Dots Crossed Connections
Its less than two weeks to Christmas, 1997. But theres little sign of cheer in T V Ramachandrans smoky office on the exclusive Hailey Road in New Delhi. The executive vice-chairman of the Cellular Operators Association of India (COAI), a fledgling but increasingly powerful lobby, is a harassed man. Have you seen it? the usually jovial TV (as Ramachandran is called) asks, referring to a newspaper report featuring comments from S S Sodhi, chairman of the Telecom Regulatory Authority of India (TRAI).
Under a headline TRAI not averse to MTNL entry into cellular services, Sodhi is reported as saying that he sees no problem with MTNL (Mahanagar Telephone Nigam Ltd), the fixed line services provider in Mumbai and Delhi which is under the department of telecommunication (DoT), starting a cellular service in the cities. Its permitted under the licence conditions. Weve to examine the terms and ensure a level playing field, goes the quote.
A cellular telecom CEO echoes TVs sentiment: How can he say this? The matter is before the TRAI. Imagine the judge in a case commenting on the case before he hears arguments! He is referring to a COAI letter sent to TRAI late last November which complains about MTNLs cellular foray, which is scheduled for 1998. and partly for which it has raised a $420 million GDR issue.
On Tuesday, February 17, over two months after the report that irked him, TV hastily heads out of a telecoms conference in Cannes, France, his cellphone buzzing. COAIs lawyer Manjul Bajpai is on the line. TVs immediate reactions on being told that TRAI has ruled in COAIs favour are not known, but the news could hardly have upset him.
Admittedly, the COAI-MTNL battle is far from over. There are the high courts and Supreme Court that MTNL and DoT, the telecoms policy-maker and largest operator, will appeal to, but legal experts believe winning round one was extremely important for both sides.
For DoT, there is a certain irony in TRAIs ruling. Says Mahesh Uppal, a Delhi-based telecoms consultant, who specialises in regulatory affairs: While setting up TRAI, the intention seemed to be keep it out of licensing. But Sodhis judgement stuck strictly to the letter of the (TRAI) Act, (1997). So suddenly the monopolist which performed regulatory functions with overweening powers found itself at the receiving end of a regulator it created early in 1996.
What caused the chief telecoms regulator and his deputy, B K Zutshi, the dapper former Indian ambassador to WTO, to change their stance between December and February?
The answer partly lies in some shrewd legal consultations between COAI lawyers Gopal Subramaniam and Bajpai.They pointed to three seemingly innocuous transgressions from the metro cellular conditions.
One, they said, the tender of January, 1992, which opened telecoms to private participation, stated that, besides the two telecom licensees, the telecom [or licensing] authority reserved the right to enter cellular services. The question was who qualified as the telecom authority. Under the Indian Telegraph Act, 1885, the telecom authority is defined as the director-general post & telecommunications, which in more current times means the telecom secretary representing DoT. Subramaniam argued that MTNL, which comes under DoT, was not the authority so it did not qualify to enter cellular services.
Next, it was stressed, the licence tender allowed for only two operators per service area. The entry of MTNL would violate this condition. Finally, it was pointed out that the entry of MTNL into cellular services was a violation of clauses under Section 11 of the TRAI Act, 1997, which clearly states that the government should ask for the telecom regulators recommendations over the need and timing of entry of a new service provider. In not consulting TRAI, the cellular operators said, DoT (or the government) was deviating from this clause.
Touche. By implying that the government had infringed on laws that are key to TRAIs survival, the operators had turned the tables on DoT. In a way the interests of COAI and TRAI are common, says an analyst.
To make matters worse, DoT blissfully unaware that it was on a sticky wicket took its own time replying to a TRAI letter asking for details of the governments Internet policy. Says an indignant Sodhi: When we read press reports on the Internet policy as far back as November 1997, we wrote to DoT asking for details. We asked for a copy of the [Bimal] Jalan committee report so that we could give them (DoT officials) our views. There was no response for two months.
In January, he adds, we were sent a press release on the guidelines of the policy. In a separate letter we were told that the Jalan committee report was a confidential document and could not be given to us. We are not the general public. We had not asked for any cabinet note, only the committee report.
In the case of a TRAI letter seeking information on MTNLs cellular plans, DoT did not reply even after three weeks. This was interpreted as delaying tactics. Telecom secretary A V Gokak sought to explain that the delay was because the DoT brass was busy with the GDR issue. But the move to clip TRAIs arbitration powers (see box) over issues pertaining to the licence agreement started then. And the origins of the Gokak-Sodhi (a proxy for government-TRAI) spat lay here.
It was easy now to predict the outcome. Despite a last minute scramble by S Rajagopalan, chairman and managing director, MTNL, and a team led by N R Mokhariwale, a senior deputy director-general with DoT, the die was cast. The departments hopes that the inclusion of the third TRAI member N S Ramachandran, the former chairman and managing director of MTNL would help its case, were dashed when Sodhi directed that a twin-bench comprising himself and Zutshi would hear the petition. (Former railway board chairperson, M Ravindra, the fourth member, had not been inducted then. He assumed office in the second week of January.)
There are two contrary views on this. One, Ramachandran, who was visiting relatives in the United States in preparation for his daughters wedding, did not want to be part of the bench citing conflict of interests since he was at MTNLs helm barely a year ago. The second view not so charitable to TRAI was that he was directed not to come back until the bench was constituted. Of course, no one confirms either of the views, but Sodhi defends his decision saying that the TRAI Act allows for a petition to be heard only with a twin-bench.
The direction the case would take was evident from the second hearing on January 13. (Earlier, TRAI had stayed status quo MTNLs cellular plans on January 6.) Sodhi ruled that the preliminary issue was whether the government should have sought under Section 11 TRAIs recommendations before giving the go-ahead to MTNLs cellular plans.
Both Sodhi and Zutshi kept quizzing K N Bhatt, additional solicitor general representing DoT, on the departments interpretation of the lynchpin Section 11 of the TRAI Act. There are two questions here, surmised Zutshi. One, should the government seek the recommendations of TRAI and, two, whether these recommendations are mandatory or not. An uncomfortable Bhatt parried the question and sought more time to discuss with the government and MTNL and come back before the authority.
Remarks Uppal: It was clear from the beginning that DoT and MTNL were ill-served by their own staff and representatives. There was a huge qualitative difference between people of the two sides. Before allowing Bhatt his request for an adjournment, TRAI rejected a plea to vacate its January 6 stay on MTNLs cellular plans. This upset MTNLs Rajagopalan, who went back to office and requested DoT permission to hire a separate lawyer for MTNL. Once granted, this set off rumours that the Rs 4,300-crore telecom utility was going to hire a battery of lawyers.
Meanwhile, DoT prepared a cabinet note in a bid to curtail TRAIs powers. The note, which was alleged to be the precursor to an ordinance, sought to pare the regulators jurisdictional powers over disputes arising out of licence-related issues.
The note set off a chain of events. Not only was it stoutly opposed within New Delhis corridors of power, it peeved TRAI no end. Officially, Sodhis reaction was that the government should not make any changes in the TRAI Act without consulting the regulator. But, privately, the members were seething that the government could attempt something as furtive. It is clearly a turf war. DoT officials see their powers being challenged, a TRAI official protested. Some even claimed that the note had the tacit blessing of the top echelons of the bureaucracy. Significantly, Rajagopalan and other top MTNL officials then stopped attending hearings.
The DoT note, which it is claimed was deliberately leaked to the press, was a godsend for the private operators. Representing some of Indias most powerful industrialists hoping to ride the telecoms boom, trade associations swung into action. Matters unfolded quickly after that.
On February 4 the third hearing MTNL had a new face representing it at the TRAI hearing: Dipankar Gupta. In response to his learned colleague Subramaniams argument that MTNL was a new service provider and hence should be governed by Section 11 of the TRAI Act, Gupta submitted documents that sought to prove otherwise. The docket comprised extracts from MTNL telephone directories advertising its car-phone service and bills issued on the service to Delhi customers. Sodhi reluctantly adjourned.
February 11. Bhatt, DoTs counsel, adamantly argued that it was not mandatory for the government to consult TRAI on every new service or service provider. MTNL lawyer Guptas arguments were more tactful. He sought to push through a contention that MTNL was already offering a (carphone) wireless service and its proposed GSM (global standard for mobile communications)-based cellular service was just a logical extension. Sodhi reserved his order till February 17.
After Sodhi ordered that MTNLs entry into cellular services was off and the governments Internet policy invalid, the tiff has snowballed. And how. MTNLs Rajagopalan was surprisingly light-hearted on the evening of the judgement hinting that the government had decided to bite the bullet. Thundered a senior government official: There is no question of it (TRAI) challenging the licensing powers of the government. We will take all necessary steps to stop it.
With the threat of an ordinance very much alive, Sodhi offered a peace-handshake of sorts. On Thursday he said that the regulator was willing to look into the merits of MTNLs cellular plans and the governments Internet policy (see page III). He suggested that asking TRAIs recommendations on the two issues might be a better option for the government rather than dragging the case through the courts.
But the future course of events may not be centred on the courts. The lynchpin could be the ordinance on TRAI, which lobbies have started working against. There promise to be more twists and turns to the government-TRAI confrontation. In these uncertain times, one things for sure: its too early to write the epilogue to the story yet.