Floor price for voice, data not ‘workable’, says TRAI:

Floor price for voice, data not ‘workable’, says TRAI: (The Hindu)

TRAI rejects telcos proposal on flour price for voice

Background:

  • Recently, some telecom services providers, in a meeting with TRAI, had sought imposition of a floor price for both voice and data services.
  • The telecom operators had argued that telcos offering below cost tariffs to consumers over a period of time might harm the industry and its financials.

Introduction:

  • The Telecom Regulatory Authority of India (TRAI) on Friday said that during a meeting the telecom industry had reached a consensus that fixing of floor price for voice and data services was not a “workable idea” at the moment, because they believe that there are enough competition in the telecom service market.
  • The telecom operators and the TRAI reached to a consensus that current regime of tariff forbearance would continue and operators are allowed to fix their own tariffs.

Principle of forbearance:

  • Forbearance has been a watchword with the telecom regulator since September 2002 when Trai first decided to allow market forces to determine the rates that cellular mobile telephony operators could charge their customers.
  • The consultation paper of 2012 clearly spelt out what “regulatory forbearance” meant. “Forbearance needs to be distinguished from deregulation,” the paper said, a concept that encapsulated the idea of discretionary restraint on the part of the regulator.
  • Under the forbearance policy, telecom players have the flexibility to fix tariffs for all the services they offer, except in the case of national roaming, fixed rural telephony and leased lines
  • There are a couple of conditions attached to the exercise of this right: the telecom player must carry out a self-check to ensure that the tariff plan does not fall foul of a triad of regulatory principles that include the interconnection usage charge (IUC) regime, non-discrimination and non-predation. The tariff plans must report the details of each plan within seven days of its implementation.

Why Principle of Forbearance was in news:

  • In 2012, the Telecom Regulatory Authority of India (TRAI) said that it will review forbearance in telephone tariffs in a bid to check recent increase in prices by operators. TRAI observed that tariff for data service were very high and in almost all the cases, the default tariff for data services post-free usage as high as Rs. 10,485 per GB.
  • Recently, the issue has come to a limelight because of free voice and dirt cheap data prices being offered by a new player Reliance Jio since the launch in September last year.
  • Existing operators have been forced to match the tariffs being unleased by Reliance Jio and it has impacted their margins and overall profitability since last two quarters.
  • Reliance Jio has termed the proposal of fixing floor price as a regressive and anti-competitive step.
  • Last month, some operators had argued that telcos offering below cost tariffs to consumers over a period of time might harm the industry and its financials and sought intervention of TRAI to review the forbearance principle.

TRAI consensus with Telecom Operators:

  • The representatives of all telecom operators and TRAI have decided that they do not need to forgo the principal of forbearance which has been accepted and working for the last 14 years.
  • This means that the telecom operators will come up with the new voice and data offer and the completion among the telecom operators to increase the number of subscribers
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