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Setting floor for telecom tariffs may not be practical: TRAI

Trai doesn’t intervene in tariffs, and any move to set a floor price would overturn this practice. While Trai had rejected the proposal for a floor price in 2017, the health of the sector has taken a turn for the worse since then.

, ET Bureau|
Updated: Nov 06, 2019, 09.54 AM IST
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Government sources recently said the regulator could be asked to look at setting a floor price for tariffs to provide relief to the sector along with other measures.
NEW DELHI: The Telecom Regulatory Authority of India (Trai) appears to be pushing back against the suggestion that a floor be put in place for voice and data rates to boost the sector’s viability, with officials saying this was “not practical” and may even be “impossible” to attempt. While the regulator is not looking at starting any consultation on its own, it will have to consider any such proposal made by the government, they added.

“We have not received any official communication. It will be extremely difficult to do suo motu. Besides, it (setting a floor) is not practical and not possible,” one of the officials told ET.

“Having a floor price is anti-consumer,” said another official. “Will it not become an incentive for someone to continue with an existing un-upgraded network?”

Trai doesn’t intervene in tariffs, and any move to set a floor price would overturn this practice.

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Proposal Rejected in 2017
Another official said the issue of a floor price had been discussed between carriers and the regulator in 2017 — at the height of the debate on predatory pricing soon after Reliance Jio Infocomm’s entry in September 2016 — but the idea was rejected by Trai as not being “workable”.

Idea had then wanted a floor price to put an end to the free services being offered by Jio, while Bharti Airtel wanted the full cost of incoming services — reflected in the interconnect charge (IUC) — be considered the floor price for voice services. Jio had opposed a floor price.

For Trai to now explore this issue once again, “there has to be a written communication from telcos to government and from government to Trai”, the second official said. “Telcos have to commit that they want it, in writing. There should not be a case tomorrow that they say that this was not asked for, and that Trai has done it on its own.”

He said that Trai could begin a consultation process on the matter only after a formal reference from the government. “Then we can discuss or ask them, whether we should put a floor price on 2G, or only voice calls.”

Government sources recently said the regulator could be asked to look at setting a floor price for tariffs to provide relief to the sector along with other measures. These include a reduction in total taxation and a repayment period of as much as 20 years for adjusted gross revenue (AGR) dues, with the possibility of an initial moratorium, ET reported on November 4.

Lowering taxes, levies
One of the officials said that Trai had already made recommendations to the Department of Telecommunications (DoT) to lower taxes and levies a few years ago. These can be put into effect speedily, rather than trying to set a floor for tariffs, he said.

“DoT should get DCC (Digital Communications Commission) to take a call on the recommendations, which are already in their domain,” the official said.

A Supreme Court decision on October 26 backing the telecom department’s stance on including revenues from noncore items in the definition of AGR while calculating government levies means the companies need to pay Rs 1.3 lakh crore in the form of licence fees, spectrum usage charge, penalties and interest.

At meetings with top government officials before the AGR judgment, Vodafone Idea chairman Kumar Mangalam Birla, chief executive Ravinder Thakkar and Vodafone global chief executive Nick Read — apart from Bharti Airtel chairman Sunil Mittal — had sought government help to raise tariffs. The sector, with debt of over Rs 7 lakh crore, is plagued by pressures on revenue and profitability.

While Trai had rejected the proposal for a floor price in 2017, the health of the sector has taken a turn for the worse since then.

Annual AGR of telcos has slumped 25% in the two years to March 2019, lowering licence and spectrum usage fees, both of which are paid to the government. Vodafone Idea’s quarterly losses hover around Rs 5,000 crore, with debt of nearly Rs 1 lakh crore. Amid price competition since Jio’s entry in September 2016, the sector has shrunk to three nonstate companies from eight.

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