Trai has raised the following for consultation: Which tariff offers should qualify as promotional? What should be the features of a promotional offer? (Reuters)

In my recent column Just a matter of opinion (FE, February 7; http://goo.gl/05yy1k), I highlighted that Trais new order on RJios tariff plan lacks merit. Now, Trai has floated a consultation paper inviting views on the various aspects of tariff including the two important issues of promotional offer and predatory pricing which were highlighted in my column (I had raised questions that, in the absence of any clear definition of these terms, on what basis Trai has come to the conclusion with regard to the tariff plans of RJio and whether these are compliant with tariff regulations or not?) Im glad Trai thought it prudent to fix these issues even if it is with an intent of a cover-up.

Lets examine both issues again in the light of a recent consultation paper.

Promotional offers

Trai has raised the following for consultation: Which tariff offers should qualify as promotional? What should be the features of a promotional offer? Is there a need to restrict the number of promotional offers that can be launched by a TSP, in a calendar year one after another and/or concurrently?

It is surprising that Trai has woken up to these questions only after it gave a go-ahead to the consecutive promotional offers of RJio, which created a disruption in the market on one hand and has resulted in lower realisation of license fee by at least 20% as estimated by a research organisation. Clearly, this action of Trai has not allowed unfair practices to play in the market, but has allowed the exchequer to suffer seriously. How can an expert body take such a casual view of the matter and raise post facto questions to get answers after upholding that the consecutive promotional offer is valid?

The consultation paper goes on to acknowledge that the authority considered the implications of offering such concessions to customers and was of the view that too long a promotional period dilutes the promotional character of the tariff plan and, in fact, makes it a regular plan. It is bizarre that despite being aware of this issue, Trai went ahead and allowed promotional offer(s) to operate beyond 90 days.

While there could be some justification for approval of a welcome offer because it was a launch offer, what was the compulsion to approve the happy new year offer that was a consecutive plan. Rather than raising this issue now, this could have been easily raised at that time and an intervention order been issued on the plan. This appears to be a clear case of a cover-up to justify its past decisions.

Trai acknowledges that the authority issued a direction to all access service providers regarding transparency in tariff offers (September 1, 2008). In part-2 of the direction, it said that while publishing their promotional offers to the public, operators should specify:

*The eligibility criteria for such promotional offer; and *The opening and closing dates of such promotional offer (within the existing limit of 90 days).

When the issue is clear that an offer cannot be allowed to operate beyond 90 days, how come Trai allowed the welcome offer to run from September 3, 2016, till December 31, 2016a period of more than 90 days. Trai, in para 3 of its order, has mentioned that the happy new year offer was implemented from December 4, 2016, till March 3, 2017. On the other hand, the announcement was made by RJio to the media at large that the happy new year offer was valid up to March 31, 2017, and not up to March 3, 2017, which makes it a period of more than 90 days. It is important to clarify whether the offer was valid up to March 31, 2017, as stated by RJio or up to March 3, 2017, as stated by Trai. The same is the case for the welcome offer. It is astonishing how Trai acted in complete disregard of its own regulation.

Predatory pricing

Trai raised a question on predatory pricing asking what methods/processes should be applied by the regulator to assess predatory pricing by a service provider in the relevant market?

As a background to this subject, it only refers the following: While the term non-predation has not been specifically defined in the TTO, it finds reference in many documents issued by Trai from time to time, which indicates its usage in the context of its generally understood meaning of abuse of dominant position by an enterprise through predatory pricing. For instance, the explanatory memorandum to the TTO 23rd amendment (2002) states as follows: The authority will continue to monitor the tariffs both with respect to predatory tariffs as well as unduly high tariffs because operators with dominant market presence and operations in more than one service sector will always have the capacity to do so.

Similarly, in the consultation paper on tariff plans with lifetime validity issued in January 2006, Trai noted that predatory pricing generally refers to a situation where a dominant firm (with significant market power) charges prices over a sufficiently long period, so as to drive competitors out of market or deter new entrants, and then raises prices to recoup its losses.

Here again, Trai adopted the practice of half reveal and half conceal. It decided to conceal its own 30th amendment to TTO regulation that touched upon the matter of predatory tariff, and noted that to ensure the tariff plan(s) is/are consistent with the regulatory principles in all respects which, inter alia, include IUC compliance, non-discrimination and non-predation.

In the explanatory statement attached to the amendment, Trai also clarified that the IUC regime specified by the authority reflects the underlying costs of providing the service. Also, the IUC charges as specified will implicitly function as a floor to retail tariffs and thereby the scope for predatory pricing or cross-subsidisation is limited. The term floor under TTO means the lower limit of a tariff for a telecommunication service as specified by the authority from time to time, below which such tariffs may not be offered. This amendment laid down the principle that the underlying cost of providing the service should be considered as the criteria to ascertain whether a given tariff is predatory or not?

In view of the above, various questions arise. First, why has Trai chosen not to disclose in the current consultation paper the fact about 30th amendment in its consultation paper which is relevant to the subject? The honest answer would be because it never adhered to this regulatory principal while examining RJio offers.

Second, in the light if its own admission that there is no criteria for deciding predatory pricing, how did it arrive at the conclusion that RJio offerings are non-predatory? Here again, the honest answer would be that it did not adhere to its own defined principle but wanted to make the legal opinion an alibi. Trai rushed to the Attorney General, a rare exception to its previous practices, to seek his opinion whether the tariff offered by RJio is predatory? It did not require any legal opinion to be obtained to ascertain the legal meaning of the term predatory pricing when the criteria to ascertain this is given in the Trai regulation itself. Trai could have examined it simply by calculating the underlying cost of providing service, which could easily be done by Trai with the battery of experts available with them and close the issue backed with factual data.

This paper makes it clear that the current exercise is an attempt to cover up the recent decisions that were taken not in compliance of regulations, but either in complete disregard or are based merely on legal opinions.

The matter is pending in courts for adjudication and Trai is finding it hard to justify its position. I hope the courts will restore justice to the aggrieved operators which the regulator failed to do.

The author is founder & CEO, Tathya Consulting. Views are personal

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Reliance Jio impact: Trai consultation on tariff issues a cover-up excercise - Financial Express