Data services: Telecom companies, OTTs quarrel over floor price

By: |
March 23, 2020 7:12 AM

The Trai, which has received responses to its consultation paper needs to hold open houses, at least, at four different centres in the country, which cannot be done now because of the pandemic.

For instance, associations including IAMAI, Internet Society, CCAOI, Asia Internet Coalition (AIC) etc, which primarily cater to internet companies, are opposing the idea of setting a floor priceFor instance, associations including IAMAI, Internet Society, CCAOI, Asia Internet Coalition (AIC) etc, which primarily cater to internet companies, are opposing the idea of setting a floor price

Telecom operators may be united in their demand for a floor price for mobile tariffs (data & voice), but various start-ups, associations of internet firms as also consumer groups are opposed to the idea.

This is understandable because the telecom operators who are currently providing below-costs services — per GB data rates are as low as Rs 4-5 — want to improve their realisations. However, start-ups or internet firms, etc are basically OTTs who have seen an explosion in their usage and hence revenues is because of low data rates. If the same goes up substantially now — say Rs 35 per GB — their entire business model and consumer usage could be adversely affected.

For instance, associations including IAMAI, Internet Society, CCAOI, Asia Internet Coalition (AIC) etc, which primarily cater to internet companies, are opposing the idea of setting a floor price. The reason given by most of these bodies is that any kind of policy intervention will make services offered by telecom operators unaffordable for low-income and rural groups. “Having a floor price will distort competition in the market by rewarding inefficient players and minimizing incentive amongst the operators to innovate. Consumers too will be deprived of newer and economical services,” AIC managing director Jeff Paine said.

AIC’s members include Apple, Facebook, Google, Amazon, Linkedin, Airbnb, Yahoo etc. Similarly, IAMAI, which boasts of all the big internet firms, said that any kind of policy affecting tariff rates has the potential of significant consequences on usage and onboarding of new subscribers to internet services.

Anyway, the entire exercise of concluding the floor price exercise by the Trai is now expected to be delayed with the outbreak of Coronavirus.

The Trai, which has received responses to its consultation paper needs to hold open houses, at least, at four different centres in the country, which cannot be done now because of the pandemic.

Internet Society, which has 67,287 members globally including Comcast, Oracle, Juniper, Nokia, Microsoft, Google, Facebook etc, said that tariff control is a poor method to enforce fair competition in the mobile market. “Such changes reward inefficient players and risk delivering windfall profits by boosting margins of players who have lower costs. They also do not have any proven positive impact on consumer welfare,” Amrita Choudhury, president of Internet Society India Delhi Chapter said.

The Trai’s consultation process on fixing floor price of mobile tariffs came as a result of the demand by mobile operators. All the operators like Reliance Jio, Vodafone Idea, Bharti Airtel, BSNL and MTNL have supported the move. But consumer organizations are opposing setting up a floor price for mobile tariffs. For instance, Consumer Guild, which is an advocacy group, said that the policy of forbearance is the right way and no floor fixation is required. “Telecom operators are increasing their tariff, no need to fix the floor price right now. Telecom operators should focus on network coverage and data speed,” Consumer Guild said.

Consumer Protection Association said there is no requirement for policy intervention and prices under forbearance should continue. The association termed the floor price as anti-competitive. “The idea of price floors is retrograde and lowers price flexibility in the market place. Price floors will hurt consumers,” it said in its submission. Similarly, Citizen consumer and civic action group said that fixing of floor price cannot be the solution to the issues faced by telecom operators. “Fair play in the market place is the basis for a healthy competition and it is important for the telecom operators to recognize this and act accordingly,” the consumer group said.

Apart from the associations, start-ups involved in new age technologies like internet of things and machine to machine communications, feel the floor price should not be enforced. Kloudq Technologies said any steps taken by Trai in setting a floor price for data plans will have an adverse impact on their business and on the IoT and M2M industry as a whole. “In the present situation any increase in the data prices will significantly affect viability of the IoT/M2M business in India,” the start-up said.

Tata Communications also opined against setting up a floor price.

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