TRAI’s new Tariff Order – a near fatal body blow to the industry: COAI


The Cellular Operators Association of India (COAI) has expressed its deep disappointment and alarming concern regarding TRAI’s tariff order amendment.

For some reason these orders seem to be strengthening the ambitions of one particular operator with deep pockets and monopolistic designs at the expense of other operators.

Over the past 12-18 months, regulation after regulation put out by TRAI has ended up in distorting the competitive landscape in favour of one operator, while putting all other operators at a serious disadvantage. This has destroyed the financials of an industry which was the poster child of India’s reform, with tens of thousands of jobs and tens of billions of dollars of investment at stake.

Rajan Mathews, Director General, COAI, said, “All our member operators, with the exception of one, feel deeply victimized and let down. We request the Government to intervene and look into these concerns on an urgent basis and ensure a financially healthy and vibrant telecom industry that is able to support Digital India and serve customers. An environment of regulation and policy that is not based on an equal footing will further aggravate the deep financial stress and kill future investments, innovation in an industry that has put India on the global map.”

The industry, which was already reeling from regressive regulations such as a cut in Mobile Termination Charge and International Termination Charge, has now been dealt a near fatal body blow with the recent amendment to Telecom Tariff Order (TTO).

The TTO has left the industry completely perplexed. The operators are at pains to understand the rush on the part of TRAI to issue the TTO amendment without following due process in compliance with TDSAT’s  recent judgment.

The amended TTO has modified the definition of Significant Market Power (SMP) to exclude relevant parameters like traffic volume and switching capacity for determining SMP. These parameters were a part of TRAI’s own criteria in the past. As a result, victims have now been made the perpetrators. In a cruel twist of fate, one operator who by its own admission is the world’s largest data network may be free to offer any sort of predatory tariffs while older operators are now subject to regulation and cannot compete without falling foul of a new definition of what constitutes predatory pricing.

Moreover, in the garb of transparency and non-discrimination, the TTO has to great extent taken away flexibility from the operators to offer benefits to customers. TRAI has effectively snatched the operators’ right to compete in the market. In effect, older operators will now be challenged on the basis of revised definition of SMP so as to be prevented from responding to what may be actual “predatory tariff plans”. Even more strangely, they will find it practically difficult to offer any discounts/provide benefits to retain their customers if a competitor choses to poach them, effectively taking away their ability to compete and conduct business. As a result, we believe the fundamental right to carry out any occupation, trade or business as enshrined in Article 14 and 19(1) (g) of the constitution may have been violated.

Ironically, in the past the TRAI has itself agreed to the concept of flexibility to service providers to provide customized services to consumer segments. Following the 2008 consultation the TRAI had said:

“The Authority is in agreement with the majority view of the stakeholders that mandating “one plan for all” would be against the interest of different classes of subscribers. Such mandate would also adversely affect the flexibility available to Service Providers to provide customised services for meeting differing requirements of various consumer segments.”

Even during the latest consultation with TRAI all private operators bar one, had supported discounted/customized offerings (in different forms) to customers. Very strangely, the TRAI has chosen to ignore the opinion of the entire industry to go with the suggestion of this one operator. In fact, it appears the TRAI has copy pasted the demands of this one operator across a range of definitions in the new TTO (Refer to Annexure 1).

Rajan Mathews added, “Something that is a standard marketing practice across multiple industries – airlines, insurance, banking etc. – and has been was working well since the inception of tariff forbearance, has been done away with. While competition is an absolute necessity in any industry and in the interest of customers, it must also be fair. TRAI is legally bound to ensure orderly growth of telecom sector and also ensure level playing field for all participants. COAI welcomes any number of new operators but at the same time existing operators must also be given an equal opportunity to compete and safeguard their investments.”

The industry is dismayed with a succession of regulatory decisions and recommendations made in recent months that clearly appear to be to advantage of one operator at the cost of other players. While reducing the mobile termination charge the regulator ignored the adverse impact on the same on rural coverage and on investments made in those areas. This alone lost incumbent operators over 15000 crore rupees per annum and benefited a new operator by nearly 10,000 crore rupees.

The International termination charge recently reduced from 53 paise per minute to 30 paise per minute is a complete U-turn from the earlier decisions for increasing the same. This impacts Indian consumers and lower forex revenues to the Government to the tune of 2000 crore rupees and has again been supported only by one operator.

The industry is therefore forced to raise these concerns at appropriate forums and demand its right to fair competition.