Price discrimination in pre-paid mobile services in India

Abstract

The mobile telecommunications system in India has achieved remarkable growth over the last 10 years with the subscriber base growing at a CAGR of 35%. Most remarkably, this growth has taken place penetrating all levels of social structure within the country. One of the features which have been instrumental in the growth of this industry has been the extremely low tariff available to the customers. Also a vast majority of subscribers in India has been prepaid customers having no need to commit to the operator for the service. In this scenario, operators have been forced to offer customers the lowest tariff options based on their individual requirements. In a highly competitive market this has meant that they needed to offer a plethora of tariff options similar to an all-you-can-eat buffet expecting customers to self-select amongst the various calling plans, top-ups and combinations of the same. However what is not clear is that in their intent to do so have they actually created confusion in the minds of the customer. This paper analyses the tariff plans in two circles one a metro city (Kolkata) and another a grade A circle (Karnataka) and uses three players in each circle. Using the relationship between the price of a bundle of options and the volumes of each of the individual components it tries to understand the price discrimination using a combination of quantitative and qualitative techniques. It also tries to identify the parameters based on which the price discrimination is taking place and how is it affecting the positioning of the various price plans in the market