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Close on the heels of the Delhi High Court
striking down crucial "decisions" regarding
service provision and interconnection taken by the Telecom
Regulatory Authority of India, the cabinet has decided
to institute via an ordinance a whole new regulatory
framework. There are three departures that are to be
made in the new framework. First, a leaner regulatory
authority, which must be mandatorily consulted by the
government, is to be given well defined powers to investigate
and make recommendations with regard to a range of issues
varying from conditions and timing of entry and technology
choice to service standards and interconnectivity charges
and tariffs. Second, these recommendations are not to
be mandatory on the government, which has the right
to accept or reject them. Finally, the TRAI has been
stripped of its quasi-judicial powers, but disputes
relating to the policy or charges imposed must be taken
by service providers to a telecom dispute settlement
and appellate tribunal. Any appeal against the judgements
made by the tribunal can only be filed in the Supreme
Court.
These revisions are expected to deal with the lack of
clarity with regard to the TRAI's powers, as well as
the fallout of the High Court judgement striking down
the TRAI's controversial Calling Party Pays ruling with
regard to calls made from fixed to mobile phones. The
High Court reportedly held that: "TRAI cannot lay
down the terms and conditions to service providers on
introduction of telecom service, installation of equipment,
technology and regulate in respect of the telecom industry."
It said that the regulator's powers in this regard were
only "recommendatory" and the Government was
not bound to abide by the proposals.
Introducing greater clarity regarding the powers of
different institutions constituting the regulatory framework
is, no doubt, a positive step. Over the last three years,
despite the existence of a TRAI Act, which defines the
role, powers, and jurisdiction of the regulatory authority,
the TRAI has repeatedly sought to extend its brief,
putting it on a collision course with the government.
In this it has implicitly and sometimes explicitly used
three arguments. First, that by combining in itself
the roles of policy maker, licensor and operator, the
Department of Telecommunications has the ability to
dilute or sabotage the government's liberalisation drive,
which threatens the monopoly profits that service providers
under its control have earned in the past. Second, that
an inappropriate licence fee structure that had emerged
out of the process of auctioning licences to the highest
bidder, adopted before the creation of the TRAI had
resulted in inadequate entry by private operators, especially
in basic services. And third, that appropriate regulation
requires the TRAI to have a say in the determination
of all aspects of telecom policy, including licensing
issues such as the introduction of new service providers,
compliance with licence conditions and revocation of
a licence. This implies that the jurisdiction of the
authority covers not merely service providers, including
the service providing divisions of the DoT, but also
the DoT as a policy maker and licensor.
In addition, the TRAI has tended to behave as if its
role in this enlarged jurisdiction is not merely one
of advisor but a decision maker whose decisions are
binding on both the government and the private operators
alike. This unilateral interpretation of the law, which
the TRAI went about implementing in practice, resulted
in a most unsavoury situation. First, it led up to a
series of disputes between the DoT and MTNL one the
one hand and TRAI on the other, souring the relationship
between the two. Second, it encouraged private operators,
who found themselves unable to meet financial and other
commitments made when bidding for licences, to use the
TRAI as the means to stall permissible penal action
against them. Influenced in part by its own conflict
with DoT, the TRAI has tended in these instances to
rule in favour of private operators, inviting the allegation
of partisanship. In the event, the TRAI found itself
dragged to the courts which were called upon to interpret
the existing law defining the Authority's powers (See
accompanying Box). The court's decisions thus far have
made it quite clear that the TRAI had clearly gone beyond
its brief, necessitating the current exercise to restructure
the regulatory framework.
But the new initiative does little to resolve the issues that
arose during the course of liberalisation and the TRAI's
initial tenure, relating to the likely consequences
of the opening up of the telecom sector (i) for the
spread of the telcom network; (ii) social benefits of
competition; and (iii) the objectives and feasibility
of regulation.
The Court
as Arbiter
The decision of the government that the TRAI would not have
the power to adjudicate in disputes between the DoT
as licensor and the private operators as licencees merely
incorporates into the legal framework a judgment that
had been arrived at by the courts in cases which
challenged the TRAI's tendency to unilaterally assume
such powers. Those cases were of two kinds. Those that
challenged the TRAI's effort to intervene in disputes
between the DoT as licensor and private operators as
licencees, over issues regarding the implementation
of the license agreement. And those that challenged
TRAI's claim that it had the right to decide on the
need and timing of entry of new operators.
The first of these became a problem when the TRAI decided
to hear a set of petitions filed by private operators
in the paging and cellular businesses against the effort
of the DoT to encash bank guarantees in lieu of unpaid
licence fees and revoke licences in some cases on account
of non-payment of licence fees. Among the cases before
the TRAI were petitions filed by Netherlands India Communications
Ltd, Fascel Ltd, ICNET, Marcstat Communications, Koshika
Telecom, Reliance Telecom, Bharti Cellular and Modi
Korea Telecom Ltd. The hearings in many of these cases
had to be stalled because the DoT filed appeals in the
Delhi High Court, saying that TRAI was not competent
to hear disputes between DoT (the licensor) and the
licensees. It argued that under the conditions of the
licence, disputes were to be settled through arbitration
by an arbitrator appointed by the licensor. Following
this appeal, the Delhi High Court stayed further proceedings.
TRAI on the other hand held that DoT should not invoke
the arbitration clause in the interests of justice,
since it was one of the affected parties.
The second controversy dragged to the courts was the
decision of TRAI to insist that it had the right to
decide on the need for and timing of entry by new operators
into various telecom sectors. The clinching case in
this regard was the was the controversy over the decision
by Mahanagar Telephone Nigam Ltd. to launch cellular
services based on the CDMA technology.
On the basis of a petition filed by cellular operators
with the TRAI, the Authority issued an order in January
1998 directing MTNL to desist from launching cellular
services till it has decided on the matter. Among the
questions raised by the cellular operator's association
was the right of the government to provide a licence
to a new service provider without referring the matter
to the TRAI. A month later the TRAI ruled that MTNL's
licence to enter the cellular mobile and paging services
business was invalid, since the Authority's recommendations
were not sought before the licence was amended in October
1997 to include the above services. It held that
the Government would have to mandatorily seek the recommendations
of the Authority on all matters pertaining to licensing
including those that involve introduction of a new service
provider. The TRAI simultaneously held that "the
Internet policy, which was formulated and announced
by the Government without obtaining TRAI's recommendation...
cannot held to be valid." The order also held invalid
the revocation of licences of paging service operators,
since no recommendations were sought from TRAI.
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