Slapping punitive tariffs for hiding information on new subscribers ratchets up tension between telecom regulator and two leading mobile operators. The matter reached to court and the operators sought to settle the issue outside the court. BTRC keeps saying that the two have to pay the tariffs and even cut their bandwidth to comply.
Mobile operators have every reason to get angry over imposition of supplementary duties every now and then. However, telecom regulator does not take the operators into task for violating consumer rights and harming competition.
In recent years, we witnessed mergers of key mobile operators. Interestingly no hue and cry has been heard from the government side. In USA, antitrust laws protect consumer interests and head off initiative to harm competition. At the heart of US antitrust policies lies the Sherman Act , the Clayton Act and the Federal Trade Commission Act. The Sherman Act discourages bad monopoly practices. Meanwhile the Clayton Act prevents price discrimination, tie-ins, exclusive dealings, mergers that shrink competition and control of competing firms by interrelated board of directors. The Federal Trade Commission Act paved the path for creation of Federal Trade Commission Act to enforce antitrust laws.
Like US antitrust laws, Bangladesh in 2012 passed Competition Act that aims " to make provisions to promote, ensure and sustain congenial atmosphere for the competition in the trade, and to prevent, control and eradicate collusion, monopoly and oligopoly, combination or abuse of dominant position or activities adverse to the competition." It also entailed creation of Bangladesh Competition Commission (BCC). Unfortunately BCC first witnessed appointment of its chairman back in 2016 and the body remains a toothless tiger under Ministry of Commerce with an annual budget of Tk 1.8 million, which is subject to ministry's approval.
In USA, not all mergers and acquisitions deem anti-consumer and anti-competition if those amalgamations result in more efficiency for the firm and thereby improving the welfare of the society as a whole. For instance, merger of two competing firms may lower the marginal cost of the combined firm in post merger period. Since the firm produces at lower marginal cost than before its efficient production may render better quality product or more output at same price or both for the consumers. Thus the social welfare is also increased because of this merger. In this light merger is good and antitrust laws do not put any obstacle in such amalgamation. A merger may also lead to increase in price and less output. A deadweight loss is attributed to the rise in price and lowering of output. Antitrust laws enforcement authority examines whether efficiency gains outweigh deadweight loss of a potential merger. If efficiency gains offset or more than offset deadweight loss of a merger plan then the court or antitrust law enforcement body nods affirmatively to such merger proposal. Otherwise, it throws cold water to merger plan. Those managed to get their merger deals passed the probing eyes of antitrust laws enforcement bodies did so by selling their efficiency gain's concept.
Bangladesh's mobile telecommunications industry is characterized by oligopoly: identical product and few operators. Previously six operators dominated the industry. Axiata's acquisition of Airtel and dissolution of Citycell reduced the number of operators to four. One does not have to be an expert to say competition is reduced because of merger. Are the consumers better off now than before? Coming back to it a little bit later.
In the USA, authority blocks merger or acquisition attempt if it leads to increase of market power of the merged firm. This market power is defined by firm's ability to set price above the price under perfect competition. One of the indirect measure of this market power is the share of the market. Often a market share of 50 percent is deemed low as market power if other firms can enter easily into the market and drive price lower to the competitive market. Unfortunately this is not easy in Bangladesh's mobile telecommunications service industry. Entry is not easy here. So any merger insinuates concentration of market power to merged company and thereby reduction in competition. EBL securities prepared an analysis for its clients about the mobile operators of Bangladesh. According to EBL Securities Limited, GrameenPhone and Robi own 43% and 33% of market share of active mobile internet subscribers respectively in September, 2018. In terms of revenue, GrameenPhone holds 58% of the market share whereas Robi holds 28% of the market share till the third quarter in 2018. Before 2016 when the merger between Airtel and Robi took place, Robi had 26% of the revenue market. Clearly Robi's revenue market share increased by 2% due to merger. Technically speaking a reduction in competition occurred.The body that supposed to look into this matter , Bangladesh Competition Commission, was formed in that same year. However, Bangladesh Telecom Regulatory Commission introduced Significant Market Player clause that allows it to impose restrictive measures to curb influence of a dominant market player.
Court in December 2018 also banned any hike in call rate. However call rate increased significantly since the merger of Airtel and Robi. Earlier 33 paisa/ minute was the lowest available call rate, now it is 77 paisa/ minute. When it comes to mobile internet data, BTRC intervened to raise the duration of all data packs to a minimum of one week. From my personal experience I can tell operators took off many offers following the instruction. For instance, data pack of 25 MB for 4 hours at Tk 5 literally disappeared. Data pack worth Tk 9 for 24 hours resulted in a duration of 72 hours. Consumers' cost on data pack has increased following reduction in competition. In addition, call drop crops up every now and then in the middle of conversation, prompting BTRC order to compensate subscribers in the event of call drop. Consumers in general do not receive more output from the leading operators let alone experience better service and products. Out of the blue this year we came to learn via Telenor website a negotiation was started to merge Axiata and Telenor in South Asia. However, Axiata underscored that Bangladesh operation is not part of the merger discussion. It is hilarious to hear such argument when operations of a significant market are about to come under one clutch and only one part will be left out. The merged company will have far more control on cost and thereby deeper influences on setting prices across different markets. This merger negotiation also laid bare to ridicule ability of our agencies to foresee such important amalgamation that has the potential to affect VAT and Tax revenue of the government struggling to finance development projects and social security programs.
Many subtle incidents also go unnoticed to the eyes of our antitrust bodies. For instance, selling of high value mobile phone sets or tabs at extended installments by mobile operators. This kind of practices deter competition among retailer shops and raise the costs for selling of such sets in the retail market. This tie-in sale practice has to be addressed in the Competition Act.
Another incident is to pick up exclusive multimedia content provider for entertainment contents. For instance, leading operators often inked exclusive deal with online entertainment service providers at a special fee or free of cost. This kind of exclusive deals raise entry barrier to other similar service providers and kill many budding companies. With the introduction of 4G , mobile operators play the role of windows to seamless internet service industry. In that service industry, it cannot cut special deal with some clients ( entertainment service providers are operators ' clients) by depriving others. This subtle-competition-killer matter has to be taken into account by our antitrust authority in a bid to augment competition and welfare.
However, we have to acknowledge that the leading two mobile operators play a crucial role in bridging digital divide and educating poor and hard-to-reach community through their freebasics services at zero balance. The Facebook assisted freebasics allows one to browse internet without paying any fee.Obviously the two operators run this program as part of corporate social responsibility out of their own pockets.
But it should not be the reason to allow the merger of two operators who have significant subscriber base and market share. Government can sell another telecom license to a new willing company in combination with ailing one brings some foreign partner so that there is resurgence in competition in mobile telecom market. So far BTRC and the Court have taken the onus of enforcing competition and consumer rights in this market. In the coming months I hope Bangladesh Competition Commission under the auspices of parliament will take the lead in that end. Before that our Competition Act needs to be updated to address various forms of competition killing practices.
Mobile operators have every reason to get angry over imposition of supplementary duties every now and then. However, telecom regulator does not take the operators into task for violating consumer rights and harming competition.
In recent years, we witnessed mergers of key mobile operators. Interestingly no hue and cry has been heard from the government side. In USA, antitrust laws protect consumer interests and head off initiative to harm competition. At the heart of US antitrust policies lies the Sherman Act , the Clayton Act and the Federal Trade Commission Act. The Sherman Act discourages bad monopoly practices. Meanwhile the Clayton Act prevents price discrimination, tie-ins, exclusive dealings, mergers that shrink competition and control of competing firms by interrelated board of directors. The Federal Trade Commission Act paved the path for creation of Federal Trade Commission Act to enforce antitrust laws.
Like US antitrust laws, Bangladesh in 2012 passed Competition Act that aims " to make provisions to promote, ensure and sustain congenial atmosphere for the competition in the trade, and to prevent, control and eradicate collusion, monopoly and oligopoly, combination or abuse of dominant position or activities adverse to the competition." It also entailed creation of Bangladesh Competition Commission (BCC). Unfortunately BCC first witnessed appointment of its chairman back in 2016 and the body remains a toothless tiger under Ministry of Commerce with an annual budget of Tk 1.8 million, which is subject to ministry's approval.
In USA, not all mergers and acquisitions deem anti-consumer and anti-competition if those amalgamations result in more efficiency for the firm and thereby improving the welfare of the society as a whole. For instance, merger of two competing firms may lower the marginal cost of the combined firm in post merger period. Since the firm produces at lower marginal cost than before its efficient production may render better quality product or more output at same price or both for the consumers. Thus the social welfare is also increased because of this merger. In this light merger is good and antitrust laws do not put any obstacle in such amalgamation. A merger may also lead to increase in price and less output. A deadweight loss is attributed to the rise in price and lowering of output. Antitrust laws enforcement authority examines whether efficiency gains outweigh deadweight loss of a potential merger. If efficiency gains offset or more than offset deadweight loss of a merger plan then the court or antitrust law enforcement body nods affirmatively to such merger proposal. Otherwise, it throws cold water to merger plan. Those managed to get their merger deals passed the probing eyes of antitrust laws enforcement bodies did so by selling their efficiency gain's concept.
Bangladesh's mobile telecommunications industry is characterized by oligopoly: identical product and few operators. Previously six operators dominated the industry. Axiata's acquisition of Airtel and dissolution of Citycell reduced the number of operators to four. One does not have to be an expert to say competition is reduced because of merger. Are the consumers better off now than before? Coming back to it a little bit later.
In the USA, authority blocks merger or acquisition attempt if it leads to increase of market power of the merged firm. This market power is defined by firm's ability to set price above the price under perfect competition. One of the indirect measure of this market power is the share of the market. Often a market share of 50 percent is deemed low as market power if other firms can enter easily into the market and drive price lower to the competitive market. Unfortunately this is not easy in Bangladesh's mobile telecommunications service industry. Entry is not easy here. So any merger insinuates concentration of market power to merged company and thereby reduction in competition. EBL securities prepared an analysis for its clients about the mobile operators of Bangladesh. According to EBL Securities Limited, GrameenPhone and Robi own 43% and 33% of market share of active mobile internet subscribers respectively in September, 2018. In terms of revenue, GrameenPhone holds 58% of the market share whereas Robi holds 28% of the market share till the third quarter in 2018. Before 2016 when the merger between Airtel and Robi took place, Robi had 26% of the revenue market. Clearly Robi's revenue market share increased by 2% due to merger. Technically speaking a reduction in competition occurred.The body that supposed to look into this matter , Bangladesh Competition Commission, was formed in that same year. However, Bangladesh Telecom Regulatory Commission introduced Significant Market Player clause that allows it to impose restrictive measures to curb influence of a dominant market player.
Court in December 2018 also banned any hike in call rate. However call rate increased significantly since the merger of Airtel and Robi. Earlier 33 paisa/ minute was the lowest available call rate, now it is 77 paisa/ minute. When it comes to mobile internet data, BTRC intervened to raise the duration of all data packs to a minimum of one week. From my personal experience I can tell operators took off many offers following the instruction. For instance, data pack of 25 MB for 4 hours at Tk 5 literally disappeared. Data pack worth Tk 9 for 24 hours resulted in a duration of 72 hours. Consumers' cost on data pack has increased following reduction in competition. In addition, call drop crops up every now and then in the middle of conversation, prompting BTRC order to compensate subscribers in the event of call drop. Consumers in general do not receive more output from the leading operators let alone experience better service and products. Out of the blue this year we came to learn via Telenor website a negotiation was started to merge Axiata and Telenor in South Asia. However, Axiata underscored that Bangladesh operation is not part of the merger discussion. It is hilarious to hear such argument when operations of a significant market are about to come under one clutch and only one part will be left out. The merged company will have far more control on cost and thereby deeper influences on setting prices across different markets. This merger negotiation also laid bare to ridicule ability of our agencies to foresee such important amalgamation that has the potential to affect VAT and Tax revenue of the government struggling to finance development projects and social security programs.
Many subtle incidents also go unnoticed to the eyes of our antitrust bodies. For instance, selling of high value mobile phone sets or tabs at extended installments by mobile operators. This kind of practices deter competition among retailer shops and raise the costs for selling of such sets in the retail market. This tie-in sale practice has to be addressed in the Competition Act.
Another incident is to pick up exclusive multimedia content provider for entertainment contents. For instance, leading operators often inked exclusive deal with online entertainment service providers at a special fee or free of cost. This kind of exclusive deals raise entry barrier to other similar service providers and kill many budding companies. With the introduction of 4G , mobile operators play the role of windows to seamless internet service industry. In that service industry, it cannot cut special deal with some clients ( entertainment service providers are operators ' clients) by depriving others. This subtle-competition-killer matter has to be taken into account by our antitrust authority in a bid to augment competition and welfare.
However, we have to acknowledge that the leading two mobile operators play a crucial role in bridging digital divide and educating poor and hard-to-reach community through their freebasics services at zero balance. The Facebook assisted freebasics allows one to browse internet without paying any fee.Obviously the two operators run this program as part of corporate social responsibility out of their own pockets.
But it should not be the reason to allow the merger of two operators who have significant subscriber base and market share. Government can sell another telecom license to a new willing company in combination with ailing one brings some foreign partner so that there is resurgence in competition in mobile telecom market. So far BTRC and the Court have taken the onus of enforcing competition and consumer rights in this market. In the coming months I hope Bangladesh Competition Commission under the auspices of parliament will take the lead in that end. Before that our Competition Act needs to be updated to address various forms of competition killing practices.
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