The right call

The Telecom Regulatory Authority of India (TRAI) would do well to ignore the proposal made by some incumbent operators to fix a floor price for mobile services. The idea is anti-consumer and goes against the principles of a free market. Currently, telecom operators are free to fix their own tariffs as long as they are not predatory. This principle of forbearance was first introduced in 2003 after the TRAI concluded that there was enough competition in the market to ensure that consumers get the best deal. Until then, the regulator had prescribed a standard tariff plan that set ceiling rates to prevent operators from forming a cartel to keep tariffs high. This policy was reviewed in 2013 when the regulator sensed that the tariffs had increased after some of the new operators were forced to shut shop due to the Supreme Court ruling on the 2G scam. The incumbent operators who are now asking for a floor price were among those opposing any form of price controls then.

To be fair, a lot has changed for the incumbents since then. They were once the dominant players with revenues growing at 30-40 per cent. In the third quarter of FY17 revenues fell by 6 per cent sequentially, the biggest ever decline seen by the sector. In this scenario, setting a floor price would surely help them shore up revenues. But there are two reasons why the regulator should not fall for this argument. First, the consumers should not be robbed of voice and data services at cheap rates arising out of competitive market play. Data tariff in India is still among the highest in the world and this has to be brought down further. By all means the TRAI should check predatory and unfair tariff schemes as it has done in the past. For example, the regulator rightly disallowed Facebook to launch its Free Basics platform as it allowed users to access only a certain set of websites for free, thus violating the principles of net neutrality. Secondly, the exercise to fix a floor price could be highly complex and time consuming given that the cost structures of operators are different.

Instead of wasting its time on such counterproductive proposals, the regulator should do two things. First, it should investigate anti-competitive practices in the industry so that all unfair tariff schemes that threaten the overall stability of the sector are weeded out and penalised. Secondly, the regulator should identify measures to lower the overall costs for the industry. This could be in the form of reduced levies, allowing operators to better monetise their networks and freeing them from the shackles of unnecessary restrictions. The regulator must strike a fine balance between continuing with the policy of forbearance in tariff fixing and preventing misuse of that freedom.

COMMENT NOW