Imposition of penalty on Bharti Airtel, Vodafone, Idea Cellular: A case of might is right

By: |
Published: January 20, 2017 5:05:35 AM

Trai’s argument does not hold in the case of imposition of penalty for QoS and interconnection default

traiMedia reports suggest that the AG has given his opinion upholding the recommendation made by Trai for imposition of penalty on three operators, i.e. Airtel, Vodafone and Idea. (PTI)

Might is right refers to the idea that people who have power can do whatever they want. When they have the might to do something, it can automatically be seen as morally right even if it really isn’t. Some of the recent actions, reactions and counter-actions concerning the battle between Trai and telecom operators concerning the interconnect, quality of service (QoS) and tariff issues arising out of the complaints of another operator seem to have been caught in this phrase.

Let us examine this in the light of recent developments. Media reports suggest that the AG has given his opinion upholding the recommendation made by Trai for imposition of penalty on three operators, i.e. Airtel, Vodafone and Idea. The AG appears to have based his opinion on the grounds that:

*Regulator has discharged functions properly U/s 11(1)(a)(iii) of the Trai Act
* The act of the telecom service providers (TSPs) is against public interest
*They have failed to comply with QoS regulation, and licence conditions

All in the name of Act

The Trai has discharged its functions, however, whether TRAI exercised its authority fully and diligently under all the other relevant provisions of the Act is something that remains to be seen Under section 11 (1)(b) of the Act, Trai inter alia has the authority to discharge the following functions, namely: –

(i) ensure compliance of terms and conditions of license;(ii) notwithstanding anything contained in the terms and conditions the license granted before the commencement of the Act, fix the terms and conditions of inter-connectivity between the service providers;(iii) ensure technical compatibility and effective inter-connection between different service providers;(iv) regulate arrangement amongst service providers of sharing their revenue derived from providing telecommunication services;(v) lay-down the standards of QoS to be provided by the service providers and ensure the QoS and conduct the periodical survey of such service provided by the service providers so as to protect interest of the consumers

The above provisions provide Trai authority in respect to interconnection and QoS. It is fair to expect that Trai should constantly endeavour to review its regulations in order to make them suitable for the changing environment. Disputes between the operators on setting up interconnection are not new and are a subject matter of controversy since privatisation. Therefore, the obvious question is why has Trai failed to come out with interconnection rules and regulations which are foolproof and provide a mechanism for fast and efficient interconnection between the operators?

When the regulator was aware that a big operator is going to enter the market and interconnection could be a serious concern it should have taken steps to come out with new regulation? The regulator is expected to be acting as watchdog, but unfortunately has failed to exercise its authority given to it under the Act.

Moreover,we just examined that under section 11, Trai has authority to make regulations on several matters. As per section 13, it also has the authority to issue directions. The authority may, for the discharge of its functions under sub-section (1) of section 11, issue such directions from time to time to the service providers, as it may consider necessary. The act further provides that no direction under sub-section (4) of section 12 or under this section shall be issued except on the matters specified in clause (b) of sub-section (1) of section 11. This matter clearly and squarely falls into the category of section 11(1)(b).

AGs opinion takes note of the fact that Trai exercised this power and a direction was issued to the defaulting operator(s) . If this was done, Trai had the power under section 30 to impose a fine, which may extend to R 1 lakh, and in case of second or subsequent offense with fine which may extend to two lakh rupees and in the case of continuing contravention with additional fine which may extend to R2 lakh for each day for which the default continues. But it chose not to exercise this authority.

Second, Trai erred in combining the two issues of interconnection and QoS into one cause of action. Both are regulated by an independent regulation. Then why did it not opt to invoke the cause of action separately. Thus, Trai has exercised its power selectively and decided to pass on the buck to department of telecom (DoT).

Against public interest

No doubt that the public interest is paramount. But is it fair to assume that the public interest was affected only due to the action of three operators? Is it not wrong on the part of the complaint operator to have acquired customers by misrepresenting and assuring to provide good quality service,when they know that they will not be able to fulfil this commitment. As if this was not enough the services were offered free of cost which created huge requirement of interconnect capacity which was not sufficient to even meet the normal requirement. Here, again neither Trai nor the other operators forced this operator to offer free services. Before offering these services they should have made a reasonable calculation with regard to interconnection capacity. In case the capacity was not adequate they should not have offered the services free of cost or would have delayed providing services until they got sufficient capacity. Here again in the enthusiasm to quickly acquire customers they chose to give a go by to the QoS and decided to take the customer for a ride. Can a customer be taken for a ride because the services offered are free or partly free? Could TRAI exempt an operator from QoS compliance because services offered are free or partly free? Unfortunately, here again the answer is no. Learned AG seem to have ignored that if public interest was compromised, it was not by three operators but by four, including the complainant.

QoS violation

Being a telecom licencee under the Telegraph Act, the complainant is covered within the meaning of service provider under the QoS regulations. Therefore, it should be equally responsible for the QoS compliance as any other operator. If this is true, then how can the operator who is complaining about others be exempted from the action for non compliance.

QoS regulation does not provide that in case any service provider is not able to meet the parameters due to lack of interconnect capacity provided by any other operator, then such operator should be exempted from compliance.I n fact, the issue was specifically reviewed by Trai while framing regulations

In this connection para 4.7(2) & (3) of the explanatory statement under the main QoS Regulation is relevant which records that the operators had raised an issue with the regulator, that the issues that are not within the control of operators should be excluded such as fiber cut, other operator in granting E1s due to port/equipment issues, outages due to other operator, important festivals, force majeure and natural calamity. Trai while coming out with the final regulation observed that the service providers and consumer organisations have generally agreed with the benchmark for the PoI parameter. As such, the authority has prescribed the benchmark of = 0.5%. As regards the suggestions to exclude issues that are not in control of the service providers, the authority is of the view that only performance affected due to force majeure conditions need be excluded for calculation purpose.”
Certainly lack of interconnection capacity does not fall in the category of force majeure, and therefore, on this ground again Trai’s action get tainted with discriminatory practices.

Predatory pricing

The most recent development as reported by media is that Trai is seeking opinion from Attorney General on predatory pricing. It is surprising as to why it is required now when in the past Trai has decided on its own. It has all resources on its command including the economic advisor, financial advisor who are competent to look into the economic aspects and issues of predatory pricing. Very recently, in the matter of “Welcome Offer”, it decided that the offer was not predatory.

Whether the AG opinion is maintainable or not, whether the penalty, if imposed, will be sustainable or not, the matter will now get settled in the courts of law.
The regulatory bodies, however, in a democratic set up are expected to look at the issues with dispassionately and in a non-discriminatory and transparent manner.

The author is founder and CEO, Tathya Consulting. Views are personal

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Budget 2017: How Arun Jaitley can cut everyone’s tax burden, pay the poor and still be revenue neutral
2Between taxman and PM Narendra Modi comments, investors running scared
3Fixing education: Linking teachers pay to outcome a must