TRAI Floats Consultation Paper On Tariff Regulation For Voice Calls, Mobile Data Usage

The Indian telecom regulator has floated a consultation paper for reviewing existing tariff policy which may see the mobile service and data usage service on the mobile, to be brought under regulation. Such a move could stump telecom operators' ongoing efforts to raise tariffs while providing cheaper data usage for consumers that may boost mobile Internet business.

The Telecom Regulatory Authority of India (TRAI) has asked stakeholders to send their comments by February 24 and counter comments by March 2, on the need for a change in present regulatory framework for telecom tariff fixation. The consultation paper seeks to gather views on what should be the basis for tariff regulation, if at all; would such a regulation affect the ability of the telecom service providers to introduce innovative tariff plans and whether the current tariff for data services is competitive and reasonable enough.

It also wants to know the factors that impact competition in data services in the market; the possible measures to enhance competition for availability of data services at affordable tariff and whether TRAI should regulate tariff for data services by way of fixing ceiling tariff to protect the interest of the consumers.

Mobile Tariff:

The telecom regulator has noted that between March 1999 and September 2011, the average out going voice tariff has been falling but the rate of decline appears to be leveling off. The entry of new operators in 2008 led to more competition in the form of reduced tariff, including introduction of innovative tariff plans such as per second billing, both from new entrants and old operators.

However, despite existence of the new entrants, by the end of December 2011, it is seen that the subscriber base of new operators remains less than 7.5 per cent and the top six incumbent operators enjoy the market share of more than 80 per cent in terms of subscriber base. "This indicates absence of effective competition despite presence of multiple operators in each service area," TRAI noted.

From July and August 2011, some of the telecom service providers uniformly hiked prepaid tariff in many service areas. The nature of revision revealed that increase in tariff has taken place from 1 paise per second to 1.2 paise per second and from 50 paise/minute to 60 paise per minute for mobile to mobile calls.

Similarly, from 1.2 paise per second to 1.5 paise per second and from 60 paise per minute to 90 paise per minute for mobile to fixed line calls. Further, tariff validity for concessional tariff rates, which was generally 12 months, has been reduced to 6 months.

"On examination of tariff revision, it was observed that the increase in tariff by six service providers has been more or less uniform and almost simultaneous for all the tariff elements, across the service providers. The level of tariff increase affected by the telecom access providers as well as the timing of such hike points towards the possible prevalence of coordinated price activity behind the increase in tariffs," according to TRAI.

It added that in the past two months, a few service providers have implemented a similar hike in respect of tariff plans offered to post-paid subscribers as well. It also pointed out that media reports suggest further hike in mobile tariff is expected soon.

The regulator noted the arguments of the telecom firms to justify the increase in tariffs: increase in operating costs due to inflationary trends and rising rate of interests, increase in network operating costs due to higher costs of power and fuel, decline in revenue and return on capital employed (ROCE) and higher cost of customer acquisition, etc.; constraints in spectrum availability and higher spectrum usage charge and microwave charges levied by the government; roll out obligations for 3G services and increase in cost of regulatory/security compliance, etc.

Data Usage Tariff:

With introduction of low cost handsets having capabilities of enabling the telecom subscribers to use data services, there is an increasing trend in usage of data services. This has boosted proliferation of mobile applications in terms of m-education, m-health, m-commerce, m-banking, m-governance, etc. In such a scenario, data services will no longer be perceived as a service meant for high-end subscribers, rather it will be viewed as a basic service.

TRAI has pointed out: "Notwithstanding certain variations across all the service providers, it is observed that tariff for data service is very high."

It has added that in almost all the cases, the default tariff for data services post free usage is as high as Rs 10,485 per GB, on the basis of pulse rate of 10kb per 10p. There are, however, two service providers providing data services at comparatively lower rates( @ Rs 256/GB and @ Rs 1,048/GB respectively).

"Such a high variation in tariff for data services cannot be justified on the basis of underlying cost for provision of these services," according to TRAI.

The telecom regulator has added that in a number of cases, after the free data usage is over, the default rates for data services are extremely high vis-à-vis the per GB rate for such services up to a pre-specified usage of data services. "Since a consumer does not know when exactly he has crossed the usage limit, this can lead to billing shocks to the subscribers in case they breach the usage limit provided under the tariff plan/package adopted by them," said TRAI in the consultation paper.