Why Trai wanted to send telco chiefs to jail but had to back down

The past week has been one of 'u-turns'. First, it was the Union Minister for Communications and Information Technology Ravi Shankar Prasad backing down from his earlier stance of being open to vesting more powers with the Telecom Regulatory Authority of India (Trai), and now it is the Trai chairman R S Sharma who is seen to making a u-turn from his earlier demand of jailing telecom executives. Earlier this month, the Trai chairman wrote to the Department of Telecommunications (DoT) seeking additional powers to levy penalties up to Rs 10 crore and imprisonment of up to two years for telecom executives who did not comply with the authority's regulations. Union Minister Ravi Shankar Prasad too has endorsed such a demand by the regulator at least on two occasions, but with the DoT taking a divergent view on the matter, both the minister and Trai chairman have backed off.

Even as the DoT has confirmed such a move by the regulator, the Trai chairman has clarified that the authority has not sought powers for it to jail executives. Instead, news reports suggest that Trai has only sought "strengthening of the Trai Act under which a competent court may imprison those who don't follow rules". Clearly, the ministry believes that it has the requisite powers it needs to discharge its mandate, which is to protect consumer interest and promote the industry's orderly growth. Officials within the government claim the regulator's explanation should be viewed as nothing more than semantics and that truth is that the chairman had over-stepped his brief.

Ever since the call drop regulation was struck down by the Supreme Court, Ravi Shankar Prasad has stated that the government was open to amending the Trai Act to vest more powers with the regulator. In response to a question raised in the Parliament by Rajya Sabha MP Rajeev Chandrasekhar, Prasad had said on May 6, 2016, "The proposal to amend Trai Act is under consideration, which also addresses issues of consumer interest/protection."

Again in an interview on June 4, the minister told news agency IANS: "If Trai approaches us in a structured manner about the legal architecture we will consider it with an open mind." On June 1, Trai had sought more powers from DoT. However, on June 9, the minister had shot off a letter to Rajeev Chandrasekhar stating that the Trai has wide ranging powers and that no amendment to the Trai Act was required at this juncture.

But clearly there has been a change of heart after DoT secretary J S Deepak made it clear that such powers were not called for. What this also suggests is that conversation between the regulator and industry has completely broken down and that the regulator believes that its mandate is to beat down the evil operators. By asking for more powers, insiders claim that the regulator wants more powers to ensure telcos do not go against its decisions, as they did in case of the call drop penalty rule. When Trai chairman informed the industry late last year that it was going ahead with the regulation, then Cellular Operators Association of India (COAI) chairman and chief of Idea Cellular Himanshu Kapania was forced to convey to the chairman the industry's inability to comply with such an order. In case more penal powers are granted to Trai, experts claim that any refusal to comply with the authority's rules could result in a jail term.

Interestingly, the preamble of the Trai Act states that the regulator's remit is to protect consumer interest and ensure orderly growth of the sector. Of late, observers claim that the regulator is more focused on consumer interest than orderly growth of the sector. The punitive powers sought by the regulator implies the same. This is also the view of the Supreme Court. In its order on call drops, the apex court says: "In attempting to protect the interest of the consumer of the telecom sector at the cost of the interest of a service provider who complies with the leeway of an average of 2 per cent of call drops per month given to it by another regulation, framed under Section 11(1)(b)(v), the balance that is sought to be achieved by the Act for the orderly growth of the telecom sector has been violated."

Insiders claim that the ongoing battle between the regulator and the industry is not being viewed kindly by foreign investors. A fund manager with a leading foreign fund says the industry is at an inflexion point and needs to invest Rs 15 lakh crore to expand its data footprint in India. With a debt of Rs 3,00,000 crore, telcos are not equipped to make such investments on their own. Unfortunately, foreign investors have lost appetite, thanks to falling profitability, hyper competition and regulatory challenges facing the sector. The constant bickering between industry and regulator will only put more hurdles on the sector's growth.

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