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ICLE files comments on the Telecom Regulatory Authority of India's Consultation Paper on Differential Pricing for Data Services PDF Print E-mail

Last week ICLE filed comments responding to the Telecom Regulatory Authority of India's Consultation Paper on Differential Pricing for Data Services.

Our comments explain why banning "zero-rating" and other "differential pricing" business models in India would be a costly mistake for the country. As we note in our comments:

The approach taken in this Consultation to the the question of competition and consumer harm risks putting the cart before the horse. Before special rules are crafted to attempt to address perceived threats to consumer welfare, existing and effective rules of general applicability can and should be employed to address actual harms: most significantly, the well-developed principles of competition law that have been in force in India since the enactment of the Competition Act in 2003.

Importantly, competition laws are typically employed to address actual harms on a case-by-case basis, generally eschewing per se condemnation of business arrangements (like vertical integration) that impair competition only in limited circumstances. The error costs of over-enforcement of TRAI’s principles of transparency and nondiscrimination. likely threaten more harm than do the risks of underenforcement.  In the face of rapidly accelerating technological changes — which will continue to present new and unanticipated possibilities for different tariff models — an effects-based approach under the competition laws that conducts an ex post analysis of conduct would be far more prudent. Instead of foreclosing or mandating specific conduct, such an approach would permit and foster experimentation, innovation and technological development, intervening only where actual competitive harms develop.

TRAI has a commendable history of “light touch” regulation of tariffs, reflecting the Authority’s understanding that proper regulation leaves room for market players to adapt technology and to tailor their services to evolving consumer demand. There is nothing new or unique about internet companies that would justify breaking from this approach — in fact there is much to be gained in continuing to allow differentiation as internet platforms discover better ways to enhance consumer welfare.

We've discussed non-neutral pricing and related issues extensively in the past -- see, among many others:

Our full comments to the TRAI are available here.

ICLE files position statement in EU Digital Single Market Strategy Platform Consultation PDF Print E-mail

Last week ICLE submitted its answers to survey questions and a separate position statement to the European Commission in the Commission's Consultation Regarding the Regulatory Environment for Platforms, Online Intermediaries, Data and Cloud Computing and the Collaborative Economy -- part of the Commission's Digital Single Market Strategy.

As we note in the introduction to our position statement:

By “tuning” the cross-border regulations that can impede efficient markets, for example by examining where specific legislation doesn’t work (e.g. data localization) and where it can  (e.g. geo-blocking), the DSMS can function as a sort of “digital free trade agreement” among the EU member states. In this regard the DSMS offers the possibility of important welfare-enhancing regulation; free trade has consistently been found to be beneficial for consumers around the globe.

It is critical, however, that the DSMS is not used to enforce a “lowest common denominator” regulatory scheme, employed to shoehorn innovative and valuable business models into a framework that curtails experimentation and competitive differentiation. The platform portion of the inquiry, in particular, would rely upon such a broad definition that many entities not previously subject to certain regulations may struggle under the weight of compliance. This could be particularly costly for new entrants without the resources to interpret and adapt to confusing issues of liability and perceptions of harm. 

* * *

Any rules that result from this Consultation must be grounded in cost-benefit analysis and concrete and identifiable harms. As constructed, the questionnaire used to request input seems better-suited for collecting competitor complaints than for obtaining the evidence required for rigorous economic analysis. Under an error cost framework, socially optimal rules are those that minimize the expected social costs of false acquittals, false convictions, and administration. Typically this means competition authorities engage in case-by-case analysis of potentially anticompetitive conduct ― comparing the expected costs to consumer welfare with prospective efficiencies. Conduct is condemned on a per se basis — ex ante — only if there is long-standing experience and economic evidence that the conduct is always or almost always harmful.

The Commission has no such basis to assume that the issues presented by platforms, intermediary liability, geo-blocking, and the like are really best served by new ex ante rules without evidence about perspective harms and potential benefits from concrete conduct. 

Importantly, the decision with respect to a new regulatory regime for online platforms is not made in a vacuum; rather, it is a choice between existing rules and the proposed alternatives. Justifying new rules demands a comparison to existing rules, meaning rigorous evidence not only that there is a problem, but also that any problems will be better addressed by new rules than current rules. No regulatory regime is perfect. Even if there are some identifiable problems with the current rules, that alone does not mean that any particular proposed new rules are preferable. The Commission should carefully consider existing law (like competition and consumer protection laws at both the EU and member-state levels) and whether new rules will bring the overall regulatory scheme closer to the optimal level.

Our full statement is available here, and our survey responses with extended answers are available here.

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