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Tariff Limitation On Premium Calls & SMS For TV Contests Removed By TRAI

In what will come as a relief to many mobile VAS businesses that rely on premium SMS and calls for monetization, the Telecom Regulatory Authority of India has reversed an order it had issued in April this year, which had placed a tariff limitation on premium calls and SMS: As per the earlier ruling, dated 20th April 2012, calls/SMS for participation in contests and competitions and to vote in television and radio programmes were allowed to have a tariff of four times of the corresponding local call/SMS charges in the Tariff plan opted by the subscriber, as ceiling. Download the amendment here.

Removing the limit, the TRAI has said that there are “practical difficulties in implementing the ceiling tariff”, since this was applicable only to contests and competitions and not to other premium SMS/Calls. These have been kept “under forbearance”, which means that companies like Cellcast (which run several contests and reverse auction programs) are free to price SMS as they deem fit. A price limit on premium calls and SMS’ would have been disastrous for the company, and the last five months would have potentially seen a significant decline in topline. Assuming a normal call price of Rs 0.49, it would have limited their calling charges to Rs 1.98, almost one-third of, say, a premium all price of Rs 6, and almost 1/8th of a Rs 15 per minute price.

Why The Limits Were Put: Odd Reasoning

The limits on premium calls were put into place following complaints from consumer organizations regarding “high usage charges and lack of transparency in provision of premium rate services” , and consumer organizations wanted to have rates that were “2 or 3 times the normal rate chargeable”. The TRAI pointed out that prices were typically Rs.2/- to Rs.5/- per minute for each call made and each SMS sent to participate in the contest, voting, survey and competitions. The explanatory memorandum (download it here) goes on to say that “While it is the choice of the subscriber to make or not to make such calls/ SMS, an unreasonably high price results in undue gain to the SP (Service Provider) at the cost of the customer. This leads to customer dissatisfaction and complaints.”

This last statement is odd. If communication in transparent, then it is up to the customer to take a decision on whether to use a premium call or not: his risk, and if he wins the contest, his reward. I don’t see what is wrong with “undue gain”.

Lessons

A few things to keep in mind here:
– Companies, particularly startups, don’t often pay enough attention to policy, which can potentially derail their business, or sometimes even offer significant opportunities.
– A policy decision that is potentially disastrous for your business can be reversed, as has happened in this case.

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