TDSAT orders TRAI to clarify pricing rules

6 Feb 2018

India’s Telecom Dispute Settlement and Appellate Tribunal (TDSAT) has issued a judgement directing the telecom watchdog to clarify and update regulations regarding tariff setting to ensure that pricing is sustainable and fair. TDSAT’s judgement bundled several appeals from Bharti Airtel and Idea Cellular against the Telecom Regulatory Authority of India (TRAI) regarding the agency’s handling of the launch of Reliance Jio Infocomm (Jio), in particular its controversial ‘Welcome Offer’ and ‘Happy New Year Offer’, which provided customers with unlimited free services. TDSAT supported the TRAI’s decisions – although Jio was found to have failed to comply with certain reporting requirements – but acknowledged that the current ‘open-ended’ provisions regarding tariff setting are potentially problematic. To amend the issues, the TDSAT has ordered a temporary halt to ‘all services free’ plans without prior approval from the TRAI. In addition, the TRAI was ordered to establish clear guidelines for performing a self-check regarding compliance with interconnection usage cost (IUC) rules – i.e. that the proposed tariff does not create a substantial expenses gap during the planned period – alongside the development of clearer regulations regarding predatory pricing.

At present, tariff setting is ‘under forbearance’ and requires operators to self-check for consistency with the regulatory principle of compliance with IUC rules. The tribunal noted that whilst Jio’s offers were extreme cases of ‘below-cost’ tariffs, the comparatively short duration of the promotions meant that they were still consistent with the principle of IUC compliance. However, TDSAT added that it wished to ‘red flag’ the issue, pointing out that the current provisions make verification with IUC compliance ‘difficult, if not impossible.’

Regarding predatory pricing TDSAT noted that the existing rules are ambiguous, relying on the operator to hold a dominant position for a plan to be classified as predatory. Jio’s VoLTE-based voice services muddied the water somewhat in relation to significant market power (SMP) designations, however, and at the time of making its decisions the TRAI did not have the necessary data to determine whether Jio had SMP. Regardless of the SMP complication, however, TDSAT’s judgement pointed out that the TRAI has not set a benchmark or guideline to determine when a below-cost tariff would become predatory and thus require action. Consequently, the TRAI was directed to issue a suitable direction or regulation regarding guidelines for ascertaining consistency with principles of non-predation.