The telecom regulatory authority of India's proposals for tariffs for basic services: a discussion

Abstract

As a precursor to enhanced competition in the telecom sector the Telecom Regulatory Authority of India (TRAI) has published recommended prices of various telecom services. This move, along with TRAI's practice of consultation with potential entrants and consumers is to be commended. The avowed aim of TRAI is to calculate and enforce cost based prices. The reason behind this aim is that increasing competition would force prices towards costs and the TRAI would, through regulation, foster surrogate competition. Another reason behind this effort is to encourage entry into the telecom sector from private firms. Since most of these entrants would have to rely on the DoT network for initiation and completion of calls high costs of interconnection would discourage entry and thereby inhibit healthy competition from developing. The following excerpt from the TRAI's second consultation paper says: "The present exercise to restructure telecom tariffs primarily aims to link tariff formulation with some clearly specified principles, provide a consistent and transparent fiamework for tariff policy, simplify the prevailing system of telecom tariffs, and achieve cost based prices through regulation and /or competition." Our approach will be to look at some of the principles used in computing tariffs and explain and critique those choices.