While initial decisions of the Trai may well seem to point it out to be the latter, the fact that all its decisions have been challenged at the high court level raises questions about its actual powers .While the private operators seem to be elated with the functioning or rather the rulings of Trai, it certainly has created bad blood between the Department of Telecommunications (DoT), and Trai.

DoT feels that the regulator is taking an anti-incumbent stand. This has led to fears among the private operators that DoT is moving towards clipping the wings of the "independent regulator."

Both lenders as well as private operators feel that this has risen out of one factor--a percieved feeling in DoT that Trai is taking an anti-incumbent stand (against DoT/Mahanagar Telephone Nigam Limited (MTNL).

According to DeutscheBank: "Due to the decisions pronounced by the Trai, including the quashing of additional STD charge in non-metro circles, providing multiple points of inter-connect and disallowing MTNL to provide cellular services in the metros, the confidence of private operators in the regulatory authority has increased.

This has, however, led to a stand-off between Trai and DoT/MTNL due to its percieved anti-incumbent operator stand."

Adds ABN Amro Bank's structured-finance country head Ravi Suri, "Trai and DoT have been engaged in a dispute over Trai's role in issuing new licenses. This continues to be an area of uncertainty, especially with the matter before the high court and DoT seeking amendments in the Trai Act." Trai's role in the area of licensing came to a flash when the regulator invalidated MTNL's licence to provide cellular services in Mumbai and Delhi.

This inspite MTNL claiming that it had the license since 1986. While MTNL is contesting the Trai decision with the Delhi high court, DoT says thatlicensing does not come not under the Trai's purview.

Says Bank of America's (corporate finance) head Sunil Gulati: "The issues of interconnection, role of government-controlled organisations, role of DoT, are all contentious issues and also interlinked because of the multiple roles of DoT as the operator, licensor and also as a quasi-regulatory body."

Adds ANZ Investment Bank's assistant director, global media and telecom group, Ashok Pandit, "At present, there seems to be problems between the DoT and Trai, which is slowing down the reform process. This problem needs to be sorted out at the earliest in order to get the sector back on track."

So, what needs to be done to end this stand-off between DoT and Trai? Both private operators and lenders say that the licensing authority should not be vested with the DoT and that it should be taken away from it--differentiate between DoT the licensor and DoT the operator. They feel strongly that DoT (the operator) should then be made to compete with the privateoperators on an equal plane.

Deutsche Bank says: "The duality of the role of the DoT as the operator and the licensing authority needs to be separated, and all licensing, interconnect and related issues, need to be brought under the purview of the Trai."

"A speedy resolution lies in making Trai, a powerful regulatory body independent of the DoT and government, and clearly defining its role to cover all aspects from licensing, interconnection, spectrum management, tariffs, with all operators, including DoT, coming under its ambit," says Bank of America's Gulati.

What is pushing the lenders to ask for a speedy resolution of the issue of strengthening the Trai and differentiating between the licensing and operating arms of DoT is the fact that so many contentious issues have cropped up even before the private basic service operators begin their services and lending to them starts in full swing.

Lenders point out that basic services projects will require much more investments compared to the cellularprojects, about Rs 4,000 crore in the first three to four years compared to about Rs 1,000 crore for cellular ventures, and if the issues are not sorted out financing these mega projects will become increasingly difficult. At present, only a handful of basic service operators have signed the licence and interconnect agreements and the first of the networks are just beginning to roll out.

The need to solve the contentious issues, especially the issue of licensing authority and independent and powerful regulation, becomes more urgent as the opening up of domestic long-distance services, which is the cash cow in telecom services, to private operators comes up for review next year (1999).

As per the National Telecom Policy of 1994, DoT was given a monopoly in domestic long-distance services till 1999 and VSNL a monopoly in international traffic till 2004, after which it will be reviewed whether to open up these services for private competition or not.

Private operators wanting to provide long-distanceservices are keen to have an independent licensing authority and a strong regulator in place by the time the service is thrown open to private sector. If the problems are not solved, it again raise problems of interconnection, tariff regulation, which both lenders as well as prospective operators want to avoid. However, everyone, including the government, understands the need to strengthen the Trai and to differentiate between DoT the licensor and DoT the operator.

In fact, the government has acknowledged the need to reorganise DoT into one or more separate operating companies. But as lenders pose: the question is how soon will the government do it?