No need to restrict promotional offers by telecom firms, says Trai
Trai’s new rules include a penalty clause in case an operator’s tariffs are found to be predatory
Ending the controversy sparked by Reliance Jio’s free offers, the Telecom Regulatory Authority of India (Trai) on Friday said there was no need to place restrictions on the number of promotional offers from telecom firms as long as they were transparent, non-predatory and non-discriminatory.
“The authority is of the view that no restrictions need to be imposed on the number of promotional offers that can be simultaneously launched and time lag between same or similar promotional offers in a licensed service area. Restrictions may not be in the interest of consumers apart from possibly hindering competition,” Trai said in the Telecommunication Tariff (sixty-third amendment) Order, 2018, made public on Friday.
“There is no further need to alter the current minimal definition of the promotional offer,” Trai said, adding that there is also no need to further restrict the time period of promotional offers from the current 90 days.
Trai’s new rules also include a penalty clause in case an operator’s tariffs are found to be predatory. The regulator may examine the tariffs of a significant market player, which is an operator holding a share of at least 30% of total activity in a relevant market, to determine the existence of predatory pricing. If the relevant tariff is found predatory, an operator will be liable to pay a penalty of up to Rs50 lakh per tariff plan per licensed service area, Trai said. There are 23 licensed service areas or telecom circles in the country.
Controversy erupted when Reliance Jio, which entered the telecom space in September 2016, announced a “welcome offer” with free voice and data for three months starting 5 September 2016. On 1 December 2016, Jio announced the extension of these free services until 31 March 2017 under its “happy new year” offer.
Idea Cellular and Bharti Airtel had moved TDSAT against Trai and Reliance Jio on the extension of free services by the latter, more than a year ago. In a 31-page order on 1 February, TDSAT ruled that Reliance Jio’s “welcome” and “happy new year” offers were non-discriminatory and non-predatory.
Last year, Trai also ruled that Reliance Jio’s plans were not violative of current norms for which it faced a backlash from rival operators. It then issued a consultation paper on Regulatory Principles of Tariff Assessment in February 2017 through which it sought views on the matter.
Trai also said “intent is a vital factor in determining whether the significant market player is indulging in the predatory pricing” and Trai will examine whether there is evidence of a specific intent to engage in predatory pricing.
Moreover, the interconnect usage charge cannot be taken as floor for the retail tariff and, hence, Trai has decided to remove the requirement of “IUC compliance” from the tariff reporting requirement. IUC is what an operator pays another for landing calls on the latter’s network.
Emails sent to Airtel, Idea Cellular, Vodafone India and Reliance Jio seeking comment were unanswered till press time.
“The issue pertaining to tariff assessment and the respective regulatory framework is an individual operator issue, based on their own business models. COAI did not participate in the consultation process and no submission was made to Trai. While COAI doesn’t comment on tariffs and individual operator issues, it will review the order and determine if our members wish to respond through COAI,” said Rajan S. Mathews, director general, COAI.
“With no restriction on promotional offers, Trai has not put in place any measure to protect incumbents. Tariff war is not going to end in near term and these rules give Jio more power to offer aggressive plans. Also, determining predatory pricing on average variable cost basis will be contentious as calculating cost incurred by an operator is difficult given their size of operations,” a sector analyst said on condition of anonymity.
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