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TRAI bans differential pricing, makes FreeBasics, Airtel Zero illegal

09-February-2016
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TRAI bans differential pricing, makes FreeBasics, Airtel Zero illegal

The Telecom Regulatory Authority of India (TRAI) announced today a new guideline for differential pricing, under which, telecom operators are barred from charging different prices for data traffic. Under the new guideline, defaulters will be fined Rs 50,000 per day for discriminatory tariffs.

"Keeping in view India's large number of internet users and content producers, both of which are rising exponentially, the Authority has taken a view that prohibition of discriminatory tariff for data services is necessary to ensure that service providers continue to fulfil their obligations in keeping the internet open and non-discriminatory," said TRAI.

This means that products like Airtel Zero and Facebook FreeBasics are now illegal in India. TRAI said it will review the guideline after a period of two years.

Giving reasons for its ruling, TRAI said that any telecom service provider (TSP) offering data services does not control the internet infrastructure in its entirety and is dependent on several other networks to facilitate this task. Thus, allowing any one TSP to charge differentially for data that it does not alone process, could compromise the entire architecture of the internet itself.

"Were other TSPs across multiple tiers allowed to do this, then the openness of internet as we know, would be altered. Allowing price differentiation based on the type of content being accessed on the itnternet,would militate against the very basis on which the internet has developed and transformed the way we connect with one another," said TRAI in its ruling.

Proponents of differnetial pricing have long claimed that allowing limited access at the start would lead to the benefits of the internet to reach a larger proportion of the population. However, TRAI is of the opinion that allowing service providers to define the nature of access would be equivalent to "letting TSPs shape the users' internet experience".

The regulatory body said that this could prove risky to the medium in the long run. It also expressed doubts about whether the users would be in an economic position to migrate to the open internet at a future date.

On the point of volume-based discounts on popular applications through content-specific data packs TRAI said, "These assertions need to be tested in light of the market failures existing in the internet services sector. Firstly, the 'information asymmetry' between service providers and users leaves users with inadequate information to make an informed choice. Secondly, internet access is not a 'search good' but rather an 'experience good' which can be understood properly only after being used. Thus, the 'information asymmetry' problem cannot be adequately solved through disclosure or transparency requirements, as many consumers may not be in a position to understand the information being presented to them."
 

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