COAI asks Trai to reconsider differential pricing of data

At present, a telecom operator cannot charge differential prices to consumers on the basis of content

Telecom operators are struggling with the ambiguity on differential pricing of data services offered via closed electronic communication networks (CECN). Companies in India cannot charge differential prices on data, according to the Telecom Regulatory Authority of India (Trai)’s rules.

What this essentially means is that a telecom operator cannot charge differential prices to consumers on the basis of content. However, they can do so over Closed Electronic Communication Networks or intranets where the content is hosted on their servers.

Trai has defined CECN as a communications network where data is neither received nor transmitted over the internet.

As that content is becoming a key differentiator for telecom companies across the globe, the Cellular Operators Association of India (COAI), the industry lobbying body, has written to Trai for clarity on CECN.

In a May 16, 2016 letter, it has requested the regulator to review its decision on CECN and allow differential data rates on the basis of content, irrespective how the content is provided.

The letter says members are deliberating on different business models with content providers and “it appears that this terminology (CECN Network) may lead to a subjective interpretation and could be misapplied. Furthermore, the regulation has also stated that if such a network is used for purposes of evading this regulation, the prohibition will nonetheless apply, which is again open ended.”

It may be recalled that earlier this month, Bharti Airtel had written to Trai seeking permission to offer exclusive video content of a leading global content company on its CECN. It said it was approached by the global content provider offering its exclusive content on Airtel's CECN.

Before tying up with the company, Airtel had sought approval but it is likely to be turned down.

In its letter, COAI has sought clarity if a telecom operator is allowed to subsidise or discount the content in return for a share in advertising revenues.

The body has sought further clarity on whether a operator is allowed to offer subsidised subscription of its content to select or all subscribers, then would that constitute a CECN or would that be excluded from prohibition of 'differential data' charging, as the customer's respective data charges would apply.

Trai prohibits discriminatory pricing for data services by operators. However, an exception was made for closed communication networks. The February 2016 notification of the regulator on discriminatory data pricing said: “No service provider shall enter into any arrangement, agreement or contract, by whatever name called, with any person, natural or legal, that has the effect of discriminatory tariffs for data services being offered or charged to the consumer on the basis of content: Provided that this regulation shall not apply to tariffs for data services over closed electronic communications networks, unless such tariffs are offered or charged by the service provider for the purpose of evading the prohibition in this regulation.”

The industry is struggling to monetise data as pure-play carrier business is unlikely to pay for high capex. According to J P Morgan, unless telcos differentiate themselves, through either proprietary/licensed content or an integrated proposition, it’s hard to see how they can command discretionary pricing/consumption.