Niti Aayog & CCI Oppose Setting Up Telecom Floor Tariff

Niti Aayog & CCI Oppose Setting Up Telecom Floor Tariff

Niti Aayog & The Competition Commission of India (CCI) have opposed any move to fix floor tariff for voice and data services.

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They have said that such a shift would damper competition, deter innovation and deprive consumer benefits and the regulator must continue with forbearance policy.

The Niti Aayog in its letter to the Telecom Regulatory Authority of India (TRAI) mentioned that the proposed minimum floor price are likely to disincentivise competition on cost efficiency, price, and quality parameters, and deter new entries and innovation.

It also added that setting a floor price now could prevent a new entry riding on disruptive technology and deprive customers of benefits of competition. It said that the the increase in data tariffs in a price sensitive market would most likely to reduce subscription and consumption which would have a negative cascading effect on the economy.

TRAI in its discussion paper have asked the stakeholders if they foresee any requirement of regulatory intervention at this stage in tariff fixation to protect the interest of telecom service providers as well as the consumers.

Niti Aayog further said that with a less than 50% broadband penetration and rural Internet penetration at 27%, India has a long way to go in digital transformation underlining the ambition of $5 trillion worth economy.

Competition Commission of India in it’s letter to TRAI stated that setting up floor price would benefit inefficient players in the market as they would get fixed returns.

Fixing a minimum floor price would ensure a minimum amount of profit to the telecom operators. It may be well disincentivise the competitors from making improvements in services, the commission said.

A free market works on interplay of demand and supply, it said and added that a price determination by market forces of demand and supply encourages players to innovate and provide better services to their customers in order to retain their existing customers and add new ones.

The telecom regulator in its paper had sought a price ceiling to safeguard consumer interest if a floor price is considered.

If price controls are resorted to, it should be imposed only when the free market system no longer functions effectively or when there is a situation of market failure, the CCI in its letter said.

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