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Telcos to TRAI: Differential tariffs enhance consumer welfare, cause no harm

Part II: In this three part series (Parts I & III here), we take a look at the TRAI’s ruling on differential pricing in India. Yesterday, TRAI, India’s telecom and internet regulator, prohibited discriminatory tariffs for data services under the Telecom Regulatory Authority of India Act, 1997 (24 of 1997). Here are the key takeaways of the paper (pdf):

Stakeholder comments to TRAI’s consultation paper:

Question 1: Should the TSPs be allowed to have differential pricing for data usage for accessing different websites, applications or platforms?

TSPs and their associations supported differential tariffs on the ground that it was allowed in other segments and industries, it helps product innovation and competition and brings more customers on the internet, thus enhancing consumer welfare. They added that there’s no evidence of harm to stakeholders and it helps in getting investments to build networks.

– Some suggested that differential pricing be allowed only in specific cases like for example accessing essential services (no definition provided).

Some service providers vehemently opposed differential pricing by TSPs on grounds that it is anti-competitive, non-transparent, discriminatory and against content innovation. TSPs are custodians of public resource infrastructure which should be made available without discrimination.

– Differential pricing violates net neutrality, and makes the TSPs gatekeepers, thus restricting consumer choice and against freedom of speech/expression and media pluralism.

– Some also raised privacy concerns.

– Some who took middle ground suggested that differential pricing should be allowed on a case to case basis. They added that with time, differential pricing, locally dependent pricing should be allowed, while others said that zero rating should be equally rated where certain amount of free data is provided with unrestricted access to any content.

– TSPs and some organisations suggested that TRAI should examine tariff plans ex-ante case by case. Others suggested that the focus should be on the consumer content before services are accessed, and better disclosure of terms and conditions of differential plans. Some suggested that there should be independent oversight mechanisms over TSPs offering differential pricing.

Question 2: If differential pricing for data usage is permitted, what measures should be adopted to ensure that the principles of non-discrimination, transparency, affordable Internet access, competition and market entry and innovation are addressed?

– TSPs say that regulatory oversight and reporting to TRAI is enough, and that differential pricing is recognised and exists across utilities like water, electricity, gas etc. They say that the scope of consultation should be broadened to include internet usage at all levels, government should invest in infrastructure and roll out mobile broadband networks. The government should focus on improving internet penetration.

Question 3: Are there alternative methods/technologies/business models, other than differentiated tariff plans, available to achieve the objective of providing free Internet access to the consumers? If yes, please suggest/describe these methods/technologies/business models. Also, describe the potential benefits and disadvantages associated with such methods/technologies/business models.

Most TSPs and some organisations said that there is no other or better business model, while others suggested that providing free/open data on agreement with content providers could be one option.

– Some suggestions stated that USO sponsored fund as subsidy of direct benefit transfer through NOFN or multiple data centres, allowing differential pricing for rural, non commercial or educational users.

– Free/open data can be provided as an alternative model by TSPs under TRAI monitoring. It could also be a general corporate social responsibility or donation driven approach.


Issues with differential pricing:

Differential tariff offerings have positive and negative impacts: It may appear to make overall internet access more affordable by reducing costs of content and enabling people to access a part of the internet. It could have the benefit of accelerating internet access as first time users, who could experience its benefits and start paying for full access.

– However, differential pricing results in classification of subscribers based on the content they want to access. Here, non-participating content will be charged higher than participating content, which goes against the principle of non-discriminatory. It also disadvantages smaller content providers who cannot participate in such schemes, thus creating entry barriers and non-level playing field, ultimately stifling innovation.

– TSPs could also start promoting their own websites and apps and services platform by providing access at lower rates.


Disclosures: MediaNama has taken a strong position in favor of Net Neutrality and against price discrimination; Founder and editor of Medianama Nikhil Pahwa is a volunteer with the SaveTheInternet coalition. 

Image Credit: Paul L Dineen under CC BY 2.0

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.



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