TRAI is contemplating the Plan and has invited suggestions on the per-second billing model….

Telecom Regulatory Authority of India (TRAI)’s Chairman, J S Sarma’s announcement for all telecom operators (Telcos) to consider the per second pulse as a mandatory option, along with their other tariff plans at the International Telecommunication Union (ITU) World Summit in Geneva, has put the Telcos in a fret. Clarifying the meaning of ‘mandatory option’, Sarma explained that it will be mandatory for the operators to offer at least one such plan, but optional for the consumers on whether or not they wish to subscribe to such a plan. TRAI would come out soon with a consultation paper on the matter and also invite suggestions on the per-second billing model.

Telcos are resenting this note as an unsustainable tariff proposal. A pro-consumer declaration shall be affecting millions of shareholders and several stocks. CEOs of various Telcos are waiting for the TRAI to start consultations on the issue. At present, the customers are charged per minute, even if they use the service for less than a minute. Switching over to a system of ‘pay per second’ would affect their revenues adversely. The tariff war among Telcos is already taking a heavy toll on their stocks.

Prior to this, TRAI did not ever make such a recommendation. Such a move may disturb the equilibrium achieved in telecom sector through free competition and market forces. Taking care of consumers’ immediate and long-term interest will adversely affect new competitors or entrants as well as industry margins. The move is being alleged to be tilted adversely against Telco’s interests, raising important issue of predatory pricing.

Telecom Regulatory Authority of India (TRAI) is a regulator under Telecom Regulatory Authority of India Act, 1997 (Act). The object of the Act is to provide establishment of the Telecom Regulatory Authority of India to regulate the telecommunication, services, and for matters connected therewith or incidental thereto. One of the functions of the Act is to facilitate competition and promote efficiency in the operation of telecommunication services, so as to facilitate growth in such services while another important function is to protect the interest of the consumers of telecommunication service. TRAI is empowered under the Act to notify in the Official Gazette the rates at which the telecommunication services within India and outside India shall be provided under this Act, including the rates at which messages shall be transmitted to any country outside India. TRAI may, for the discharge of its functions, issue such directions from time to time to the service providers, as it may consider necessary.

Since some operators are already offering such billing models of ‘pay per second’, the other operators may follow suit voluntarily to compete with them. Intervention by TRAI in such a scenario is being viewed as premature, unwarranted and uncalled for. Telcos want to take their own economic decisions. The offer by some of the service providers of ‘pay per second plan’ is already being viewed as anti-competitive distorting entry for new competitors and as a threat to existing operators.

Suggested billing model raises issues of TRAI trying to over-regulate the telecom market, which has so far worked fairly well. TRAI has been exercising a policy of forbearance on tariffs for many years. With more than 10 operators in almost every circle already engaged in aggressive tariff war, no evidence of market failure or consumer dissatisfaction, TRAI’s move is being questioned on the issue of desirability. Department of Telecommunications (DoT) has also expressed concern over the said announcement as it could impact potential 3G bids. As reported in Times of India a senior DoT official has told TOI, “Bidders cannot ignore the revenue implications of this move and their bids will be adjusted downwards accordingly. This is a local consumer and tariff issue, and should have been done keeping in mind the overall environmental sensitivity”. He further added, “Potential bidders include large, global telecom operators deploying the most sophisticated bidding tools. The timing of the announcement just before the 3G auctions and its positioning as a mandatory option is worrying.”

India is a large market for telecommunications, which is having plenty of competition and the announcement by TRAI’s chairman is a move towards consumer getting the best possible service at the best possible price. In view of the large number of operators in Indian market and vast number of consumers, there is already healthy competition in the mobile telecom market. It is reflected in the fact that mobile tariffs in India are among the lowest in the world. In such a scenario, Telcos are finding it difficult to accept intervention of TRAI with competitive forces.

While on the one hand function of TRAI is to protect the interest of the consumers of telecommunication service on the other hand another function is to facilitate competition and promote efficiency in the operation of telecommunication services. Important issue is whether such a proposed Billing Plan would disturb the need to maintain balance between the two functions. Should TRAI keep itself away from such economic decisions, more so when the likely beneficiaries that are the customers have no grievance with the existing plans and tariff structure? Should the market forces alone take the lead in economic decisions while TRAI continue to perform the role of the watchdog and regulator for healthy competition?

Some of the telecom players in the country have already launched per-second pulse, but such tariff plans are not mandatory and are mostly aimed at expanding their penetration and expanding market share. To illustrate, BSNL introduced one paise per second pulse (for local calls) and two paise per second pulse (for STD) in Karnataka, Andhra Pradesh and Orissa. Tata Docomo is offering users per second pulse on its GSM network in Delhi. Aircel has also extended its pay-per second calling plan from Kolkata and Orissa to Uttar Pradesh.