TRAI opens consultation on minimum price levels

TRAI opens consultation on minimum price levels

Indian regulator TRAI has opened a public consultation regarding a potential price floor for mobile voice and data tariffs.

The consultation follows the decision by three major Indian operators increasing their tariffs in response to a Supreme Court ruling that broadened the definition of adjusted gross revenue. Since the entry of Reliance Jio to the market in 2016, operators have been locked in a race to the bottom in terms of pricing.

The regulator has issued a consultation paper on the subject, having been requested to set a minimum price for tariffs by the Cellular Operators Association of India (COAI) in December last year. If TRAI follows this recommendation, it would mark the first instance of India’s government setting a minimum price for any industry.

Noting that operators have “freedom and flexibility to design their tariff offerings”, TRAI stated that price controls are discouraged by economists in case they cause “economic inefficiencies, consumer harm, market distortions and reduced innovation”.

However, the regulator also acknowledged the importance of the “orderly growth” and health of the telecoms sector due to its role as “the infrastructure provider for many other sectors of the economy.”

Nonetheless, calls from operators for price levels that could be considered more sustainable may be resisted by the government, which has strong ambitions for the digitalisation of India and therefore will not want consumers to be deterred by higher tariffs.

The Supreme Court’s decision to update the definition of adjusted gross revenue has saddled India’s already-strained operators with colossal fees for licences and spectrum usage totalling INR933 billion ($13.1 billion). Vodafone Idea chairman Kumar Mangalam Birla slammed the move, saying that the operator would be forced to shut down unless it received government relief.

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