Conflict between Regulation and Competition Law in the Indian Telecom Sector

The debate regarding the respective realms of competition law and economic regulation is not new. In the Indian context, complaints filed against the telecom incumbents Airtel, Vodafone and Idea by Reliance Jio before the Telecom Regulatory Authority of India and the Competition Commission of India bring to the fore such an example. This case is analysed primarily through the legal standpoint, and it is argued that competition law intervention is warranted only in “gap” cases: where the regulatory regime cannot account for consumer welfare. Where the regulatory and competition agency reach conflicting decisions, the issue can be resolved by a third body whose decision is binding on both the regulator and the competition agency.

The author is grateful to Mahesh Uppal and Geeta Gouri for very helpful discussions on the topic. The author reserves special thanks for the anonymous reviewer who offered valuable insights.

Network industries such as telecommunications are often subjected to the simultaneous application of sector-specific regulation and competition law. It is often considered that there exists no conflict between sector-specific regulation and competition law, while the former has ex ante application, the latter comes only at ex post stage. This over-simplistic assurance has, however, little practical value, in view of some cases that attract the concurrent application of both regulation and competition. Indeed, there have been several instances world over, where the jurisdictions have struggled to correctly demarcate the boundaries of regulatory and competition regimes. The events that transpired in the Indian telecommunication sector over the last almost one year have presented this issue in the Indian context as well.¹

In December 2016, Reliance Jio Infocomm Limited (RJIL) filed a case with the Competition Commission of India (CCI) under Section 19(1)(a) of the Competition Act, 2002 (henceforth, the act) against Cellular Operators Association of India (COAI), Vodafone India, Vodafone Mobile Services Limited (VMSL), Vodafone Group (Vodafone PLC), Bharti Airtel Limited (Airtel), Bharti Hexacom Limited (Bharti Hexacom), and Idea Cellular Limited (Idea), alleging contravention of the provisions of Section 3 of the act.² Airtel, Vodafone and Idea are the incumbent telecommunication service providers in India. The COAI is the trade body of the telecommunication service providers. The primary allegation of RJIL, which is the new entrant in the Indian telecommunication market, is that the incumbents colluded to deny point of interconnections (PoIs) that is a mandatory requirement for offering telecommunication services.³ It was also alleged that instead of giving two-way PoIs, the incumbent primarily provided one way (from the incumbent’s to RJIL) to consciously downgrade the services of RJIL. Thus, the entrant accused the incumbents of forming a cartel to deny market entry and downgrading the services of the new entrant. The CCI considered the allegation and found the facts, prima facie, convincing enough to order investigation under Section 26(1) of the act. However, in July 2016, even before its complaint before CCI, RJIL had approached the Telecom Regulatory Authority of India (TRAI)—the telecommunication sector regulator—with the grievance that the required number of PoIs were denied by the three incumbents. The TRAI found the act of not providing sufficient number of PoIs to be in violation of various regulations (License Agreements and the Standards of Quality of Service [QoS] of Basic Telephone Service [Wireline] and Cellular Mobile Telephone Service Regulations, 2009). The TRAI made a recommendation on 21 October 2016 to the Department of Telecommunication (DoT) that a penalty of ₹50 crore each be imposed against Airtel, Vodafone, and Idea, for each of the licensed areas.⁴