In a major blow to mobile operators, the Telecom Regulatory Authority of India (Trai) on Monday barred operators from offering differential data tariffs through select tie-ups with content providers, which it labelled as “discriminatory”.
In a major blow to mobile operators, the Telecom Regulatory Authority of India (Trai) on Monday barred operators from offering differential data tariffs through select tie-ups with content providers, which it labelled as “discriminatory”. The regulation, which comes into immediate effect, has an impact that goes beyond barring services like Facebook’s Free Basics and Bharti Airtel’s yet to be operationalised Airtel Zero. It basically bars mobile operators to offer any data services for which tariff varies on the basis of either website, application, platform or type of content being accessed. The regulation also bars operators from entering into arrangements by which instead of providing differential tariff, content providers do the same through a refund to the consumer. However, it has left a big door ajar for possible misuse and, thus, litigation, allowing such tariff on closed communication networks called intranet.
Airtel, which has launched a music streaming app called Wynk, offers the basic version with a subscription fee of R99 per month for Android phone users, and R120 per month for Apple users. However, Bharti users get this subscription waived if they use the company’s 3G or 4G services. Also, the premium version of the app that comes with a subscription fee of R129 a month and offers about 500 songs’ download, is available only for Bharti Airtel users wherein the company has waived data charges. While subscribers of other operators can download this app, they will have to pay for the download charges. Such schemes will have to be closed once their existing validity comes to an end, which shall not be later than six months at the most.
However, what can become a source of a fight within the industry and, therefore, a source of litigation is the exception Trai has provided to this regulation. It has said that such differential tariff can be provided by the operators over closed communications networks such as intranet. For instance, if Bharti’s Wynk app was not available on the internet as it currently is and tomorrow is restricted to only Bharti subscribers through a closed communication network, the company can offer the service free of data charge to its subscribers. Similar will be the case with Reliance Jio’s Jio Chat.
Operators will also be outside the ambit of the regulation if, instead of the current business model where they tie up with content providers to enable their subscribers to download free movies/songs via the net or buy movie/song rights, they offer them free to their subscribers through some form of closed communication network.
Analysts said that this is a grey area and would lead to industry scraps and litigation if any large operator develops a model on the lines of an intranet network. Trai seems to be aware of such a misuse and has hence said, “If such a closed network is used for the purpose of evading these regulations, the prohibition will nonetheless apply.”
Providing its justification for barring differential tariffs, Trai said that any one operator offering data services does not control the internet infrastructure in its entirety but is dependent on several other networks to facilitate the task. Therefore, allowing such practices would mean compromising with the entire architecture. On the other point that differential tariffs enable in bringing the unconnected to the net, the regulator has said that while that’s true, it can be risky in the medium to long term as the knowledge and outlook of such users would be shaped only by the information made available through those select offerings.
The regulator ruled out a case-by-case approach in allowing differential tariffs by stating that it increases regulatory uncertainty and cost and would be loaded in favour of the ones who have deep pockets.
Reaction to the regulations was as divided as the consultation on the subject with telcos being extremely critical of the move, saying it has killed marketing innovation in tariff fixation, while netizen activists have hailed the move.
“The telecom industry is disappointed with Trai’s decision to rule out differential pricing. COAI had approached the regulator with the reasons to allow price differentiation as the move would have taken us closer to connecting the 1billion unconnected citizens of India. By opting to turn away from this opportunity, Trai has ignored all the benefits of price differentiation that we had submitted as a part of the industry’s response to its consulting paper, including improving economic efficiency, increase in broadband penetration, reduction in customer costs and provision of essential services, among other things,” Rajan Mathews, director general of the Cellular Operators Association of India, said.
Expressing its disappointment, a Facebook India spokesperson said, “Our goal with Free Basics is to bring more people online with an open, non-exclusive and free platform. While disappointed with the outcome, we will continue our efforts to eliminate barriers and give the unconnected an easier path to the internet and the opportunities it brings.”
Quite in contrast, the Internet and Mobile Association of India (IAMAI) welcomed the regulation “as a bold and fair move”. However, it cautioned regarding its misuse by operators in the garb of intranet.
What goes out
Facebook’s Free Basics
Anything available on internet cannot have differential pricing
So no exclusive tie-ups for movie, song downloads with content providers
Differential tariff can be offered on intranet
So if an operator buys movies and gives it free to its customers, it is fine
Operators can offer free data to consumers with no strings attached
Can be offered during emergencies