Bharti Airtel urges India’s telecom regulator to fix floor price for data service

data floor price
Photo by gior

Bharti Airtel chief executive officer Gopal Vittal has once again urged India’s telecom regulator, Trai, to quickly make a decision and bring in a floor price for data services to help bring back financial stability.

Replying to questions at an earnings call on Tuesday, Vittal said, “The submissions have been made, but Trai is yet to make a decision, and this needs to be corrected soon as tariffs remain totally unsustainable.”

The top executive also urged the government to bring down the high levels of regulatory levies and taxes that the sector is subjected to.

Telecom operators, Bharti Airtel, Reliance Jio and Vodafone, have repeatedly called on the Indian government to set a floor for tariffs urgently to restore the health of the sector, which has been severely impacted by the adjusted gross revenue (AGR) payments issue.

Telecom tariffs for services have been under forbearance for the last 16 years, which means telecom operators have a free hand in fixing rates. 

However, the Telecom Regulatory Authority of India (Trai) floated a consultation paper in December 2019 to explore if a floor price was needed for voice and data services.

After the consultation paper was out, Bharti Airtel, in its comments to the Trai recommended fixing a floor for data services for two years. 

Airtel had recommended three possible approaches for the floor prices for data services. The first approach was fixing the floor for voice unlimited bundle with 1 GB of data in a month at Rs. 165, which it said would deliver a steady-state return on capital employed (ROCE) of 15% for telcos.

As per the second approach recommended by Airtel, first data block of 5GB data to be fixed at Rs 30 and subsequent blocks at Rs 20, Rs 10 and Rs 5, effectively pricing per GB data at around Rs. 22 based on current consumption and ROCE of 10%.

Under the third approach, Airtel had suggested increasing daily 1 GB data pack with a month validity from Rs 219 to Rs 349. It had then said that the third approach will result in a price per GB at Rs. 22 and ROCE of 10%.

Trai Chairman Ram Sevak Sharma last week conveyed that the consultation process for floor prices can’t be speeded up. He told the media that India’s Competition Commission of India (CCI), Niti Aayog opposed setting up floor prices through their comments on the consultation paper and said that there was a need to conduct an open house before deciding on floor prices.

NITI Aayog, a policy think tank of the Government of India, had in March said that setting a base price will discourage competition and will disincentivise competition on cost efficiency, price, and quality parameters, and deter new entries and innovation.

The CCI had also said 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 well disincentivise the competitors from making improvements in services,” the Competition Commission of India (CCI) had said in a letter to Trai dated March 28.

All three private telecom operators had increased tariff prices by 47% in December 2019, the first such hike in tariffs in India’s cut-throat telecom market since 2012. The move was significant for Airtel and Vodafone Idea which suffered massive losses due to Reliance Jio’s cheap 4G services after its launch in September 2016. 

(USD1.00 equals INR or Rs 75.6)

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