TRAI Issues Amendment to Telecommunication Tariff Order

The Telecom Regulatory Authority of India (TRAI) issued an amendment to the telecommunication tariff order in February 2018 with an aim to ensure transparency, non-discrimination, and non-predation but it has caused controversy and led to lawsuits against the regulator by mobile operators.

According to the amendment, telcos are considered to be predatory for any market if an operator with significant market power (SMP) - more than 30% share by subscriber base or gross revenue - offers services at a price below the variable cost[1] with specific intention to reduce competition or remove competitors in the market. Telcos are also not able to offer customized offers to specific subscribers and all their plans must be publically available. If any plan is considered predatory, operators will have to pay a penalty of up to Rs. 50 lakhs per tariff plan for each service area.

These regulations come after Reliance Jio launched services with a “Welcome Offer”, providing free voice and data to subscribers for three months. This offer was followed by a “Happy New Year” offer which also provided free voice and data. It raised controversy as other operators believed that the “Happy New Year” offer was an extension of the “Welcome Offer” and hence Jio offered promotional offers for 200 days when the limit is 90 days. The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) however ruled that the offers did not violate any rules.

Recent amendments have also been criticized for favoring Jio. Changes in the definition of significant market power to 30% of share by subscriber base and gross revenue and not by sub-market (voice, data) and other metrics of market share (capacity, traffic carried) may allow Jio to offer tariffs below the predatory pricing threshold. But, Jio’s competitors, such as Bharti Airtel – largest revenue and subscribers market share- Idea Cellular and Vodafone India, may not have the same flexibility in pricing and hence they believe that the new amendment limits their ability to compete with Jio. Vodafone, Bharti Airtel, and Idea Cellular have all separately challenged the tariff order.



[1] Average Variable Cost (AVC) is calculated by identifying those costs that vary with output (total cost-fixed costs-overhead costs), adding them together, and dividing the result by the total number of units produced.

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