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TMI Blog2024 (11) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... ter alia, entrusted with the duty of eliminating practices having an adverse effect on competition, to promote and sustain competition in markets, to protect the consumers and to ensure freedom of trade carried on by other participants in the market. As a sectoral regulator, the TRAI may formulate and enforce obligations through appropriate code of conduct for the entities operating in the telecom sector, keeping in view its sector-specific objectives. However, compliance with the TRAI regulatory framework remains independent of the possibility of any practice of an entity operating in the telecom sector falling afoul of the provisions of the Act. The OP s submission that the entity s existence stems from sectoral regulator s recommendations and thus, it is within the domain of TRAI and not Commission s, does not hold water. It will be erroneous to interpret the judgment of the Hon ble Supreme Court in Bharti Airtel case [ 2018 (12) TMI 1683 - SUPREME COURT ] to mean that in every case of overlap of jurisdiction with a sectoral regulator, the Commission will have to withhold taking action and await examination by the sectoral regulator. This would render the object and purpose of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present matter. Therefore, the matter is directed to be closed forthwith under Section 26(2) of the Act. The Secretary is directed to communicate the decision of the Commission to the parties, accordingly. - MS. RAVNEET KAUR CHAIRPERSON, MR. ANIL AGRAWAL MEMBER, MS. SWETA KAKKAD MEMBER AND MR. DEEPAK ANURAG MEMBER For the Informant: Mr. A.N. Haksar, Sr. Advocate Mr. Saurabh S. Sinha, Advocate Mr. Chitra Y. Parande, Advocate Mr. Raunaq Maheshwari, Executive Director For the Opposite Party: Mr. Vaibhav Gaggar, Advocate Mr. Ashok Kumar, Advocate Ms. Kokila Kumar, Advocate Ms. Chhavi Arora, Advocate Ms. Shefali Munde, Advocate Mr. Shubham Sharan, General Manager Ms. C. Jayakiran, Law Officer Mr. Soumen Bhowmik, Manager Order under Section 26(2) of the Competition Act, 2002 1. The present Information has been filed by Extreme Infocom Pvt Ltd. ( Informant ) under Section 19(1)(a) of the Competition Act, 2002 ( Act ), alleging contravention of the provisions of Section 4(2)(a)(ii) and 4(2)(c) of the Act by National Internet Exchange of India ( NIXI/OP ). Facts and allegations, as stated in the Information 2. It is stated that the Informant, having its registered office in Delhi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in the same city. To connect to these CDNs/ content providers, either the ISP has to physically connect to Internet exchanges in those cities where CDNs have their data centers or to Internet exchanges in the location of the ISP which then connect to the CDNs. Either way, there is a cost of transportation involved for the ISP - directly in the first case and indirectly in the second. This cost is stated to be known by various names such as Transport cost, National long-distance cost, National Private Link cost, Point-to- Point cost or National Ethernet Link cost. Further CDNs / content providers have their data centres located only in certain locations viz. Mumbai, Chennai, Delhi etc. 7. The Informant has delineated relevant market as the market of internet exchange services for peering between content providers, CDNs and ISPs in towns/cities in India in which CDNs/content providers are not present/ do not have their data centres and has stated that services provided by both the Informant and the OP are interchangeable. 8. It is stated that the OP enjoys a dominant position in the relevant market and has since 2015, posted significant profits from its other heads of revenue. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . ( Netrun ), based in Hyderabad owing to the free provision of IXP services by the OP. Netrun apprised the Informant of its decision vide email dated 07.10.2022. This has resulted in denial of market access to the OP s competitors such as the Informant. It is alleged that the Informant has lost customers to the OP because it is not charging transportation cost at least in as many as 17 sectors such as Bangalore and Mumbai, Guwahati and Mumbai, Agra and Delhi, Srinagar and Delhi, Lucknow and Delhi, to name a few. The provision of free services has caused revenue loss to the Informant and other players in the industry. 11. The Informant has averred that the OP has a routing and tariff policy which provides for the terms of availing internet exchange services from it. The said policy prescribes connectivity charges payable with effect from 01.01.2021. The OP after the prescription of charges, issued several tenders to establish internet exchanges/ ports across the country. These activities include point-to-point connectivity of upcoming internet exchanges and acquiring space at data centres for upcoming internet exchanges. Thus, the Informant has alleged that the OP is incurring cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above 430 in respect of the Informant. DE-CIX India and the Informant have been stated to be other major players providing IXP services, besides the OP. 16. In the meantime, the OP filed a letter dated 30.08.2023 requesting the Commission to seek inputs from Department of Telecommunications (DoT) for getting a holistic view of the matter. In the said letter, it also apprised that the Informant had filed a writ petition (W.P.(C) No. 7804/2019) in the Hon ble Delhi High Court, which is pending. The OP submitted that since the present matter is interconnected, it requested the Commission to make a reference under Section 21A of the Act. Detailed reply filed by the OP 17. The OP filed its detailed reply dated 11.09.2023, in which it denied all the allegations, averments and contentions in the Information. 18. The OP submitted that it has been established as a not-for-profit organisation under the administrative directions of the Ministry of Electronics and Information Technology ( MeitY ) for setting up of peering of ISPs among themselves for the purpose of routing the domestic internet traffic within the country for better quality of service (reduced latency) and reduced bandwidth ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue from the DoT, they were informed that they would, indeed, require a license under the Indian Telegraph Act. Thus, the Informant is aggrieved by the fact that the Government of India through the DoT and TRAI is trying to bring IXPs like the Informant within a uniform licensing regime under the Indian Telegraph Act and the present Information has been filed to undermine the mandate of the DoT. 21. The OP has stated that the Informant has relied upon certain email communications between the Informant and the two ISPs, namely, Aeronet and Netrun to substantiate the allegation of the loss suffered by the Informant due to the OP s alleged anti-competitive conduct, which cannot, in any manner, be read in isolation. Further, the Informant has failed to annex a Certificate under Section 65B of the Indian Evidence Act, 1872, which is a mandatory requirement. Thus, the said email communications are not admissible and cannot be relied upon. 22. While replying on the merits, the OP submitted that the Informant has erroneously delineated the relevant market as the same is misconceived, baseless and incomplete. The Informant has failed to apply established tests and principles followed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly maintaining more IXs than those of the OP during the period ranging from 2016-2022. It is averred that in six cities including Hyderabad, where the Informant is present, the Informant has nearly four times more connected networks than that of the OP. 24. On the availability of funds and resources, the OP submitted that its resources are intended to enable it to pursue its social and development goal of facilitating internet penetration all through India, including major cities, Tier 2 and Tier 3 cities and beyond. The Informant, on the other hand, is driven solely by profit motive and is concentrating on six major cities and is planning to start business in the seventh city, Bengaluru. No other Internet exchange provider including the Informant has an exchange center outside metros and couple of Tier 1 cities since their objective is commercial whereas the OP is working for the benefit of the member ISPs enabling growth of internet penetration in the country and internet ecosystem as per its mandate. 25. The OP also submitted that there are other players present in the market such as AMS-IX, Extreme-IX and DE-CIX and there are no entry barriers. The Informant, on the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpetition in the market and certain level of entry barrier to prevent competitors to re-enter the market. In addition, it also involves engaging in conduct of pricing below cost (as defined in CCI Cost of Production Regulations, 2009) which is usually below the average variable cost, and eventually recouping losses incurred in the process, over a period of time. The intent is to reduce competition or eliminate the competitors. Predatory intent and recoupment of losses/profits are thus sine qua non for establishing predation by a dominant player under the Indian competition regime and both of these are not satisfied in the instant case. 29. The OP has stated that with effect from the beginning of 2023, it has increased the prices for its services. Lower prices were part of the fulfilment of OP s mandate to create a market in Hyderabad and was only for a 6 8-month period. Moreover, there was no ISP/telco present in Hyderabad. However, due to change in its CDN joining policy in 2019, the OP was able to connect not just Hyderabad but also a few key cities within India. Further, as per the OP, it had first entered the market in Hyderabad in 2021, while the Informant entered the market i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le any rejoinder within the stipulated time, and decided to call the parties for a preliminary conference on 14.02.2024. 33. On 14.02.2024, the parties made their oral submissions considering the relevant geographic market to be pan-India. After hearing the parties at length, the Commission directed them to file a written synopsis of their oral submissions. The Commission further directed the parties to file certain data pertaining to their market presence. OP s written arguments 34. The OP reiterated its stand taken in its reply such as lack of jurisdiction, reference under Section 21A, concealment of previous litigation by the Informant, erroneous delineation of the relevant market, no dominance/substantial market power of OP, no ingredient of predatory pricing being met, emails not to be read in isolation and the content providers and CDNs having options to choose their preferred IXPs. The OP also relied upon certain judgments to canvass its aforesaid submissions in the matter. Informant s written arguments 35. The Informant submitted that the argument of OP that the issue be placed before TRAI is wholly misconceived in view of the present lis. The OP has failed to point out any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e OP provides these services at zero/ below cost. The OP s case that it provides these services at zero/ below cost in compliance with social obligations/ social mandate is not acceptable because Report of Task Force on the Growth of Internet in the country dated August 2002 (TRAI Report) specifically states that the OP was charging and must charge cost-plus . Further, since there is no categorical or specific denial of these facts, the contents of the Information be taken as admitted by the OP. 40. Further, the Informant stated OP failed to show that the below cost pricing or zero price was adopted to meet competition and social cost/ obligation cannot be considered as an objective justification for predatory pricing. 41. Internet Exchange facilitates connection between ISPs and local/ international content providers/ CDNs. These CDNs provide data centres in select cities in India. It was stated that the places where such CDNs are not situated, the provision of services entails costs which are to be paid to telcos. This cost is not passed on to their customers by the OP. The OP has offered free services in Hyderabad in the past and admitted with a caveat that it happened during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 47. The Commission has perused and examined the submissions made by the parties at various stages and the information available in public domain. 48. At the outset, the Commission would proceed to deal with the preliminary objection raised by the OP that the Commission lacks inherent jurisdiction to deal with the matter. It has stated that the Writ Petition No. 7804 of 2019 filed by the Informant before the Hon ble Delhi High Court (Extreme Infocom Pvt. Ltd. v. Union of India Anr) is sub judice. The petition pertains to a challenge to the Union of India s clarification order dated 25.06.2019 issued to the Informant which held that an Internet Exchange Point (i.e. the Informant) requires a license under Section 4 of the Indian Telegraph Act, 1885, which squarely falls within the ambit of DoT and TRAI. The OP has submitted that TRAI has been tasked with the regulation of the telecom sector and also regulating/ supervising the activities undertaken by the OP. As background, the OP has submitted that TRAI had recommended to Government of India for setting up of a domestic internet exchange and consequently, the OP was envisaged as a central body to handle interconnection of domesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpliance with the TRAI regulatory framework remains independent of the possibility of any practice of an entity operating in the telecom sector falling afoul of the provisions of the Act. This has also been upheld by the Hon ble Supreme Court of India in the Bharti Airtel case (supra) wherein it has categorically held that the Commission s jurisdiction would not be completely ousted merely due to the existence of a sectoral regulator. While addressing the apparent overlap between the powers of TRAI and the Commission, the Hon ble Court appreciated the exclusive jurisdiction that remains with the Commission to determine whether a particular agreement is in contravention of the provisions of the Competition Act and this specific and important role assigned to the Commission cannot be wished away. The Hon ble Supreme Court held as under- 109) The CCI is specifically entrusted with duties and functions, and in the process empower as well, to deal with the aforesaid three kinds of anti-competitive practices. The purpose is to eliminate such practices which are having adverse effect on the competition, to promote and sustain competition and to protect the interest of the consumers and en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all decisive. This was also the view of the Hon ble Supreme Court in State of Rajasthan v. Ganeshi Lal, (2008) 2 SCC 533. 52. Further, the allegation in the present matter is that the OP, an IXP, is a dominant entity in the relevant market and has indulged in predatory pricing (provided internet exchange services for free/below cost) leading to a denial of market access to the Informant which is also an IXP. The Commission notes that the issues arising in the present matter pertain to abuse of dominant position which involves examination of relevant market, dominance and then return a finding on any allegation of abuse of the dominant position (such as predatory pricing). Such determination can be addressed under the provisions of the Act. It is clear that the allegations involved in the present matter are determinable within the legal mandate given to the Commission. Thus, the Commission does not find any merit in the preliminary objection regarding lack of jurisdiction in the matter. Further, seeking opinion of any statutory authority such as TRAI under the provisions of Section 21A of the Act is the prerogative of the Commission and may be exercised in appropriate cases, as de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioning name and number of IX points and total traffic. The OP also submitted city-wise data under the heads such as date of inception of IXP, membership fee, date of membership fees levied, port fees, date of port fees levied, one time joining charges, rack charges and reconnection charges. The Commission notes that the parties have not provided the market data on the variables and time period as sought. 57. Be that as it may, the Commission places reliance on the earlier submissions of the OP. The OP stated that the Informant hosted higher traffic of 2.393 Tbps whereas the OP is having traffic of 1.3 Tbps. The Commission notes that the Informant has stated the traffic to be 1.6 Tbps in about 35 points of presence across 6 cities. As per OP, the number of networks connected with the OP as on 31.07.2023 was about 298, while the Informant s was about 430. Further, the OP submitted that in the last 20 years, it has managed only approximately 298 ISPs. Also, the OP submitted that the Informant currently has a network of over 350+ ISPs. Further, the OP provided the following data: Table 1: Number of connected networks in six markets where the Informant is present Year OP Informant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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