Trai dials telco CEOs to discuss floor price

The Telecom Regulatory Authority of India (Trai) has called top executives of telecom companies for a meeting on July 21, seeking their views on setting floor prices for voice and data tariffs.

The demand to fix a floor price was raised by some telcos last month, when Trai Chairman R S Sharma met them for a discussion on the ongoing financial crisis in the industry. Reliance Jio’s entry in September 2016, with its free services and low tariffs, added to the stress of the telecom operators. The debt in the telecom industry is estimated at ~4.5 lakh crore, and companies are facing profit erosion.

In that backdrop, the sectoral regulator has written to all telecom companies and asked them to submit their views on floor pricing, a Trai official said. The regulator also wants to know the industry view on the upper ceiling for tariffs, in case such a cap was necessary.

Currently, telecom tariffs are under forbearance - a practice which has been in place for the past 14 years and there is no upper or lower ceiling. The Trai has only fixed a ceiling for tariffs during roaming.

Some telcos had raised the issue of operators offering below-cost tariffs to consumers, arguing it could hurt the financials of the industry. The incumbents, including Bharti Airtel and Vodafone, have maintained that Reliance Jio is offering “predatory pricing” by offering free calls for months.

However, an official at the Trai said that an operator can offer free calls, as this was part of the original telecom tariff order, which described tariffs.

Sources indicated that the issue of floor price was raised by Idea Cellular and Bharat Sanchar Nigam during a meeting last month, with Sharma and most operators, barring Jio, agreeing to it. Idea had said there should be one floor price for voice and one for data, and the lowest cost operator data should be taken to work out the floor price.

Analysts pointed out that fixing of floor price is not a norm in most developed markets.

Among the other demands made by the incumbent operators is an upward revision of interconnect usage charges (IUC). The incumbents want an early closure of the issue and have suggested to the regulator to raise the charges, as the current regime is not able to recover costs. The current call-connect charges are below cost and need to be corrected, according to executives at incumbent telecom companies.

Interconnect charges are paid by a telecom operator to another, when its call terminates on another network.

Currently, the charges are 14 paise per minute for wireless calls, but the Trai has sought comments from stakeholders on reviewing these charges. The Trai is meeting telcos on Tuesday for a workshop where operators will give presentations on IUC. In addition, the regulator will also have an open-house discussion on Thursday on the matter.

Most telcos are in favour of increasing the IUC, but Jio and Reliance Communications have suggested the charges be brought down to zero.

The incumbent operators want IUC to be fixed on a “fullcost” basis, whereas Jio wants a “bill-and-keep” method.