Trai’s new order on the validity of RJIo’s Happy new year offer lacks merit

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New Delhi | Published: February 7, 2017 5:19:59 AM

Telecom regulatory authority of India (Trai) has upheld the tariff offer of RJio deeming it to be non-predatory, non-discriminatory and compliant with interconnect user charges (IUC) regulation.

It has taken this stand without offering any explanation, data or any calculation of underlying cost of providing the service by RJio. (Representative Image: Reuters)It has taken this stand without offering any explanation, data or any calculation of underlying cost of providing the service by RJio. (Representative Image: Reuters)

Telecom regulatory authority of India (Trai) has upheld the tariff offer of RJio deeming it to be non-predatory, non-discriminatory and compliant with interconnect user charges (IUC) regulation. It has taken this stand without offering any explanation, data or any calculation of underlying cost of providing the service by RJio. So, the conclusion is nothing but a mere eyewash. Notwithstanding the above, let us examine how authentic are theoretical grounds on which Trai has based its decision.

Welcome offer and Happy new year offer are two distinct promotional offers

The basic premise of the authority is incorrect as the new offer is nothing but “old wine in a new bottle”. Even if we assume for a minute that both are distinct. The welcome offer was announced on September 4, 2016, and was restricted to be operative till December 3, 2016. This was communicated in a letter to the telcos who had complained against this offer. But the said offer was extended and was allowed to operate till December 31, 2016. This extension can only be valid if Trai affirms that a promotional offer can operate beyond 90 days. Trai has failed to take any action for violation for running a promotional offer beyond 90 days, even if the two are distinct.

Operators can make consecutive promotional offers

In none of its regulations or directives has Trai bothered to define the term “promotional offer”. In absence of any such clear definition, operators are free to announce any tariff plan in the guise of being promotional.

Operators have been offering free services during the initial entry period into the market to quickly acquire a large customer base. This strategy was adopted by Reliance even in 2002. Amidst this background, Trai was compelled to review the issue of pricing of telecom services as well as interconnection to impose a call termination charge to be paid to the terminating operator. This was done to avoid flooding of calls, offered by the originating operator free of cost to its customers.

Since, free services are offered in the guise of “promotional offers”, to curb this practice, Trai on June 19, 2002 also issued instructions to the TSPs stating that the validity of a promotional tariff plan should not extend beyond a reasonable period, say 90 days. TSPs were advised to restrict the validity of promotional packages and/or the benefits offered to customers under such packages.

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It can never be the intention to allow the promotional offers one after the other to the same set of customers. For instance, Rjio’s “happy new year offer” can be seen as a valid promotional offer for new customers acquired between January 1, 2017 till March 31, 2017, because it is being considered as a promotional offer for this category of customers. However, the customers who were acquired prior to this period cannot be offered the free services. If this is allowed the operator will never be under obligation to come out with a regular plan.

Moreover, Trai 31st amendment to the TTO stipulate that a tariff plan once offered by an access provider shall be available to a subscriber for a minimum period of six months. For such tariff plans, the access provider shall be free to reduce tariffs at any time provided that no tariff item in that plan shall be increased within the said period. If we examine the welcome offer in this context, for customers acquired under the plan en mass migration of those customers to Happy new year plan is violative of the regulatory principles. First, it migrates all the customers forcibly and does not give any choice to the customer to subscribe the plan of his choice. Second, it offers one promotional plan after the other which is not the intention of the regulation. Third, it does not offer any regular plan to the customer which is valid for at least six months, as this offer is valid only up to March 31, which is period of less than 6 months. Trai order overlooks all the above three violations and has clearly allowed breach of the 90-day window.

Predatory or not?

By way of 30th amendment to TTO, dated January 16, 2004, Trai stipulated to ensure that the tariff plan(s) is/are consistent with the regulatory principles in all respects which inter-alia include IUC compliance, non-discrimination & non-predation.

In the explanatory statement attached to the amendment it also clarified that the IUC regime specified by the authority reflects the underlying costs of providing the service. Also, the IUC charges, as specified, will implicitly function as a “floor” to the retail tariffs, and thereby scope for predatory pricing or cross-subsidisation will be limited. The term” floor”, under TTO, means the lower limit of a tariff for a telecommunication service as specified by the authority from time to time below which such tariffs may not be offered.

This amendment laid down the principle that underlying cost of providing the service should be considered as a criteria to ascertain whether a given tariff is predatory or not?

While examining the tariff offered by RJio as “welcome offer” Trai, in a letter dated October 20, 2016, had stated that the tariff plans and the various submissions cannot be considered as IUC non-compliant, predatory and discriminatory. This was done without taking the legal opinion from Attorney General whether the tariff is predatory or not.

It is presumed that Trai must have conducted a detailed study to calculate the underlying cost of the service provided by RJIo, including IUC, as per its own laid down criteria and then arrived at a decision whether the tariff is predatory or not. It was logical to follow the same practice in relation to the Happy new year offer as well. The regulator should have shown complete transparency in its working and shared the study at least with the aggrieved operators.

Rather than doing its job it rushed to the Attorney General, a rare exception to its previous practices, to seek opinion on the predatory nature of the new plan? Even when in this case it did not require any legal opinion as the criteria to ascertain this is given in the Trai regulation. The fact that Trai rushed to AG to seek legal definition of the term “predatory”raises doubt that there is something more than what meets the eye. If that is so, it is likely that what cannot be justified via regulation is being attempted to be justified through legal opinion.

The author is founder and CEO, Tathya Consulting. Views are personal

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