexed or accessible through traditional search engines. It is a network of private and encrypted websites that cannot be accessed through regular web browsers and requires special software and configuration to access.

    The darknet is often associated with illegal activities such as drug trafficking, weapon sales, and hacking services, although not all sites on the darknet are illegal.

    Examples:

    Examples of darknet markets include Silk Road, AlphaBay, and Dream Market, which were all shut down by law enforcement agencies in recent years.

    These marketplaces operate similarly to e-commerce websites, with vendors selling various illegal goods and services, such as drugs, counterfeit documents, and hacking tools, and buyers paying with cryptocurrency for their purchases.

    Pros :

    • Anonymity: Darknet allows users to communicate and transact with each other anonymously. Users can maintain their privacy and avoid being tracked by law enforcement agencies or other entities.
    • Access to Information: The darknet provides access to information and resources that may be otherwise unavailable or censored on the regular internet. This can include political or sensitive information that is not allowed to be disseminated through other channels.
    • Freedom of Speech: The darknet can be a platform for free speech, as users are able to express their opinions and ideas without fear of censorship or retribution.
    • Secure Communication: Darknet sites are encrypted, which means that communication between users is secure and cannot be intercepted by third parties.
    •  

    Cons:

    • Illegal Activities: Many darknet sites are associated with illegal activities, such as drug trafficking, weapon sales, and hacking services. Such activities can attract criminals and expose users to serious legal risks.
    • Scams: The darknet is a hotbed for scams, with many fake vendors and websites that aim to steal users’ personal information and cryptocurrency. The lack of regulation and oversight on the darknet means that users must be cautious when conducting transactions.
    • Security Risks: The use of the darknet can expose users to malware and other security risks, as many sites are not properly secured or monitored. Users may also be vulnerable to hacking or phishing attacks.
    • Stigma: The association of the darknet with illegal activities has created a stigma that may deter some users from using it for legitimate purposes.