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.
Recent Posts
- In the Large States category (overall), Chhattisgarh ranks 1st, followed by Odisha and Telangana, whereas, towards the bottom are Maharashtra at 16th, Assam at 17th and Gujarat at 18th. Gujarat is one State that has seen startling performance ranking 5th in the PAI 2021 Index outperforming traditionally good performing States like Andhra Pradesh and Karnataka, but ranks last in terms of Delta
- In the Small States category (overall), Nagaland tops, followed by Mizoram and Tripura. Towards the tail end of the overall Delta ranking is Uttarakhand (9th), Arunachal Pradesh (10th) and Meghalaya (11th). Nagaland despite being a poor performer in the PAI 2021 Index has come out to be the top performer in Delta, similarly, Mizoram’s performance in Delta is also reflected in it’s ranking in the PAI 2021 Index
- In terms of Equity, in the Large States category, Chhattisgarh has the best Delta rate on Equity indicators, this is also reflected in the performance of Chhattisgarh in the Equity Pillar where it ranks 4th. Following Chhattisgarh is Odisha ranking 2nd in Delta-Equity ranking, but ranks 17th in the Equity Pillar of PAI 2021. Telangana ranks 3rd in Delta-Equity ranking even though it is not a top performer in this Pillar in the overall PAI 2021 Index. Jharkhand (16th), Uttar Pradesh (17th) and Assam (18th) rank at the bottom with Uttar Pradesh’s performance in line with the PAI 2021 Index
- Odisha and Nagaland have shown the best year-on-year improvement under 12 Key Development indicators.
- In the 60:40 division States, the top three performers are Kerala, Goa and Tamil Nadu and, the bottom three performers are Uttar Pradesh, Jharkhand and Bihar.
- In the 90:10 division States, the top three performers were Himachal Pradesh, Sikkim and Mizoram; and, the bottom three performers are Manipur, Assam and Meghalaya.
- Among the 60:40 division States, Orissa, Chhattisgarh and Madhya Pradesh are the top three performers and Tamil Nadu, Telangana and Delhi appear as the bottom three performers.
- Among the 90:10 division States, the top three performers are Manipur, Arunachal Pradesh and Nagaland; and, the bottom three performers are Jammu and Kashmir, Uttarakhand and Himachal Pradesh
- Among the 60:40 division States, Goa, West Bengal and Delhi appear as the top three performers and Andhra Pradesh, Telangana and Bihar appear as the bottom three performers.
- Among the 90:10 division States, Mizoram, Himachal Pradesh and Tripura were the top three performers and Jammu & Kashmir, Nagaland and Arunachal Pradesh were the bottom three performers
- West Bengal, Bihar and Tamil Nadu were the top three States amongst the 60:40 division States; while Haryana, Punjab and Rajasthan appeared as the bottom three performers
- In the case of 90:10 division States, Mizoram, Assam and Tripura were the top three performers and Nagaland, Jammu & Kashmir and Uttarakhand featured as the bottom three
- Among the 60:40 division States, the top three performers are Kerala, Andhra Pradesh and Orissa and the bottom three performers are Madhya Pradesh, Jharkhand and Goa
- In the 90:10 division States, the top three performers are Mizoram, Sikkim and Nagaland and the bottom three performers are Manipur and Assam
In a diverse country like India, where each State is socially, culturally, economically, and politically distinct, measuring Governance becomes increasingly tricky. The Public Affairs Index (PAI 2021) is a scientifically rigorous, data-based framework that measures the quality of governance at the Sub-national level and ranks the States and Union Territories (UTs) of India on a Composite Index (CI).
States are classified into two categories – Large and Small – using population as the criteria.
In PAI 2021, PAC defined three significant pillars that embody Governance – Growth, Equity, and Sustainability. Each of the three Pillars is circumscribed by five governance praxis Themes.
The themes include – Voice and Accountability, Government Effectiveness, Rule of Law, Regulatory Quality and Control of Corruption.
At the bottom of the pyramid, 43 component indicators are mapped to 14 Sustainable Development Goals (SDGs) that are relevant to the States and UTs.
This forms the foundation of the conceptual framework of PAI 2021. The choice of the 43 indicators that go into the calculation of the CI were dictated by the objective of uncovering the complexity and multidimensional character of development governance
The Equity Principle
The Equity Pillar of the PAI 2021 Index analyses the inclusiveness impact at the Sub-national level in the country; inclusiveness in terms of the welfare of a society that depends primarily on establishing that all people feel that they have a say in the governance and are not excluded from the mainstream policy framework.
This requires all individuals and communities, but particularly the most vulnerable, to have an opportunity to improve or maintain their wellbeing. This chapter of PAI 2021 reflects the performance of States and UTs during the pandemic and questions the governance infrastructure in the country, analysing the effectiveness of schemes and the general livelihood of the people in terms of Equity.
Growth and its Discontents
Growth in its multidimensional form encompasses the essence of access to and the availability and optimal utilisation of resources. By resources, PAI 2021 refer to human resources, infrastructure and the budgetary allocations. Capacity building of an economy cannot take place if all the key players of growth do not drive development. The multiplier effects of better health care, improved educational outcomes, increased capital accumulation and lower unemployment levels contribute magnificently in the growth and development of the States.
The Pursuit Of Sustainability
The Sustainability Pillar analyses the access to and usage of resources that has an impact on environment, economy and humankind. The Pillar subsumes two themes and uses seven indicators to measure the effectiveness of government efforts with regards to Sustainability.
The Curious Case Of The Delta
The Delta Analysis presents the results on the State performance on year-on-year improvement. The rankings are measured as the Delta value over the last five to 10 years of data available for 12 Key Development Indicators (KDI). In PAI 2021, 12 indicators across the three Pillars of Equity (five indicators), Growth (five indicators) and Sustainability (two indicators). These KDIs are the outcome indicators crucial to assess Human Development. The Performance in the Delta Analysis is then compared to the Overall PAI 2021 Index.
Key Findings:-
In the Scheme of Things
The Scheme Analysis adds an additional dimension to ranking of the States on their governance. It attempts to complement the Governance Model by trying to understand the developmental activities undertaken by State Governments in the form of schemes. It also tries to understand whether better performance of States in schemes reflect in better governance.
The Centrally Sponsored schemes that were analysed are National Health Mission (NHM), Umbrella Integrated Child Development Services scheme (ICDS), Mahatma Gandh National Rural Employment Guarantee Scheme (MGNREGS), Samagra Shiksha Abhiyan (SmSA) and MidDay Meal Scheme (MDMS).
National Health Mission (NHM)
INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS)
MID- DAY MEAL SCHEME (MDMS)
SAMAGRA SHIKSHA ABHIYAN (SMSA)
MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (MGNREGS)