The Telecom Regulatory Authority of India (TRAI) has amended the regulatory principles for assessing how telecom service providers (TSPs) set tariffs for the services they provide, in order to ensure that transparency is maintained, as well as to prevent discrimination and predatory pricing in telecommunication services.
These amendments specifically address reporting requirements, guiding principles for checking transparency in tariff offers, definition of non-discrimination, adherence to the principle of non-predatory pricing, definition of predatory pricing, relevant market, and assessment of significant market power (SMP) among others.
Timeline of events leading to these amendments:
- TRAI had released a consultation paper titled ‘Regulatory Principles of Tariff Assessment’, in February last year.
- Following which, an open-house discussion was held in New Delhi in May 2017.
- In June 2017, TRAI met with the CEOs of telecom service providers to decide on “setting some form of floor price for retail tariff.”
- And again in July 2017 to further discuss the same issue, during which “the majority view was that as of now, TRAI should not undertake fixation of floor price, and the IUC should not be taken as a floor for retail tariff.”
Lowdown of the amendments
To begin with, TRAI says that ‘Distinct Telecommunication Services’ include:
- Wireline Access Service
- Wireless Access Service
- National Long Distance Service
- International Long Distance Service
- Any other telecommunication service for which licence is granted
Non-predation & Predatory pricing
One of the key elements of this latest amendment is non-predation. TRAI defines non-predation as “not indulging in predatory pricing by a service provider having significant market power.” In regards to predatory pricing, TRAI says that if a telecommunication service is provided at a price below the average variable cost in a relevant market, and if this is done in order to either reduce competition or eliminate competitors in that market, then it will considered as predatory pricing.
But how will TRAI determine that a particular service provider’s tariff plan is lower than the average variable cost, specifically to hurt competition? Or will TRAI just look at the tariff plan pricing, and if its lower than the market average, it will assume the objective is to hurt competition and monopolise the market?
What is ‘relevant market’?
Relevant market has two parts to it – relevant product market & relevant geographical market.
Relevant product market is essentially the market for which a TSP has received a license to provide a particular telecommunication service (wireline service or wireless service or any other). Whereas, relevant geographical market denotes an entire License Service Area (LSA) for which various TSPs have been granted licenses to provide telecommunication services.
What is Significant Market Power?
If a TSP holds at least 30% share of the total activity in a relevant market, then it will be considered a Significant Market Power (SMP). In this case, total activity will be determined based on either subscriber base or gross revenue. So, if a TSP holds at least 30% share of the subscriber base or earns at least 30% of the gross revenue in a relevant market, then it will be considered a SMP.
From now on, TRAI will also have the authority to examine the tariff plans of service providers identified as SMPs, to check for predatory pricing. And in case instances of predatory pricing is discovered, TRAI will disallow such tariff plans for continuing, “after providing detailed reasons.” That’s not all, if a service provider is found to have tariff plans with predatory pricing it will have to pay a fine of not more than Rs 50 lakh per tariff plan for each service area.
The service provider will be “given a reasonable opportunity of representing against the contravention of the tariff order.”
Telecom service providers (TSPs) are now obliged to report to TRAI “any new tariff for telecommunication services under this Order or any change therein, within seven working days from the date of its implementation for information and record.” TSPs also have to conduct a “self-check to ensure that the tariff, including promotional tariff, is consistent with the regulatory principles which, include transparency, non-discrimination and non-predation.”
If the TSP fails to comply, then it will have to pay Rs 5,000 for every day of delay up to a maximum of Rs 2 lakh.
It’s worth noting that when the Telecommunication Tariff Order was first passed in March 1999, ‘Reporting Requirement’ mandated TSPs to report any tariff change at least 5 working days before actually implementing it.
Telecom service providers will have to disclose all relevant information related to a tariff plan, so that consumers can make an informed choice. TRAI also mentions that the disclosed information must be “accessible, accurate, comparable, complete, distinct and identifiable, explicit and non-misleading, simple and unambiguous.”
- No service provider shall, in any manner, discriminate between subscribers of the same class and such classification of the subscribers shall not be arbitrary:
- Provided that every classification between subscribers shall be based on intelligible eligibility criteria where such
criteria shall have a rational nexus to the purpose of the said classification.
- Provided further that tariff in the nature of vertical price squeeze shall be a case of discriminatory tariff.
Earlier, in May last year, TRAI had issued a directive banning all licensed telecom operator in India from offering differential (or discriminatory) tariffs to a set or class of subscribers.
Read the order here.
For a list of all previous amendments to the Telecommunication Tariff Order, 1999, check here.