JIO’S DOMINANCE: SHOULD INDIA BE CONCERNED LIKE U.S.?
A 100 million customers within 170 days of starting off. A 60% grab of new 4G customers in 2018, along with 70% of the total 4G data traffic. Services at dirt cheap prices being offered. All looks merry about Reliance Jio to business model enthusiasts and in fact, even merrier in 2020 with the incoming heavy foreign investments from companies such as Facebook, Google and more. But is it something to be happy about as far as Competition in the telecommunication market is concerned? For a similar dominance of Amazon, Google, Facebook and Apple in America’s internet market sphere, the U.S Congress is certainly not having a peaceful sleep.
THE ESSENCE OF COMPETITION IN A MARKET
Former Supreme Court judge Justice A.K Sikri, while delivering a judgment,[i] quite rightly explained the ‘laudable’ purpose behind competition policies. He stated that the end objective is consumer welfare by ensuring that consumers have adequate and affordable choices in the market for a particular product or service. It is also necessary to curb anti-competitive practices and ensure a ‘level playing field’ for all market players so that the markets remain competitive. Owing to such competition, independent players provide a variety in prices and higher quality, which ultimately leads to welfare of the consumers and indicates a healthy market. This is in consonance with economic perspective. It is widely accepted in the economic sphere that it is necessary to maintain competition in the market; and that a market locked up by a few powerful players leads to stagnation. Therefore, as Mr. Vijay Kelkar in his lecture states,[ii] it is necessary that the state uses its powers through policy-making to ‘prise open these closed systems’.
POWERS OF U.S JUDICIAL COMMITTEES
Both the House of Representatives and the Senate, which constitute the U.S. Congress, consist of one Judicial Committee each. These Judiciary Committees further consist of sub-committees amongst which both have a sub-committee responsible for overseeing the anti-trust laws and competition policy.
The Committees as well as the sub-committees are provided with a range of necessary powers [iii] under their respective rules in order to keep a check on any anti-trust violation, and to ensure there remains fair competition in the market. These include major investigative powers such as issuing subpoenas, holding hearings, receive evidence and conduct deposition. In addition to this, the Senate Judicial Committee and the sub-committees also have the power to summon confidential documents, records and communication between officials and employees of the company.[iv]
THE BIG 4 SCRUTINY IN THE U.S.A
“House lawmakers plan a sweeping review of Facebook, Google and other technology giants to determine if they’ve become so large and powerful that they stifle competition and harm consumers.”
This was the introductory content of the Washington Post’s headline in June, 2019.[v] The U.S lawmakers found it necessary to start investigations on Silicon Valley giants Amazon, Google, Apple and Facebook (jointly ‘the Big 4’). The reason behind this step was growing evidence of these companies dominating the internet market and possessing an outsized share of commerce and communications. Consequently, through their powers and jurisdiction, the judicial committees summoned top officials for statements in front of the Congress and demanded confidential documents in furtherance of its probe to see whether such dominance of these companies is rooted in anti-competitive practices.[vi] The main objective was to see whether these companies, through anti-competitive practices (if any found), are gobbling up smaller players in the same market owing to dominance. Also, as Representative Douglas A. Collins stated,[vii] such information and probe will also help the Congress to determine whether there is improvement needed in the anti-trust policies to better promote competition in the digital markets.
Since then, there have been several events as a part of this scrutiny involving the Big 4. All efforts are primarily aimed for the sake of maintaining competition in these markets as a result of which consumer welfare is protected.
Seeing the nature of scrutiny, it is clear that the U.S Government has been very aggressive about it. The same reflected in the way a recent historical Congressional hearing took place in which the CEOs of all the Big 4 tech companies were grilled by both Democrats and Republicans. [viii] All Congress Representatives came equipped with evidence in the form of personal documents, personal messages of CEOs and other sort of data that indicated anti-trust activity by the Big 4 companies. After taking of oath, the CEOs were fired with questions related to anti-trust activities in their business conduct which hampers competition and does not give any chance of participation in the market to smaller players. Along with that, America’s concern for anti-trust activities can be seen the way in which Department of Justice has bought a suit against Google, which may shape the landscape for any party-either the federal government or the tech giants of Silicon Valley. [ix]
JIO’S DOMINANCE IN INDIA
Reliance Jio stands as the number one telco player in the Indian market in terms of subscriber base with a staggering number of 370 million and growing as of January, 2020.[x] The feat was achieved in a short span of about 3.5 years, owing to aggressive business by Mukesh Ambani led Reliance Industries, which left other players in the market to bleed. Even in terms of revenue share, Reliance Jio had become the top telco company in 2019.
With Jio’s rise, about half a dozen companies have shut down owing to disruptions in the price ranges and inability to compete. Companies like Aircel had filed for bankruptcy and shut shop in 2018, while others chose to get acquired by bigger players. All this cumulatively resulted in the Telecommunication market shrinking to only 3 major players- Vodafone-Idea Ltd., Bharti Airtel and Reliance Jio-a market clearly locked up by a few players. Several market observers and government officials expected the Vodafone-Idea merger in August 2018 to overhaul the telco market in order to bring stability and competition. However, since the merger, the conglomerate has seen only decline in subscribers and no definite signs of breakthrough.[xi] Bharti Airtel has tried to compete with Jio by reducing tariffs and various attractive plans, but it finds itself in a similar situation as that of the Vodafone-idea conglomerate.
The story does not end here. In October, 2019 came another shock for the telco sector when the Supreme Court, in favor of the Department of Telecommunications (DoT), ordered the telco players to pay spectrum dues equivalent to Rs. 1 trillion.[xii] This has put more pressure on the already strained financial situation of Telco players, including Vodafone-idea and Bharti Airtel. In fact, the majority of these dues are owed by Airtel and Vodafone-Idea, amounting to Rs. 35,586 crore and over Rs. 50,000 crore respectively![xiii] While Airtel looks capable of clearing the dues through several overseas bonds, Vodafone-Idea is at the brink of collapse as the total net debt of the conglomerate amounts to over Rs. 1 lakh crore as of December 31, 2019.[xiv]
While even Jio was roped in the AGR dues, the amount was the least. Dues amounting to Rs. 190 Crore up till 31stJanuary, 2020 have already been paid by the company.[xv] Perhaps the heavy debt on both of its major competitors comes as a boost to Jio Platforms but certainly as a worry to the Indian market of Telecommunication.
And finally, the recent series of foreign investment could not have come at a better time for Jio Platforms. It may in fact prove to be the last nail in the coffin, beyond which we may see a powerful monopoly and a tougher market for existing and potential new entrants in India’s telco sector. The series of FDI which started off with Facebook injecting $ 5.7 Billion into Jio Platforms, eventually witnessed almost a weekly investment from giant Private Equity firms and big names from Silicon Valley such as Google. Though it might indicate an increased FDI in India, the worrying part is the concentration of such FDI in a single company. It is unfortunate to see that Silicon Valley giants, in their bid to tap India’s internet and telecommunication market, look at Reliance’s Jio as the only way through. [xvi]
SHOULD INDIA BE CONCERNED WITH THE RISE OF JIO?
The U.S Congress has shown an aggressive stance against the Big 4 giants of the tech and internet market for checking on the growing evidence of anti-competitive behavior and to tune its antitrust policies to free up the market. It is not suggested that Jio Platforms or Reliance Industries indulges in anticompetitive practice. But if it has or does, will the Indian authorities take a stance similar to U.S Congress? Before this it should be asked, are the Indian authorities even equipped to take the required action to save India’s telecom sector, which had 10 service providers before 2016.
ARE INDIAN AUTHORITIES EQUIPPED TO TAKE ACTION?
The aspect which impresses about the U.S model is that investigative authorities and policy makers are the same-the Congress Lawmakers. Owing to this, they are able to investigate, present the case in Court, and if any anti-competitive behavior is found, they are able to make suitable changes in policies.
While the Indian Parliament does not have any investigative powers as that of the U.S Congress, it surely can bring changes in policies in order to save the dying telecommunication sector and to keep a check on anti-competitive behavior. However, a change looks impossible pretty soon, owing to various other issues clogging the parliament such as poverty, border disputes, illiteracy eradication and the ever present tug of war for power. Concerns related to competition are new and emerging for the Govt. of India, owing to which the Parliament may be least concerned with it.
This leaves us with the Competition Commission of India (CCI), which under Section 19 of the Competition Act, 2002 has investigative powers through the Director-General (Section 26). While the CCI has the investigative powers, it does not have policy changing powers which is the sole domain of the Parliament and State Legislatures.
Certainly every country has their own efficient model to curb anti-competitive practices in the market, and so does India. While a direct connection between the investigative authorities and the policy making authorities doesn’t appear to be in the picture, there certainly is through the Competition Law Review Committee which submits its suggestions to the Ministry of Corporate Affairs. The only thing required is that both the Committee and the Law Makers should be as aggressive about competition in the Indian market as the U.S Congress is for the U.S market, since it is high time the Indian government takes the dying telco sector into consideration.
[i] Excel Crop Care Ltd. v. Competition Commission of India and Anr. (2017) 8 S.C.C 47 (India). [ii] Lecture Report, National Council for Applied Economic Research, The 5th C.D Deshmukh Memorial Lecture 2017, Reflections on the Art and Science of Policymaking by Vijay Kelkar (Jan. 27, 2017) http://testnew.ncaer.org/image/userfiles/file/CD%20Deshmukh%20memorial%202017.pdf [iii] Rules of Procedure, Committee on the Judiciary (U.S House of Representatives), 116th Congress https://judiciary.house.gov/uploadedfiles/rulesofprocedurefinal.pdf [iv] Rules of Procedure, United States Senate Committee on the Judiciary, Section IX https://www.judiciary.senate.gov/about/rules [v] Tony Romm and Elizabeth Dwoskin, Facebook, Google and Other Tech Giants To Face Antitrust Investigations By House Lawmakers, Washington Post (Jun. 4th 2019, 2:50 A.M GMT + 5:30) https://www.washingtonpost.com/technology/2019/06/03/facebook-google-other-tech-giants-face-antitrust-investigation-by-house-lawmakers/ [vi] Tony Romm, House Lawmakers Ask Apple, Amazon, Facebook and Google To Turnover Trove of Records in Antitrust Probe, Washington Post (Sept. 14th 2019, 1:08 A.M GMT + 5:30) https://www.washingtonpost.com/technology/2019/09/13/house-lawmakers-ask-apple-amazon-facebook-google-turn-over-trove-records-antitrust-probe/ [vii] Ibid. [viii] Tony Romm, Amazon, Apple, Facebook and Google Grilled On Capitol Hill Over Their Market Power, Washington Post (July 30th 2020, 4:25 A.M. GMT + 5:30) https://www.washingtonpost.com/technology/2020/07/29/apple-google-facebook-amazon-congress-hearing/ [ix] Tony Romm, The Justice Department is Suing Google- But it’s the Government’s Power to Police Big Tech that’s on Trial, Washington Post (Oct. 21st 2020, 7:32 P.M. GMT + 5:30) https://www.washingtonpost.com/technology/2020/10/21/justice-department-google-lawsuit-congress/ [x] Navadha Pandey, Devansh Sharma, 3 Years After Launch, Jio Becomes No. 1 Telco By User Base, Revenue, LiveMint (Updated Jan. 17th 2020, 12:09 A.M. IST) https://www.livemint.com/industry/telecom/reliance-jio-is-the-largest-telco-in-india-trai-11579180602386.html [xi] BI Indian Bureau, Two Years On, Reliance Jio Continues To Dominate Indian Telecom Market, Beating Global Giants, Business Insider India, (Jan. 14th 2019, 3:15 P.M. IST) https://www.businessinsider.in/two-years-on-reliance-jio-continues-to-dominate-indian-telecom-market-beating-global-giants/articleshow/67380627.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst [xii] Anandita Singh Mankotia, Anandita Singh Mankotia, Supreme Court Tells Telecom Companies To Pay Dues In 3 Months; Government Mulls Relief, The Economic Times (Updated Oct. 26th 2019, 3:47 P.M.) https://economictimes.indiatimes.com/industry/telecom/telecom-news/supreme-court-tells-telecom-companies-to-pay-dues-in-3-months-government-mulls-relief/articleshow/71768993.cms?from=mdr [xiii] Navadha Pandey, Bharti Airtel Joins Vodafone-Idea’s Chorus, Won’t Pay AGR Dues Today, Live Mint (Updated Jan. 23rd 2020, 11:55 A.M.) https://www.livemint.com/industry/telecom/bharti-airtel-joins-vodafone-idea-s-chorus-won-t-pay-agr-dues-today-11579760281669.html [xiv] Manu Kaushik, What’s Next for Vodafone Idea, Bharti Airtel After Supreme Court’s AGR Blow? , Business Today (Updated Feb. 14th 2020, 20:42 IST) https://www.businesstoday.in/sectors/telecom/what-next-vodafone-idea-bharti-airtel-after-supreme-court-agr-blow/story/396220.html [xv] Agencies, Reliance Jio Clears its AGR Dues of 195 Crore till January 31, LiveMint (Updated Jan. 23rd 2020, 5:59 P.M.) https://www.livemint.com/industry/telecom/reliance-jio-clears-agr-dues-11579778571547.html [xvi] Vedica Kant, How Jio Became the Darling of Silicon Valley, Marker (Accessed Oct. 24th 2020, 8:47 P.M. IST ) https://marker.medium.com/how-jio-became-the-darling-of-silicon-valley-4ad5aab7949f