The Telecom Regulatory Authority of India may look into the possibility of introducing a minimum floor price for voice and data services to restrict massive discounts. This came up at a meeting between TRAI and the CEOs of mobile companies.
“The proposal to have a floor price came from one of the incumbent operators as a means to arrest the declining revenues for the industry,” said an industry source.
Other countries, including Sri Lanka, have had floor price for mobile services and it has benefited the industry in terms of higher revenue realisation. Recently, the regulator in Zimbabwe has also introduced a floor price after operators there started offering below cost tariffs, thus hurting the overall industry economics.
According to the Zimbabwe regulator, “the floor prices shall go a long way in addressing the apparent under-pricing of voice and data services that was characteristic of data bundles and promotions that were being offered by operators. This means the mismatch between the rate of growth in data traffic and data revenues can be addressed to ensure the viability of operators.”
However, not all support imposing a floor price in the Indian context. “A floor price would mean that consumers won’t get the best deal any longer. It also restricts the ability of a new operator like Reliance Jio to wean away subscribers through freebies,” said an industry expert.
“The incumbent operators are now talking about a floor price after they have been hit by RJio. Until now they were the biggest votaries of forbearance, which means letting market forces decide the tariff, not regulation,” said a source close to the RJio camp.
Different cost structure
Other experts said that implementing the floor price could be complex in India because the cost structure is different for various operators. “How do you fix the floor price when on 4G network the cost of offering a voice call is substantially lower compared to a 2G network. Whose cost will you take to calculate the floor price?” asked an industry analyst.
The operators also raised several other issues during the meeting with TRAI. “The common theme was that telcos want lower levies — lower licence fee, lower spectrum charge and more time to pay the spectrum price. They also wanted faster approval of M&A deals,” said a industry source.
The operators raised questions on auction design stating that it is flawed as it creates “ a Do or Die situation” for operators whose spectrum comes for renewal. They also sought level playing field with over-the-top players like WhatsApp. Newer players wanted a reduction in the Interconnect Usage Charge, or the fee paid by one operator to another. They said the IUC is a subsidy to the existing operator and TRAI should move to bill and keep regime. – The Hindu Business Line