TRAI rules against differential pricing for telecom services; imposes penalty of Rs 50,000 per day for offenders

NEW DELHI: In what is clearly a major win for crusaders of net neutrality, the Telecom Regulatory Authority of India (TRAI) has ruled against differential pricing and said no service provider will enter into any arrangement or contract that has the effect of discriminatory tariffs for data services.

TRAI reserved the right to either ask a service provider to withdraw any discriminatory tariff or impose a penalty of Rs 50,000 per day (subject to a maximum of Rs 50 lakh) for discriminatory tariffs charged by service providers. The decision of the Authority as to whether a service provider is in contravention of this regulation will be final and binding. 

‘The Prohibition of Discriminatory Tariffs for Data Services Regulations 2016,’ issued today comes into effect immediately and will be reviewed every two years.

TRAI said allowing service providers to charge differently for data could compromise the entire architecture of the internet. "Prohibition of discriminatory tariff is necessary to ensure that service providers continue to fulfill obligations in keeping internet open and non-discriminatory," TRAI said.

The Regulation has been issued after reviewing the responses received by the regulator to its Consultation Paper on Differential Pricing for Data Services issued on 9 December last year. As was reported earlier by, major broadcasters like Star India, Sony Pictures Networks India and Zee Network submitted their comments to TRAI in favour of net neutrality citing the drawbacks of differential pricing for telecom services.

TRAI said the paper was issued because two key principles of tariff regulation - non-discrimination and transparency were getting impacted from such practices and required consultation. 

While almost all the broadcasters opposed differential rates, the telecom and internet service providers felt that this was necessary particularly in view of the deluge of over the top (OTT) services expected to come in.

The general economic concept of 'price differentiation' covers all practices where a seller of goods or provider services charges different prices from different consumers, either for exactly the same goods or service or for slightly different versions of the same goods or service. The 'service' being referred to in the context of differential pricing of data services is the units of data or bits that a person consumes in order to access the internet. This understanding is also qualified by the fact that the current regulation refers to a particular category of price differentiation - that is content-specific. 

While ruling out differential pricing in such cases, TRAI put a proviso: “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.”

It also said, “A service provider may reduce tariff for accessing or providing emergency services, or at times of grave public emergency, provided that such tariff shall be reported to the Authority within seven working days from the date of implementation of the reduced tariff and the decision of the Authority as to whether such reduced tariff qualifies under this regulation shall be final and binding.”

The penalties will be imposed only after the service provider has been given a reasonable opportunity of representing against the contravention of the regulation. The amount payable by way of financial disincentive under these regulations will be remitted to such head of account as may be specified by TRAI.

The regulator also said, “Nothing contained in these regulations shall affect any packs, plans or vouchers with unexpired validity subscribed by a consumer before the date of commencement of these regulations, provided that no such pack, plan or voucher shall be valid beyond a period of six months from the date of commencement of these regulations.”

Explaining the rationale for the paper, TRAI said, “Some practices have come to the notice of the Authority wherein differential tariffs were offered based on the content, websites, applications, platforms.”

It also said the appropriate regulatory response on the issue of differential pricing must necessarily be grounded in a sound understanding of the basic architecture of the internet. Any proposed changes in business models and commercial practices must also be seen in the context of the need to preserve the unique architecture of the Internet as a global communication network.

The Internet and Mobile Association of India (IAMAI) welcomed the Regulation as a bold and fair move. It said net neutrality would be ensured with TRAI explicitly clarifying its stand in a very clear and transparent ruling about differential tariffs and agreements. The association had taken a ‘no exception standpoint’ against differential pricing.

“This ruling vindicates the associations stand on the issue. The internet Start-up eco-system and the internet user community are delighted,” IAMAI said. 

IAMAI has also welcomed the move that TRAI will be the ultimate authority to decide the cases of violations of this ruling and that the decision of the authority will be final and binding. 

However, the association voiced a concern on the exceptions as to how this will pan out. The association hoped that the exceptions to the rule will not be misused by the TSPs. The exception states “...regulation shall not apply to tariffs for data services over closed electronic communications networks...”

Meanwhile, the campaigner claimed a massive victory and said “History has been created!” It said nearly 3.75 lakh users had supported Net Neutrality. 

The nationwide campaign that unfolded over almost a year was started by Sandeep Pillai, a techie from Kollam in Kerala.

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