The Need for Price Hike
The private telecom operators, Vodafone Idea, Bharti Airtel, have been in dire need of a price hike. Both the telcos are on the list of companies that have to pay massive Adjusted Gross Revenue (AGR) dues to the central government. In addition to this, they have to pay for the renewal of the spectrum in a few years along with the dues for the spectrum, which they bought in March this year. On the contrary, Reliance Jio being a new entrant in the telecom industry, has been an exception to the AGR dues demanded in high quantum by the courts. The Mukesh Ambani-led telecom company also finds itself basking in good financials, unlike Vodafone Idea. In such an industry structure, a floor pricing regime would have helped the companies in uniformly raising tariffs across the band and to get their finances in order. Such a move would have also helped the companies in lifting up their Average Revenue Per User (ARPU). A metric that remains very low despite India being the biggest user of data across the world. The global prices of data in India also remain super low at Rs 8 per GB. The worst of all, Vodafone Idea, which now stands at a staggering financial risk, would also likely be saved if TRAI were to bring a floor pricing regime and help the telco in raising tariffs.
Unilateral Hike and Why It Could be Wrong
A unilateral tariff raise would trigger competition and would not help any operator. If the other operators with some runway, like Reliance Jio, decides to hold off the tariff hike while Vodafone Idea continues to do it, then the churn of subscribers of Vodafone Idea would be worse off than it already is, thus driving the telco towards ensured financial ruin. Hence, the coming of a pricing regime from the regulatory side remains such an imperative move of this debate. Also, the comments about a floor pricing regime being against the interest of the consumer hold little ground since the absence of supportive prices in the telecom industry is starting to hurt the subscribers. Because of a lack of incentives and under pressure, telecom companies are starting to wash away the low-value prepaid plans. They are also increasingly resorting to moves like reducing the benefits, removing SMS benefits from some of their plans. Such moves are actually not for the benefit of the consumers, and if a floor pricing regime were to be rolled out, these happenings could be countered for the subscribers’ benefit.
