Well Done TRAI!

telecomThe Liberals thunder that the uncontrolled private sector by the government will lead to price war and at the end benefits the consumers.But that rarely happened in the world history. There needs to be a regulator to moderate the corporate greed. TRAI (Telecom Regulatory Authority of India) seems to be doing the dream act. In its continuous regulation and monitoring TRAI had done a wonderful service to the telecom users. Result of this genuine regulation can be seen in the nook and corner of India. It really realised the slogan “Roti, kapada, makan aur mobile”. TRAI deserves all our support and best wishes in its journey to make the telecom sector within the reach of every India.

The Times of India writes (12 October 2009)

The stormy discussion around telecom regulator TRAI’s intent to enforce a mandatory ‘pay per second’ mobile tariff is significant because it will affect close to 500 million telecom consumers, millions of shareholders and several bellwether stocks. TRAI wishes to mandate that every operator offer at least one per second plan. While on the face of it this appears reasonable, even pro-consumer, it does raise a few questions about over-regulating the telecom market which has so far worked pretty well.

TRAI has been exercising a policy of forbearance on tariffs for many years. What are the compulsions forcing its intervention at a time where 12 operators per circle three times higher than the global average are already engaged in the fiercest price war that the industry has ever seen? Three operators Tata Docomo, BSNL and MTS have already introduced the ‘pay per second’ scheme without any regulation, compelling others to follow. Is there any evidence of market failure or consumer dissatisfaction compelling TRAI to act? Does a per second offering by incumbents constitute predatory pricing for new entrants? Last but not the least, if intervention is critical why didn’t TRAI act for years to proactively recommend a pay per second regime before this?

The debate needs to be balanced at many levels: consumers’ immediate and long-term interest (especially if this move adversely affects new competitors) and consumer interest versus industry margins. A ‘pay per second’ plan does mean savings for consumers and the consumers must have the best, but should this be TRAI’s priority given other pressing issues that need its immediate attention? Finally, the issue of predatory pricing is significant. It is unclear whether the per second tariffs offered by incumbents are anti-competitive, and whether that will significantly distort entry pricing for new competitors.

It is perhaps best for the regulator to hold off its guns. The TRAI Act wisely provides for a statutory consultation process before jumping to conclusions. Its pre-emptive statement ahead of economic conclusions derived from a detailed analysis of the per second regime is premature and unwarranted. Yet, if the consultation offers a sound basis for this regulation, it should be enacted without delay. TRAI’s winning bet would be to give market forces a chance. Act it must, but not in haste and preferably not in vain.


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