It’s not that AI itself is a new phenomenon; it has been around for over 50 years. However, the complementary ecosystem is vastly different. Chips are now lighting fast, algorithms have become far superior, storage is abundant and cheap, and training data is omnipresent. Naturally, the opportunities are boundless, but so too are the costs. Lest the reader suspects this is another article bemoaning AI — perish the thought. This is about recognising its immense ability, but also the urgent need for preemption before it’s too late.
You cannot fault firms such as Airtel, India’s second largest telecom player with nearly 34 per cent of the market share, to test the limits of antitrust, especially when the law itself is trying to keep pace with technology. Airtel recently announced a partnership with Perplexity, an AI-powered search engine offering a one year ‘free’ subscription to a premium (“Pro”) version of its large language model (LLM)-based search engine to its 390 million users. The firm believes this partnership will allow all customers (mobile, Wi-Fi, and DTH) access to advanced AI models, including deep research and image generation. Lauded as strategic, the ‘bundle’ gives Airtel widespread access to data, while Perplexity can significantly expand its footprint in India. Significantly, Perplexity also gets access to vast troves of sensitive personal data. Indeed, because of the tie-up, Perplexity overnight became the most downloaded app on the Apple store, overtaking Chat GPT and Google Gemini. Imitation, they say, is the best form of flattery. According to media reports, Reliance Jio and OpenAI are also discussing an AI partnership that includes a strategy to roll out cheaper subscription plans for ‘ChatGPT’ in India.
Such deals are, by definition, exclusive. One can rationalise these as good or bad, depending on where one sits. While some suggest the partnership ‘democratises’ access to premium AI tools, others are raising potential competition concerns. In digital markets, due to the profound network effect (where the value of a service increases with the number of users), the potential for leveraging market power across complementary markets is more pronounced than in traditional brick-and-mortar settings. Thus, telcos acting as gatekeepers could influence winners and losers in the market to the detriment of competition, consumer choice, and quality.
The Competition Commission of India, for example, condemned mandatory pre-installation of the Google app suite on Android TV devices to be an unfair practice. Airtel’s partnership with Perplexity fits into what is called ‘zero additional cost’ technological bundling. In 2004, the European Commission ruled against Microsoft, stating that bundling of Windows Media Player with its Windows PC Operating System is detrimental to competition in the media player market. Microsoft was subsequently required to offer a version of Windows without Media Player. More recently, in 2024, Microsoft (again) offered to ‘unbundle’ Teams, its chat and online meeting platform, from its Office suite to address competition concerns raised by the EC.
India, too, has had a brush with zero-cost bundles. Nearly a decade ago, Facebook (now Meta), launched Free Basics with RCom to offer access to a limited set of websites and services for free. This move provoked severe criticism for privileging access to a select group of websites and apps, thereby creating high barriers for smaller players lacking deep pockets. It paved the way for a regulatory ruling against differential pricing of data services and was banned by the Telecom Regulatory Authority of India (Trai). The principles of ‘net neutrality’ in India were thus established. Quick on the heels of Free Basics, Airtel launched the Airtel Zero platform, which gave customers access to certain apps for free. Once again, Trai stated that the scheme violated net neutrality.
‘Zero-cost bundles’, however, are common in telecom, manifesting in strategic partnerships with digital solution providers — content providers, e-commerce and digital payment platforms, and other cloud-based solutions. The Airtel-Perplexity partnership, however, risks locking users within the walled ecosystems created by Airtel and Perplexity. Recognising traditional antitrust limits in dynamic digital markets, a new Standing Committee report released this month urges the Ministry of Corporate Affairs towards proactive ‘ex-ante’ regulation to assertively tackle tech ‘gatekeepers’ and practices like tying and bundling.
Big Tech fiercely resists regulation, especially ex-ante measures. Despite perceived short-term consumer gains, studies show that long-term competition suffers due to the powerful “status-quo bias” created by pre-installed services. On the other hand, will it not be a good thing if this partnership enables competition to Big Tech? Yes, but it’s very unlikely. For starters, Perplexity’s core functionality — generating summaries from user research — is inherently dependent on foundational LLMs such as OpenAI’s ChatGPT, Anthropic’s Claude, and Meta’s Llama. Its growth is, therefore, tied to the foundational models controlled by Big Tech. Besides, with major investments from prominent tech leaders, including Jeff Bezos (of Amazon, which also strategically partners with Anthropic) and Nvidia, Perplexity is hardly an ‘underdog’.
In conclusion, it is imperative for market authorities to demand full transparency into such partnerships, rigorously assess them on their merits, and remain exceptionally attentive to potential anticompetitive concerns. The siren song of ‘free’ access must not deafen us to the long-term implications for competition and consumer choice in India’s burgeoning digital economy.
Rajat Kathuria is Dean, School of Humanities and Social Sciences, and Professor of Economics at the Shiv Nadar University. Isha Suri is a lawyer and researcher based out of New Delhi; she is also a Global AI and Market Power Fellow at the European AI Society Fund. Views are personal
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