AGR: NITI Aayog does a flip-flop on minimum floor price for telcos

Less than a week after NITI Aayog sent its comments to the Telecom Regulatory Authority of India (TRAI) opposing any kind of floor price for data or voice tariffs, the government think-tank, in another letter, vociferously backed putting in place a minimum floor price.

In a letter dated February 28, 2020, Archana G Gulati, joint secretary, NITI Aayog, said that the consultation paper itself highlighted the market interventions in the form of price controls like the proposed minimum floor price are likely to disincentivise competition, cost efficiency, price, and quality parameters, and deter new entrants and innovation.

“In fact, the greatest disruption in recent years was the entry of a new player with better technology who made significant inroads into the market thanks to very low tariffs. This brought intense competition and growth to the market,” the letter said.

Setting the floor price now could prevent the entry of a similar new entrant riding on disruptive technology and deprive customers of benefits of competition. The only reason minimum floor price was being considered was to address the prevailing financial stress in the sector, Gulati said.

Diametrically opposite were the views of Amitabh Kant, CEO, NITI Aayog, who “emphasised” that floor prices are the “need of the hour” to enable continuation of a multiplicity of firms that is critical for healthy competition.

In a separate letter to TRAI, Kant said, “Given the heavy debt burden being faced by the sector and the recent fall in prices to unsustainable levels, there is no option available but to set floor prices.””

Kant claimed that fixing a floor price is in “national interest” and would ensure that the sector is provided with much needed relief measures which would ultimately benefit consumers and the economy.

However, towards the end, he said that the floor pricing is not a long-term solution.

Telecom service providers — Bharti Airtel, Vodafone Idea and Reliance Jio –- in tandem have sought a minimum floor price for mobile data services and asked that voice call tariffs be left to market forces.

They said that data prices should be regulated keeping in mind the financial health of the sector.

“We recommend that the floor price be set for mobile data services. It is critical that the floor price should be made applicable to all categories of tariff plans (i.e. retail consumer, corporate, tendered or other contracts, segmented and any other including one on one),” Airtel said.

Reliance Jio said that tariffs must not be hiked abruptly as it may dampen usage considerably. For now it can be raised to Rs 15 per GB and gradually to Rs 20 per GB after 6-9 months based on data consumption. Trai may review its tariff order after 3 years, Jio said.

While Vodafone Idea and Reliance Jio advocated restriction on telecom service providers offering free off-net calls as long as interconnection usage charges are applicable, Bharti Airtel opposed it.

TRAI had sought recommendations from the stakeholders, on December 17, 2019, on tariff issues of the telecom sector including setting up of a minimum floor price for voice and date tariffs.