Mobile tariff fixing : Will TRAI stop cartelization among Indian telecom operators?

By Telecom
Lead Team:
The Telecom Regulatory Authority of India (TRAI) has sought the
industry response to finalize formalities to review on regulating mobile tariffs offered by mobile
service providers.


The TRAI consultation paper will have wider market implications as the Supreme Court has recently cancelled 122 telecom licenses mainly owned new licensees. They were the
backbone for maintaining the mobile call rates at lower levels, though this
affected the revenue and profitability of all operators in India.


In a consultation
paper on review of policy of forbearance in telecom tariff, TRAI admitted
that there was an increase in telecom tariffs recently and the increase in tariff by six service providers has been more or less
uniform and almost simultaneous for all the tariff elements, across the service
providers. The level of tariff increase affected by the telecom access
providers as well as the timing of such hike points towards the possible
prevalence of coordinated price activity behind the increase in tariffs, TRAI said.


to TRAI chairman JS Sarma, during the months of July and August, 2011, some of
the telecom access service providers hiked prepaid tariff in many service
areas. The nature of revision revealed that increase in tariff has taken place
from 1 Paise per second to 1.2 Paise per second and from 50 Paise/minute to
60Paise per minute for mobile to mobile calls.


from 1.2 Paise per second to 1.5 Paise per second and from 60 paise per minute
to 90 Paise per minute for mobile to fixed line calls. Further, tariff validity
for concessional tariff rates, 
which was
generally 12 months, has been reduced to 6 months.


In the
months of December, 2011 and January, 2012 too, a few service providers have
implemented a similar hike in respect of tariff plans offered to post-paid
subscribers as well. Further, there have been continuous media reports
including reports from various market analysts as well as indications from the
industry about a further hike in mobile tariff.


TRAI said
that after entry of new operators, in the year 2008, the market witnessed
competition in the form of reduced tariff, including introduction of innovative
tariff plans such as per second billing, both from new entrants and old
operators; from the former with a view to attract customers including from the
incumbent operators and from the latter to retain their customer base. This
phenomenon continued for few years.


despite existence of the new entrants, by the end of December 2011, it is seen
that the subscriber base of new operators remains less than 7.5 percent and the
top six incumbent operators enjoy the market share of more than 80 percent in
terms of subscriber base. This indicates absence of effective competition
despite presence of multiple operators in each service area.


telecom regulator should be able to promote competition and ensure healthy
balance sheet for all operators. At present, the industry is reeling under
pressure despite tariff fixing  by select players.


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