The Prohibition of Discriminatory Tariffs for Data Services Regulation of 2016 is a regulation that was released by the Telecom Regulatory Authority of India (TRAI) for the main purpose of banning differential pricing arrangements for internet access across India (Stallman, 2016). The regulation was necessitated by the fact that over the years, the number of internet users and content producers across India has grown exponentially. This situation might expose the users to discriminatory tactics employed by the internet service providers that may deprive them of their right to open and non-discriminatory access to the internet (SSC Online , 2016). This essay aims to have an in-depth look at the regulation so as to provide more insight on the kind of laws governing the regulation, the benefits and drawbacks associated with such laws as well as the benefits or drawbacks that have been observed by the implementation of the regulation.
Laws Governing the Prohibition of Discriminatory Tariffs for Data Services Regulation 2016
The Prohibition of Discriminatory Tariffs for Data Services Regulation is governed by the anti-trust laws of India under the Competition Act of 2002. The act was fully constituted in 2009 replacing the Monopolistic and Restrictive Trade Practices Act of 1969 (Singh, 2018). The regulation denies the internet service providers the right of offering or charging discriminatory tariffs on data services on the basis of content offered. The regulation went on to define content as any application, data or service that can be transmitted over the internet. The Telecom Regulation Authority of India (TRAI) highlighted the fact that pricing differentials violate the principle of non-discriminatory tariffs which leaves smaller service providers at a disadvantage since they may not be able to match the pricing terms set by the bigger service providers. This creates unfair competition in the market since the larger service providers will be in a position to obtain a larger market share as a result of their discriminatory tariffs. This goes against the Competition Act 3(1) that specifies that no person or enterprise shall enter into an agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services which is likely to have an adverse effect on the competition within India (Trilegal, 2016). The regulation 3(2) goes on to prohibit any agreements that result in discriminatory tariffs being charged. The Telecom Regulation Authority of India (TRAI) argued that the internet penetration in India is still at a very low level and therefore provision of zero-rated tariffs by internet service providers will limit the amount of knowledge and information available to the consumers since they will only be able to access what is made available to them by the service providers (Trilegal, 2016).
The Prohibition of Discriminatory Tariffs for Data Services Regulation can also be described as being protectionist in nature. The regulation is seen as a move that is aimed at protecting the smaller service providers from unfair competition especially since the Telecom Regulation Authority of India (TRAI) decided that the regulation would be ex ante instead of case by case. This greatly benefits the smaller service providers that do not have the resources necessary to carry out case by case analysis of tariff discrimination which would leave them disadvantaged (Capital Market, 2016). One of the main arguments of protectionist laws is the protection of sunrise industries. These are described as the infant industries for the purpose of giving them the opportunity to grow and develop into globally competitive brands (Economics Online). Trade protectionism has in the past decade become one of the signature features of India’s economic policy under the leadership of Prime Minister Narendra Modi and his self-professed economic doctrine of “Atmanibhar Bharat” (self-reliant India) (Shukla, 2021).
Competition laws are defined by (Chen, 2021) as statutes that are developed by governments for the aim of protecting consumers from predatory tactics that are deployed by businesses and to ensure there is fair competition in the market. The laws are intended to protect the interests of consumers, promote competition in the market, guarantee freedom of trade as well as prevent practices from having appreciable adverse effects on competition (AAEC) (Luniya, 2021). The laws cover a wide area of business ranging from market allocation, bid rigging, price fixing as well as monopolies.
Competition laws are responsible for a number of benefits in a market. Through competition laws, consumers are able to enjoy a wide variety of products or services at the most competitive prices. The availability of several options is as a result of the entry of new producers that aim to obtain a piece of the market share through provision of innovative products or services at a price meant to compete with more established brands (Manorama Yearbook, 2021). Competition also enhances innovation. In a bid to capture a larger market share, companies are willing to go out of their way to innovate new products or services that will give them an edge over their competitors. This provides consumers with better quality products and helps drive economic growth of a region subsequently improving the quality of life of the local population. Lastly, competition laws control monopolistic tendencies exhibited by established companies thus giving room for entry into the market by newer companies. Despite the benefits observed, one of the biggest drawbacks of competition laws is that the barriers to competition are widespread and they adversely harm innovation, productivity as well as equitable growth (Manorama Yearbook, 2021).
Protectionism refers to government policies that are intended to protect local businesses by restricting foreign businesses (The Investopedia Team, 2021). These laws are intended to improve the economic activity within a region but can also be used to implement measures on safety and security based on concerns that are brought up. In trying to enact protectionist policies, governments use tools such as tariffs, import quotas as well as product standardization. Tariffs refer to the taxes imposed on imported goods in the domestic market. Quotas on the other hand refer to restrictions on the importation of a particular good or service over a specified period of time. Product standardization refers to a set of standards that must be met by all imported goods in a country (Corporate Finance Institute).
Protectionist laws have a number of benefits to the local market. They facilitate more growth opportunities for local industries. By restricting the number of imports, local industries are able to produce more and eventually attain growth that will enable them to compete internationally. Protectionist laws also enhance job creation which is as a direct result of the growth of local industries. Lastly, protection laws result in a higher GDP as a result of increase in domestic production.
Despite the benefits observed, protectionist laws have a number of drawbacks. The first is that they result in stagnation of technological advancements. Since the local producers do not face competition from abroad, they do not have an incentive to keep innovating new products or services. The other drawback is that the laws result in limited choices for consumers. The limitation in the number of imported goods does not leave consumers with much to choose from in the market.
Analysis of the Impact of Prohibition of Discriminatory Tariffs for Data Services Regulation 2016
The implementation of the regulation has resulted in a number of benefits while at the same time drawing some criticism. One of the benefits of the regulation is the adoption of a net neutrality policy in India. Net neutrality refers to a concept of open and equal internet for everyone regardless of the device used, content consumed or application used (Kenton, 2021). By adopting the regulation, companies such as Facebook that had planned a roll out of Free Basics Plan which would allow free access to the company’s social network sites and messaging platforms could not go on with the plan since it would give unfair treatment to limited websites. The regulation is seen as a step toward regulation of all applications and websites regardless of their size thus ensuring there is a fair market.
The implementation of the regulation has also brought about some drawbacks. One of the most prominent is the negative impact on growth of the industry. Discriminatory tariffs are seen as a marketing tool that would facilitate the growth of the internet by making it more affordable and accessible to people. Rajan Matthews, Director-General of the Cellular Operators Association of India argued that adoption of the regulation went against the government’s push for adoption of the internet (Bhargava, 2016). The regulation is also seen to lock out more than 1 billion people in India who would have greatly benefitted from the roll out of the free internet since they may not be in a position to afford non-discriminatory data packages (Bhargava, 2016).