TRAI should reject COAI’s demand of floor price for data services

| Updated on December 30, 2019 Published on December 30, 2019

Fixing a minimum price is not only anti-consumer but also goes against the principles of free competition, open market, and tariff forbearance

The industry body for mobile telephony services providers, the Cellular Operators Association of India (COAI), has called on the Telecom Regulatory Authority of India (TRAI) to fix a “floor” rate for mobile data services. The COAI has argued that the industry is going through a financial crisis and operators can recover the massive losses only if there is an assurance that the tariffs won’t fall below cost again. Unfortunately, this extraordinary call for price regulation in an intensively competitive market which has grown explosively precisely because of such competition, is also somewhat poorly timed. There are only three operators in the market and they have already announced up to 50 per cent increase in tariffs over the last month. Both Airtel and Vodafone Idea have clearly indicated that they are looking to increase their respective average revenue per user even at the risk of losing subscribers. Reliance Jio, responsible for the sharp fall in data tariffs since 2016, has announced an increase in tariffs. The current tariff framework gives operators the freedom to design the tariffs according to the prevailing market conditions. This has resulted in the emergence of new and innovative products in the market aimed at providing telecom services at an affordable and competitive price to consumers. TRAI has already twice reviewed the policy of forbearance in telecom tariffs, in 2012 and 2017. On both occasions, the regulator decided against fixing tariffs because forbearance was held to be in accordance with international best practices. Globally, there are only 4-5 countries where the regulator stipulates some form of tariff fixation. After the consultation process in 2017, TRAI had said that due to the complexities involved in the fixation of a floor price, it was not an idea worth pursuing. This continues to be true even now.

To be fair, the telecom industry is reeling under a debt of nearly ₹7 lakh crore. But that should be addressed through other policy interventions and not through regulatory fiats on tariffs. In 2003, when the incumbent operators were charging as much as ₹8 per minute for calls, Reliance Infocomm brought down call rates to ₹1 per minute. In 2009, Tata DoCoMo launched a one-paisa-per-second billing plan at a time when other operators charged for the entire minute even if the call duration was for just 10 seconds. In 2016, Reliance Jio came in with free voice calls and data tariffs that were at 80 per cent lower than prevailing market prices. These disruptive tariffs were then termed as predatory but helped drive mobile and data consumption. Fixing a floor price now would rob consumers of potential benefits from future tariff disruptions. Instead, the regulator should focus on checking predatory and unfair practices, and identify other measures that reduce the overall costs for the industry including lower spectrum price and licence fees.

TRAI should reject COAI’s demand. Fixing a floor price is not only anti-consumer but also goes against the principles of free competition, open market, and tariff forbearance.

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Published on December 30, 2019
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