The telecom divide

The Digital Communications Commission’s (DCC’s) approval of a cumulative penalty of Rs 3,050 crore on Bharti Airtel and Vodafone Idea for refusing to provide points of interconnection (PoIs) to Reliance Jio has once again brought out the sharp divide in the industry. The affected telcos have issued statements that legal recourse will be explored. In any case, the DCC, a government panel comprising several top bureaucrats across ministries, is not the last word in the matter. It is for the Department of Telecommunications (DoT) to take a decisive call on the penalty after weighing the arguments of all stakeholders. Incidentally, the DCC (formerly Telecom Commission) and the DoT are both headed by the telecom secretary. The department had set up an expert committee in 2016, when the issue arose, and has been studying the matter for three years.

 

In October 2016, the Telecom Regulatory Authority of India (Trai) had recommended imposing a penalty of Rs 1,050 crore each on Airtel and Vodafone India, and Rs 950 crore on Idea Cellular (before the merger of Vodafone and Idea) for allegedly denying PoIs to then new player Reliance Jio. The Trai recommendation followed a complaint by Jio that over 75 per cent of the calls on its network were failing as incumbents were not releasing a sufficient number of PoIs, which are used to connect two operators’ networks so that a call can be completed. The Trai recommendation of hefty penalties was based on the premise that incumbents, by denying sufficient PoIs to Jio, went against the public interest. The regulator had called these telcos anti-consumer, saying they were stifling competition. However, the incumbents have argued the requested PoIs were provided within the prescribed time limits, adding that those were more than the numbers requested for.

 

There has been much back and forth between Trai and the DCC on penalty, and it should be settled once and for all. Given the argument of those facing the fine, the DoT must examine all aspects before slapping the penalty. The DCC last month approached Trai, seeking a review of the amount of fine. After Trai refused to change its recommendation, the DCC approved the original penalty. Meanwhile, the delay in taking a decision on the penalty is under the scanner of the Central Vigilance Commission. The corruption watchdog had earlier this year asked the DoT to investigate the role of certain officials in delaying it. Recently, the DoT submitted its investigation report to the CVC. Since the issue has taken so much time, the DoT should ensure that all aspects are examined. Also, it would do well to assess how differences can be settled swiftly. This will allow the company managements to focus on business. The industry is under severe financial stress and recent consolidation has resulted in making telecom a three-player industry, which once had more than 10 participants. Any further consolidation or exit will mean the industry will be left with no competition. But there is also considerable merit in the argument that the financial condition of the industry should not be the sole criterion in determining the fine if there has been a violation. What is important, however, is that the decision should be just.