Reliance’s Monsoon Hungama was intended to create a storm. And it has. Not just amongst enthusiastic prospective customers but amongst the company’s competitors who have complained to TRAI that the tariffs are predatory. They have also questioned the concepts of bundled handsets and a “lock-in” period. Are these complaints valid? Or is Reliance justified in that the scheme will push up subscriber volumes and hence lead to wireless growth? Some industry views….

TRAI has received complaints about Reliance’s Monsoon Hungama offer, about its low tariff, three-year lock-in period, etc. Are these complaints valid? If so, why?

Manjul Bajpai
The complaints received against Reliance Infocomm’s recent Monsoon Hungama offer for mobile phone users across India are valid. Effectively, the plan brings down entry charges on handsets to Rs.501. However, the “club charges” have been driven up to Rs.200 per month for 36 months. Thus, the total handset charges that would be collected work out to Rs.7,701. Compare this with the initial Pioneer Offer scheme and you will find that Reliance customers paid only about Rs.6,600 for the handset. The Monsoon Hungama plan further requires subscriber continuance for three years. To opt out, the subscriber has to pay Rs.8,000, Rs.6,000 and Rs.5,000 in the first, second and third years respectively as compared with the Rs.5,000, Rs.3,000, and Rs.2,000 in the Pioneer offer.

It seems that not only are customers being enticed into taking up connections that they think are costing them less, they are also being tied to the service provider for a period of three years. Ingenuity does not justify the substance of the plan. I may also add that the Monsoon Hungama offer is not at all justified while TDSAT’s judgement on the WLL (M) matter is awaited. This is particularly so as the offer has been advertised without informing the prospective subscribers of this pending litigation.

Aditya Sapru
Based on my understanding from press reports, the Telecom Regulatory Authority of India (TRAI) has recently approved the packages being offered by Reliance Infocomm and BSNL, which offer CDMA handsets at cheap prices. We believe that Tata Teleservices too has introduced or is likely to introduce a similar package. This is likely to offer a new connection for just Rs.999.

As is evident, what makes these packages popular is their lower entry cost, which, needless to say, has been contributing to the growth of the wireless space.

However, the catch with this kind of package is that the customers have to remain with the same operator regardless of whether or not they are happy with the service. Transfer of ownership of the handset happens only after paying the cost of the handset plus the interest component in installments. If customers want to cancel the connection, they are forced to pay a fixed amount depending on the time period they utilized the service for.

Mohit Saraf
Reliance is trying to do cellphones what Sabeer Bhatia did to e-mail. Indian consumers are finally in a position to get a phone handset and connection – all for Rs. 501. the common man’s phone is finally here. Right? Wrong- the road to hell is paved with good intentions and the Monsoon Hungama is a classic example.

The larger issues in the Reliance Monsoon Hungama offer have been totally missed. TRAI recently ruled that it would not interfere with WLL handset pricing. The real issue here is the bundling of services and handsets to provide a form of cross-subsidy that deserves immediate recognition in view of its potential for damage. For the naive, it is pertinent to note that the handsets are not being offered free. Though carefully disguised, the handset prices are being recovered over a period of three years as a component of the monthly rental.

The perils of such intense price competition are real. The trouble with aggressive price cutting lies in the looming danger of bankruptcies. WorldCom is a case in point. In India, a complicating factor is the fierce rivalry unfolding between limited mobility service providers and mobile phone service firms. Since the market penetration of cellular subscribers is low in India, limited mobility providers and mobile phone operators are both getting an increasing share of an increasing pie. As the market saturates, these two industry segments are likely to cannibalise each other to stay afloat. Since India is a very price-sensitive market, WLL operators would appear to have an upper hand here. The relatively inferior quality of services being provided so far by WLL operators generally has ensured that this shift has not been dramatic. This is likely to change as the CDMA technology matures.

The Reliance Monsoon Hungama offer may be able to survive legal challenge under the outdated Monopolies and Restrictive Trade Practices Act, 1969. The more progressive Competition Act, 2002, may be able to stall the onward march of such predatory pricing practices and the unfair use of a monopolistic position to undercut competitors. In the long run, both consumer interest and industry interest converge. Predatory pricing is anti-competitive since it facilitates the creation of monopolies, which hold the consumer to ransom.

Issues of predatory pricing and unfair price competition in the telecommunications industry present a clear and present danger to the future of the telecom industry in India. What is required urgently is an appreciation of the nuances of the issue and its economic implications. In taking what is clearly a flawed decision, TRAI has exhibited its stunted perspective and myopic judgement. There is no silver lining in this “monsoon” cloud.

Ravinder Singhania
Increasing competition in WLL sector is forcing oper-ators to provide potential customers with better offers and incentives. One such development has been Reliance’s Monsoon Hungama offer, which provides a multimedia mobile phone along with a connection for Rs.501. The offer includes a monthly payment of Rs.200 for three years.
Though some customers have been complaining that the stipulation of a monthly payment of Rs.200 for three years acts as a lock-in period for subscribers, on review of the entire scheme the customers would find that the operator has also provided an exit scheme wherein an exit charge has to be paid by the subscriber.

A well-known fact is that TRAI regulates tariff matters in respect of telecommunications and related services and therefore, before an operator releases a new tariff scheme, it has to receive approval from TRAI. If at any point of time the regulator receives complaints with respect to tariff plans, it is the duty of the regulator to examine the issue. It appears that bundling of handsets, or in other words subsidizing handsets, is part of the tariff scheme as it would eat up revenues from call charges and thus such offers should be approved by TRAI.

Mahesh Uppal
The Reliance Monsoon Hungama package, which offers a bundles mobile phone for a price of Rs.501, is in my view quite typical of the deals offered by mobile operators the world over. The high price of handsets holds back many ordinary customers from subscribing to the service. By spreading the cost of the handset over the subscription period or recovering this cost through higher call charges or rentals, the operator and customer both can benefit.

The issue on hand is what TRAI should do if it thinks that the price is too low and designed to gain competitive advantage over other players. The answer, to some extent, depends on the players that are purportedly being hurt.

In the case of WLL(M) players claiming to be hurt by Reliance, my view is that TRAI needs to do nothing. TRAI was wrong when it intervened earlier and right now when it has decided not to. Reliance does not have any particular advantage in the marketplace compared to other WLL (M) players. It can do nothing which similar operators are prevented from doing.

GSM players have a different complaint against not only Reliance, but all WLL(M) players. They have argued that WLL(M) services are cheap because the government charges them lower licence fees to offer similar services. This and related licensing issues are sub judice at the time of writing. It is difficult to say how this will be dealt with by TDSAT and eventually TRAI. The latter’s own approach to WLL(M) and GSM has been quite schizophrenic. It treats them similarly one moment and differently the next. See, for example, the recent IUC regulations.

But an equally important issue is the business practices of services providers. Many customers have complained about the fine print in contracts and billing which often disguises the true price of services as well as imposes excessive penalties when someone wishes to move to a different plan or service provider. TRAI has enough powers to deal with this and to ensure that the customer is not hoodwinked into buying any product.