“Average variable cost”, the best way to determine predatory prices: TRAI


The Telecommunications Regulatory Authority of India (TRAI) has stated that Average Variable Cost (AVC) is the most appropriate method to determine predatory pricing problem, and operators engaging in other practices will be fined 50 lakh per tariff. place by circle.

“The authority, after considering the various relevant factors, such as the availability of cost details, their reliability and their relevance for this purpose, is of the opinion that stroke is the most appropriate measure of cost to determine the cost. predatory pricing issue, ”TRAI said. in his ‘Telecommunication Tariff (63rd Amendment) Order, 2018’ on Friday. The new order follows allegations from major carriers such as Bharti Airtel, Vodafone and Idea Cellular that new entrant Reliance Jio is offering predatory pricing, following which TRAI said the issues were being debated under of the ongoing TRAI consultation on “Regulatory Principles of Tariff Assessment”.

AVC describes how marginal cost behaves, on average, over a given production range. The stroke is calculated by identifying the costs that vary with production, adding them up, and dividing the result by the total number of units produced.

“Predatory pricing means the provision of a separate telecommunications service in the relevant market at a price lower than AVC, with the aim of reducing competition or eliminating competitors in the relevant market, as determined. by authority, ”TRAI said. For example, Bharti Airtel, for its 22 circles, has launched a tariff plan, and if the plan proves to be predatory, the company will be assessed a penalty of 11 crore.

The authority said after considering all factors including, but not limited to, consumer interests, maturity of the telecommunications industry, competition, tariff forbearance and the fact that even promotional tariffs must meet “principles transparency “, non-discrimination and non-predation tariffs is of the opinion that it is no longer necessary to modify the current minimum definition of the promotional offer as contained in the instruction dated 1 September 2008.

“The authority is also of the opinion that it is not necessary to further restrict the period of the promotional offer compared to the existing stipulation of 90 days. Currently, while the offer period is limited to 90 days, there is no restriction on the period of consumer benefits, ”he said.

On the issue of transparency, the sector regulator said it advocates the disclosure of all relevant information of each tariff plan offered by an operator, which allows consumers to make informed choices.

To ensure transparency, the regulator imposed a fine of 5,000 for each day of delay, with a maximum of 2 lakh on telecom operators who fail to comply with the requirement to notify the authority within seven working days. following the publication of a tariff plan. .

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