Uninor urges TRAI to examine lack of cost-oriented wholesale market in Indian telecom industry

Telecom Lead India: Mobile service provider Uninor has
urged Telecom Regulatory Authority of India (TRAI) to ensure that adequate
safeguards are instituted against predatory retail pricing and competitive
distortions of wholesale services.


On retail, we do not believe that there should be any
tariff regulation. However, on wholesale, the services should be provided on a
nondiscriminatory, cost-oriented and unbundled basis,” Uninor said in its
response to TRAI.


According to Uninor, any requirement for the introduction of retail
price ceilings is a clear sign that the basic competitive elements are not
functioning optimally.

In this regard, Uninor has expressed its view on the following issues
which has a significant impact on the ability for smaller operators to compete
effectively: Pricing of wholesale voice termination above cost; Pricing of
wholesale SMS termination above cost; Pricing of on-net origination and
termination voice/sms for own retail; customers below the wholesale rates
offered to other operators; and Terms and conditions for POI establishment.

Uninor said competition in the Indian market has over the past few years
been performed on a very uneven playing field, with a number of very small
start up operators trying to gain market share against well entrenched incumbent
operators dictating terms and conditions for permitting voice and SMS termination,
POI connectivity and other essential services which would be required by such
start up entities.

Most of these services would be classed as inter-operator wholesale
services which are essential building blocks to create an effective competitive

As this Consultation is focused upon the creation of prices which
reflects efficient costs, one must also take into consideration the
inter-operator pricing levels which would form the basis for retail tariffs.
Thus, we would urge TRAI to carefully examine the lack of an efficient and cost
oriented wholesale market rather than introducing regulation of retail prices.
This is also in line with the basic principles in the EU regulatory framework, where
the Commission has explicitly stated that regulation of retail services is the
last resort,” Uninor said.

According to its response to TRAI, Uninor does not subscribe to the view
that the market share indicates absence of effective competition in the retail

We would rather underline that it is very difficult for new entrants to
compete on par due to unbalanced terms and conditions at wholesale level.
However, it is worth noting that although a number of new entrants were
introduced in 2008, the effective operative dates of these operators would have
been at least 1 year later, and taking due account of this extremely short timeframe,
the lack of any competitive safeguards, and incumbent margin squeeze on IUC,
the market share and impact of new competition is extremely impressive,” Uninor

For smaller operators a larger share of the total traffic will be
off-net. Consequently, the relatively high termination rate serves as a barrier
for competing with attractive offers introduced by incumbent operators without
taking significant losses, i.e. cross-subsidizing these traffic volumes.

We have noted a significant effort by vested interests to claim that
competition is very high in the Indian market, but the same parties omit to
outline that such competition is neither between equally placed parties nor on
a level playing field,” Uninor said in its response to TRAI.

It is clear that competition has indeed intensified over the past years
and driven retail tariffs down significantly but as we have argued above, such
competitive pressure has come from new operators, rather than the incumbent,
despite the new operators being faced with significant wholesale challenges.

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