Predatory tariff: Telcos to be fined up to Rs 50 lakh a circle

The Telecom Regulatory Authority of India (Trai) on Friday issued regulations on predatory pricing, which imposes a penalty of up to `50 lakh per circle on mobile operators if they are found to indulge in such practices. While the regulator has defined predatory pricing for the first time, it won’t affect the existing players in any manner as far as their current tariffs have been designed. This is because Trai has said that a tariff will be considered predatory if in a relevant market an operator with over 30% market share offers services at a price that is below the average variable cost, with a view to reduce competition or eliminate the competitors in the relevant market. This clearly rules out any scope for a new player to be penalised if it disrupts the market by below-market tariffs because its market share will be below 30%.

In fact, this whole exercise by Trai to define predatory pricing was started after Reliance Jio entered the market with free services and incumbent operators protested calling the offer as predatory. However, the new regulations will not affect Jio’s pricing strategy because it still does not have 30% market share in any circle. Trai will determine “relevant market” based on relevant product against which it receives a complaint. It will arrive at “variable cost” after deducting fixed cost and share of fixed overheads borne by the company from total cost of incurred by it for running business during the period under review.

It also said that operators will have to provide services to all subscribers availing the same tariff plan in a non-discriminatory manner.

“No service provider shall, in any manner, discriminate between subscribers of the same class and such classification of the subscribers shall not be arbitrary,” Trai said. To ensure transparency, the regulator has imposed a fine of Rs 5,000 for every day of delay subject to a maximum of Rs 2 lakh on operators who fail to comply with the requirement of intimating Trai within seven working days of coming out with a tariff plan. Dealing with “promotional offers”, Trai has said that such offers are beneficial for consumers as they not only provide additional benefits to subscribers but also that such offers by an operator forces its rival to follow suit, thereby benefiting all subscribers. Promotional offers can vary from operator to operator and may include “free SMS, free/reduced/local STD/ISD rates, gifts, FMCG products/schemes/vouchers for other products and services etc.”

On the timeline and number of promotional offers, the regulator said that if such a plan has been offered as a regular plan then it will be counted as tariff plans under the cap of 25 plans and will have to comply with minimum 180 days of benefits to consumers, but such offers cannot remain open for subscription for more than 90 days.

Stating that there is no need to reduce the mandated 90-day period for promotional offers, the authority said, “Currently, while the offer period is restricted to 90 days, there is no restriction on the period of benefit to consumers. Regulatory principles applicable for regular tariff offers are equally applicable to promotional offers as well.”

It has also not put any restrictions on the number of promotional tariffs that an operator can launch, subject to meeting the regulatory requirements under Telecommunications Tariff Orders and Telecom Consumer Protection Regulations.