The TRAI had issue the show cause notice on the grounds that MTNL's proposedtariff of Rs 1.40 for a three-minute call was insufficient to cover itscosts and meant that its CDMA-based cellular services were being subsidisedby its basic services. If the MTNL refuses to pay interconnection chargesthen this again would amount to a subsidy from its basic service operations.

While the stay order issued by the high court, was based on the issue ofTRAI jurisdiction, the focus on jurisdiction of the regulator has obscuredseveral important substantive issues, not only the subsidisation issue, butthe absence of a legal regime governing the relationship between CDMA andGSM-based cellular technologies. The regulatory vacuum has, in effect,allowed CDMA technology to be appropriated solely by the MTNL therebydashing hopes of a level playing field between the government and privateoperators.CDMA is a type of technology known as Wireless in Local Loop (WLL)which operates at 824-849 and 869-894 MHz frequencies.

WLL technology permits the creation of a wireless telephone network withoutlaying down fibre optic or copper cables. WLL also has another importantadvantage, that is, the phone provides the user mobility within an area of aradius of 25 km. A person can roam within a certain distance using a WLLphone just like a GSM cellular phone. As many urban subscribers may not roambeyond city limits during their regular business day, the CDMA-basedtelephones compete directly against GSM-based cellular phones in that bothare mobile phones which enable the subscriber to roam within a prescribedarea.

Therefore, notwithstanding MTNL's view that CDMA-based cellular services donot pose any threat to GSM-based cellular services, in fact, the two aredirectly competitive to a certain extent. However, the two technologies havebeen treated in a vastly different fashion by the evolving telecom legalregime.The Indian Telegraph Act, 1885 confers the Union government with theexclusive right to establish, maintain and work `telegraphs' defined as anyapparatus used for transmission or reception of signals, writing, images andsounds or intelligence of any nature by wire, visual or otherelectromagnetic emissions, radio waves, Hertzian waves, galvanic, electricor magnetic means.

WLL systems fall within the definition of `telegraphs' and accordingly, comewithin the purview of 1885 Act. Under the Telegraph Act, a person who seeksto provide WLL-based telephone services will have to obtain a license as aservice provider from the DoT and license to deploy the wireless system fromthe wireless advisor. In addition to the Telegraph Act, the WirelessTelegraph Act, 1933 requires that a person obtain a license in order topossess a wireless telegraphy apparatus. In short, a license is required toprovide CDMA-based cellular services much like other basic and value-addedservices. Thereafter, the regulatory regime diverges.

The National Telecom Policy of 1994 and the Telecom Policy Guidelines of1996 both fail to mention any type of WLL systems, whether CDMA or others.While the 1994 policy envisioned granting of licenses for basic andvalue-added services, no licenses were issued for providing WLL systems.

However, the basic service tender document provided that optical fibre andwireless are the preferred technologies for the subscriber loop and coppercable technology shall not be permitted except over the radial distance ofthe last 500 metres of the loop. In other words, WLL or fibre optic cablesmust be used for the backbone of the telephone network to be rolled out bythe basic (fixed) services providers, and not copper cable. Copper cablescould used only in the last 500 metres of the loop which connects to thesubscriber otherwise known as the `last mile'.

Therefore, WLL appears to be intended to be deployed by basic servicesproviders as a means of avoiding having to lay cables all over India, andnot as part of cellular telephone system.The standard license agreementexecuted by cellular mobile telephone services under the 1994 policysupports the view that WLL was not meant to be used for providing mobiletelephone services.

The license agreement provides that the applicable systems are cellularmobile telecommunication systems conforming to GSM standards issued byEuropean Telecom Standards Institute. The license agreement does not mentionuse of WLL technology to provide mobile telephony, therefore, the privatecellular operators are limited to using GSM technology. Moreover, while thelicense agreement reserves the right for DoT to operate a cellular servicein the area directly or through a public authority, it does not reserve theright for the DoT to do so using other technologies such as WLL.

The regulatory intent that WLL is not meant for mobile telephony is furtherreiterated in the New Telecom Policy of 1999. The NTP 1999 states that theWLL frequency shall be awarded to fixed service providers (FSP) requiringthe same based on the payment of an additional one-time fee over and abovethe FSP entry fee.

The basis for determining the entry fee and for assigning the WLL frequencyshall be recommended by the TRAI. All FSP operators utilising WLL shall paya license fee in the form of a revenue share for spectrum utilisation. Thepercentage of revenue share shall be over and above the percentage payablefor the FSP license as per the TRAI recommendations. The NTP 1999 does notcontemplate that either private operators or the government will deploy WLLfor providing cellular services.

Nevertheless, this year the MTNL announced its CDMA-based cellular servicesas a `poor man's cellular service' which will be much cheaper than theGSM-based services offered by private operators. In effect, MTNL hasappropriated CDMA technology for its exclusive use so as to cut into thecellular operators' market. Although the CDMA-based phone allows thesubscriber only a limited mobility, it provides for the first time in India,an economical mobile phone which the average person can afford. Theexclusive use of CDMA technology by MTNL has been permitted by theregulatory vacuum governing WLL technology created by the failure of eitherthe 1994 or the 1999 telecom policies to provide for licensing of WLLtechnology to private operators and the failure to repeal antiquated 19thCentury legislation as yet another century draws to an end.

The author is a Supreme Court advocate