The TRAI Ordinance: Removing Obstacles for the Industry

The BJP led Government has promulgated an Ordinance on the Telecom Regulatory Authority of India (TRAI) that creates two bodies instead of one, reconstitutes the authority in terms of members and removes the telecom regulator from the jurisdiction of the High Court and the CAG. The telecom regulatory body is the only body that has been removed from compulsory auditing by CAG. Removing the decisions of TRAI from the jurisdiction of the High Court is also equally sensitive. A consumer anywhere in the country, affected by a decision of the regulator, can not now appeal to a High Court in his or her state, but must come to an Appellate body in Delhi.

The question that arises is what was the tearing hurry for such an ordinance. After all, the TRAI Act is now in operation for the last three years and if it had to be amended, it could easily have been done by the due process of amending any Act, that is through the Parliament. For understanding this hurry, we must look at what the industry has been wanting and what have been the roadblocks for the industry in achieving its aims.

The private operators first got rid of their commitments to pay the Government for the licenses: the Government just before the elections agreed to waive off the fixed license fees and asked TRAI to frame an appropriate revenue share as license fee. In the TRAI discussions, the private operators have been arguing for a zero license fee. It is now clear that the so-called revenue sharing arrangement is nothing but a stratagem to avoid paying license fees all together.

Next was the Department of Telecom’s annual surplus of Rs.10,000 crore, which it uses to expand the telecom network. It is this surplus that the private telecom operators have been eyeing for some time. The TRAI has been sympathetic to the private operators and have been apportioning revenue share between private operators and the Department of Telecom (now Department of Telecom Services) in a way that the Department found adverse. The Calling Party Pay (CPP) regime, by which the DoT subscriber pays the local call charges and for air time if he calls a cell phone, was an attempt to pass on a part of DoT’s revenue to the cellular operators. Delhi High Court’s intervention in both the change of license fees case and striking down of the CPP regime had thus set the alarm bells ringing. The private operators and the industry friendly Government thus wanted the High Court’s power of reviewing TRAI decisions to be removed.
Meanwhile, another event occurred to disturb the industry. This was that CAG wanted the basis of computations that TRAI had made regarding tariff fixation, in which it felt that TRAI had unduly favoured the private operators. Therefore the need arose to put TRAI’s decisions beyond the jurisdiction of the CAG. In case the CAG wants to examine the basis that TRAI has used to fix tariff or revenue share, this has now been barred under the Ordinance.

The Ordinance was thus aimed at placing the decision of the TRAI beyond the jurisdiction of the High Court and the CAG. As, under the Ordinance, the new Telecom Appellate Tribunal will review the decisions of TRAI, hence the Government claims there is no need for a either a CAG review or a review by the High Court.  The decisions of the Tribunal can be challenged only in the Supreme Court. In addition to reviewing TRAI’s orders, the Appellate Tribunal is now to have adjudicatory functions in matters involving the licensor (Department of Telecom) and the licensee (the private operators).

The ordinance also has other objectives. TRAI has been arguing that the TRAI Act defines its jurisdiction ambiguously. It had argued that if the regulator does not have powers of fixing revenue share, interconnection charges and tariffs, it cannot effectively regulate the industry. TRAI’s understanding of regulation has hitherto been that its basic task is to ensure competition. For doing this, it had, according to past TRAI functionaries, protect the private operators from the incumbent monopoly operator, namely the DoT. In practice, this form of competition has meant handing over a part of DoT’s revenues to the private operators. It has also lead to high costs for the low-end subscribers. The only ones benefiting from the “competitive” regime of TRAI have been private operators and the well off subscribers. Under the new Ordinance, all the powers that TRAI had been demanding — the right to fix interconnection charges and revenue share between operators — have been now given to it. The only hope now is that the newly constituted TRAI will be fairer than the earlier pro industry and pro elite subscriber one.

In the past, the TRAI has also wanted to decide on telecom policy. The question that arises is what is the accountability of such a regulator? The regulator is not accountable to the people. It is the people of the country that should decide on telecom policy. Thus, the Parliament is the appropriate body that should determine policy. Unfortunately, by giving TRAI complete tariff making powers in the new Ordinance, the Government is allowing the tariff policy also to be the prerogative of the regulatory body. Thus, the people may feel that the telecom tariff policy, in the interest of the nation, should be designed to provide low cost access (rentals, installation charges etc.) as this will lead to much greater teledensity. However, the earlier TRAI members felt that the telecom policy should be to align costs with tariffs and increased access charges. By the current Ordinance, the TRAI has been given sole right to set tariffs and thus removed the Parliament as the forum to decide on such matters.
The regulator should also be transparent in its computations of tariff and other matters. Since it has now been entrusted with administering the licenses, hitherto the preserve of DoT, it should be able to justify its calculations to CAG, as the DoT had to do earlier. TRAI has already locked horns with CAG on this count and has refused to submit its calculations to CAG. With the current Ordinance, not only has it been given greater powers, it has been made virtually not accountable. And this is what the private operators want.

The justification for the unseemly hurry of the Ordinance is the long drawn turf battle that TRAI and the Department of Telecom have been having. However, it is difficult to understand how such turf battles between two parties – TRAI and DoT — can be solved by introducing another new party, the Telecom Appellate Tribunal. In all countries where a regulatory is in place, there is only a regulator and the Government. The chances are that the current confusion over turf is going to be compounded by adding a new party.

Under the BJP regime, the sequence of events in telecom make interesting reading. Jagmohan, the former Telecom Minister was removed, as he wanted the industry to pay the contracted license fees. The High Court has passed judgements against the industry and TRAI on the Calling Part Pay regime. The High Court’s jurisdiction is now being removed. The CAG has made adverse remarks against TRAI, and also on the Government on shifting from a fixed license fee to a revenue sharing regime. The CAG’s jurisdiction over auditing TRAI’s actions is being removed. While all this is being done to help the industry, the slogans of increased teledensity and rural telephony, are all being forgotten.