Toothless Tiger: Between court cases, Trai can’t regulate the industry

These cases are being filed by incumbent operators, Airtel, Vodafone India and Idea Cellular. They say that the new Trai regulations are designed to favour one operator—Reliance Jio. Trai’s counter-argument is that these changes become necessary as India moves towards data-based networks.

But things weren’t always like this.

Trai was established 21 years ago to regulate mobile telephony, which, back then, had only 14.5 million users. Gradually, its scope was expanded to regulate multiple information and communication technologies (ICT). This included internet, television, DTH and radio. Today, all these technologies are converging on smartphones. Hence, Trai’s regulation of the industry in a neutral and impartial manner has become critical.

As a regulator, Trai has not shied away from taking bold decisions to ensure an orderly growth of the ecosystem. For example, in 2007, it passed a regulation which required all DTH operators to offer TV channels on an à la carte basis and said that they could not compel customers to subscribe to a bouquet of channels. Eventually, it fixed bouquet tariffs on DTH for consumers and also made pay channels possible.

Variety of factors

But today, that boldness looks partisan. In February, over a Telecom Tariff Order (TTO), Trai changed the definition of an SMP. The order required that SMPs (read as Airtel, Vodafone and Idea Cellular) would have to disclose all their tariffs on an online portal to prevent predatory pricing. But this new definition did not take into account two crucial parameters in place for over 20 years. “As per the earlier definition, [an SMP] had four different aspects to it. There was revenue market share, customer market share, and in addition to that, there was also the data market share which included traffic volume and switching capacity,” said a senior executive at Idea Cellular. He requested not to be named as the matter is being heard in court.

“Now, in an environment where data is the new oil and everything is leading to data, the regulator has very conveniently removed data as a base of measurement of SMPs, and seems specious at the best,” he said. But not counting Jio as an SMP is the main grouse of the incumbents. Because, be it data traffic, voice calls, or revenue (latest quarter), it’s by no means less than a significant market player. It is also estimated to overtake others in another domain—subscribers.

Trai, on the other hand, believes that the TTO had to be amended to bring in “more transparency” for customers.

“Basically, we are like a toothless tiger and we have to ask for compliance reports. If [incumbents] don’t comply with the regulations, we can’t do anything as the court said that we can’t take any coercive action till the court hears the matter,” the Trai official quoted above says. Earlier this week, Trai approached the Delhi High Court seeking relief from the Tribunal’s order, but the court saw merit in the three telcos’ argument. The Madras High Court, too, agreed with Vodafone India against the tariff order.

That’s strike one against Trai.

Call drops complication

In August 2015, Prime Minister Narendra Modi expressed concern over calls getting disconnected and urged officials and telecom companies to fix the rampant call drops in the country. RS Sharma, Trai’s chairman, issued a consultation on call drops after several consumer complaints. The regulator conducted Independent Drive Tests through June and July 2015 in Delhi and Mumbai and found that the call drop rate of most telecom service providers was higher than the benchmark of <=2%. In some operators, the rate was as high as 17.29%.

So Trai decided to wield its stick.

Two months later, it asked all telcos to pay Re 1 to compensate consumers in case of call drops. However, this was limited to three instances in a day. Unsurprisingly, carriers were upset with the new regulation and approached the Delhi High Court which upheld the regulation. The telecom operators then appealed to the Supreme Court which struck down the regulation in May 2016 saying that the fines were “arbitrary, ultra vires [or beyond their authority], unreasonable and not transparent.”

The courts don’t look favourably upon such penalties, says Rajan Mathews, the director general of telecom lobby Cellular Operators Association of India (COAI). “You have to show, first of all, the extent of the damage. So they try and parse it in terms of ‘what is the alleged harm that is being caused?’ and there has to be a proportionality to the issue, and you can’t just take the maximum penalty and then throw that at somebody,” he says.

That’s strike two against Trai.

 

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