DOT’s decision arbitrary, illegal: COAI

Following is a summary of the petition submitted by the Cellular Operators’ Association of India (COAI) on October 23 before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT)

It is submitted at the outset that crossover allotment of spectrum is not permitted under the present policy and licensing regime and both DoT and TRAI have admitted so. However, DoT has recently and wrongly decided to permit both GSM and CDMA spectrum under the same license in order to benefit one set of operators. Further, that DoT has acted upon its decision with unseemly haste and has, on the basis of some invalid applications made around February 2006 (when such allotments were not permissible and thus such applications were ipso facto and ab initio, illegal and non est), issued an in-principle approval to some CDMA operators on 18.10.2007. It has further allowed these CDMA operators to make the necessary payments and complete all formalities before making its decision known on 19.10.2007 to the public at large including to the GSM operators who are the main impacted party. These recent acts of DoT smack of legal malafides.

As per the existing license regime the applicant company first acquires the license upon payment of a specified entry fee and then exercises its technology choice. Clause 43.1 of the UAS license requires the licensee to apply for a separate specific authorisation and license (herein called WPC license) from the WPC (Wireless, Planning and Coordination) wing of DoT, permitting utilisation of appropriate frequencies/band for the establishment and possession and operation of (the) wireless element of the telecom service under the license agreement of unified access. Thus when a license is acquired, the same is technology neutral and the licensee has to choose either the GSM or the CDMA platform to offer its mobile services and therefore the authorisation that is granted by WPC is based on the technology choice that is exercised by the licensee as per the above Clause 43.1, for granting of “appropriate frequency band”.

This is further reinforced by Clause 23.1 of the UAS license, which provides that the licensee shall provide the details of the technology proposed to be deployed for operation of the service. Clause 43.5 clearly provides that allotment of frequency shall be made only either on GSM platform or on CDMA platform. It does not contemplate allotment of both types of spectrums to a single licensee
for provision of the same service on different platforms. The above has been the firm and consistent stand of DoT ever since the introduction of technology neutrality.

In 1999-2000 when some GSM operators applied for CDMA spectrum, the said request was turned down by DoT. DoT stated that the operators were technology neutral only within their designated band and further that the CDMA spectrum was earmarked for the fixed service providers. In other words, GSM operators were refused spectrum allocation in CDMA band despite technology neutrality. Also, post the UAS licensing regime, when Bharti Airtel surrendered its BSO (Basic Service Operator’s) license, it also had to surrender its CDMA spectrum, because a licensee was not permitted to hold both GSM and CDMA spectrum under the same license. This is despite the fact that Bharti had actually paid an entry fee and had both an operating network as well as subscribers on its CDMA platform.

Thus clearly no licensee could hold both GSM as well as CDMA spectrum under the same license and this policy and these license terms were consistently implemented by DoT. DoT has admitted that no licensee could hold both GSM as well as CDMA spectrum under the same license in its terms of reference dated 13.04.2007 to TRAI.

In light of the above fact, any applications made by a CDMA operator for allocation of GSM frequency at a time when the same was clearly not permitted, was ipso facto void
ab initio, illegal and non est and therefore can not be acted upon.

TRAI too, in its consultation paper of 12.06.2007 on review of license terms accepted that such cross technology allotment was not permitted under the present policy and licensing regime. In para 1.16, TRAI states that the present UAS and CMTS (Cellular Mobile Telephone Services) licenses provide that the operator shall make its choice for specific mobile technology. In para 2.50, TRAI states that spectrum is assigned based on technology-sensitive subscriber-based criteria, which is different for CDMA and GSM technologies. And in para 4.5, TRAI states that as per the existing licensing regime, the applicant company is first given the license on a specified entry fee and then based on the technology option and the frequency band applied for by the licensee; the WPC wing of the DoT issues the WPC license which permits the utilisation of appropriate frequency band.
The impermissibility of cross technology allotments under the existing policy and licensing regime was once again reiterated by TRAI in its recommendations dated 28.08.2007. In these, TRAI has clearly recognised and acknowledged in para 4.6 that technology neutrality is being effectively pursued in terms of freedom to choose any technology by the licensee. TRAI has noted various provisions of the UASL License which include Clauses 23.1, 23.5 and 43.5 and has clearly and correctly acknowledged that the telecom licensee having chosen the technology will offer services in spectrum specific to that technology chosen and, therefore, no cross over is permitted under UASL License. TRAI has also clearly and correctly understood that in Clauses 43.5(i) and Clause 43.5 (ii), the words used is either CDMA system or GSM system and that the bands also restrict the scope of technology choice.

TRAI has stated that when a license is acquired, the same is technology neutral and the licensee has the freedom to choose either the GSM or CDMA platform to offer his mobile service. In para 4.12, TRAI clearly records that a close reading of the license (agreement) does not contemplate more than one technology choice being made by the licensee. And that the UAS license rules out a scenario where a licensee can acquire spectrum for both technologies in a single license. TRAI has also recognised in para 4.13 that freedom thus exercised once, becomes the base for offering telecom services and building of the edifice. In para 4.15 also, TRAI states that equipment for both CDMA and TDMA technology is available in different spectrum bands and as such the spectrum can be allocated by WPC on the basis of the technology specified by the licensee. In para 4.16, TRAI states that the growth path of the licensee is confined to the technology chosen at the early stage.

After having so acknowledged, admitted and recognised that licensing regime does not allow for allotments of spectrum in more than one technology, that crossover of spectrum is not permissible, that a technology choice, once exercised, became the basis of all future allotments of spectrum and even after recognising that allotments of spectrum in both technologies is not permissible under the present policy and licensing regime, TRAI has without any cogent reasons wrongly recommended that allocation of dual spectrum/cross technology allotment may be permitted through an amendment of license.

In addition, in order to so benefit the said one set of operators, TRAI admittedly went beyond its terms of reference and suo motu and without any consultations (in violation of the mandate of transparency under Section 11(4) of the TRAI Act) made some very arbitrary and ad hoc recommendations raising the subscriber linked spectrum allotment criteria by as much as 700 per cent, that is, where an operator would have been required to serve, say, 100 subscribers before being allotted additional spectrum, he would now have to serve 800 subscribers before being eligible for the next tranche.

It appears that DoT took a decision on or prior to 18.10.2007 to permit allotment of both GSM and CDMA spectrum under the same license. Pursuant thereto, vide its letter dated 18.10.2007 addressed to some CDMA operators, DoT wrongly issued an in-principle approval to use GSM technology in addition to CDMA technology under the same license. This was done in a completely non-transparent manner and without informing the world at large or even the directly concerned/impacted parties, viz. the GSM operators. Nay DoT also allowed/gave full opportunity to the said CDMA operators to even deposit the entry fee towards the same again without informing the world at large or even the directly concerned/impacted parties, viz. the GSM operators. DoT has thus acted with undue and unseemly haste in a bid to advantaging one set of operators over the others, thus denying equal opportunity and level playing field to GSM operators. The unseemly haste on the part of DoT is further evidenced by the fact that the in-principle approval has been issued to the CDMA operators even before the licenses were amended in order to make the decision a fait accompli.

It is verily believed that DoT called for a Telecom Commission meeting on 18.10.2007 which concluded at about 6 p.m. It is also verily believed that the said in-principle approval was issued to the CDMA operators at about 6:30 p.m. By the next morning, i.e. on 19.10.2007, one large CDMA operator submitted the necessary fee as also a detailed application for assignment of frequency and other parameters in duly completed formats.

It was only after all the above activities were concluded, including the payment of the said entry fee as also acceptance of application for assignment of frequency, that the DoT decided to inform the world at large and that too, only through a press release posted on its website on 19.10.2007. It may also be noted that no detailed guidelines have yet been issued by DoT on the subject matter except the said press release. The above actions of DoT clearly smack of legal mala fide.
Without prejudice to our submissions that such cross technology allocations are not permissible, it is also submitted that the entire manner in which this has been actioned by the DoT demonstrates a complete bypass of all due process. The normal process would include, inter alia, the followDing:
< The TRAI recommendations are to be examined/considered by the DoT/Telecom Commission;
< If DoT does not agree with any recommendation of TRAI, the same has to be referred back to the TRAI for its reconsideration (fifth proviso to Section 11 of the TRAI Act);
< If the recommendations are accepted in toto, (which is not the case here) and if the issue is impacting the entire sector including the prevalent policy and licensing framework, the same is referred by DoT to the Cabinet for its approval;
< After Cabinet approval, the Cabinet decision is shared openly with the public at large;
< Thereafter the guidelines/policy is framed by the DoT and is shared with the public at large. Also the amendments to license, etc., are shared transparently;
< After this, an opportunity is given to all, without any discrimination, to act upon the new guidelines/license conditions.

Significantly, the petitioners verily believe that almost all the above steps have been dispensed with in the present instance, and DoT has bypassed all requisite procedures and has with unseemly haste, directly issued in-principle approvals to companies on the basis of some invalid applications. Further, although TRAI had recommended that revenue share spectrum usage charges should be applied on the total spectrum held by the operator, the DoT decided that the spectrum charges would be paid separately for the two technology streams. The result of this is that the CDMA operators would pay far lower rate of spectrum usage charges, despite having double the spectrum of the GSM operators. This decision of DoT is rendering huge financial benefit to the set of CDMA operators at the cost of the exchequer. DoT has thus amended TRAI recommendations without referring the matter back to TRAI, as required under the TRAI Act. In fact we verily believe that this decision was not even supported by the Telecom Commission. It is submitted that the Hon’ble Tribunal may like to call for the necessary records /files of the DoT in this regard.
It is further submitted that despite TRAI’s recommendation (Clause 4.34) requiring DoT to settle the inter se priority for existing licensees, DoT by issuing “in principle” approvals for cross technology use to some applicants and allowing them to deposit the entry fee, has enabled these operators to jump the entire queue.

It is submitted that the adverse and irreparable impact of the DoT decision is that the DoT by selectively implementing the crossover spectrum allocation recommendation of TRAI, has issued in-principle approvals to a set of CDMA operator and have accepted payments of entry fee. DoT has thereby decided a new priority for allocation of spectrum from the date of payment by such operators and on the other hand have completely demolished the queue of licensee applicants who have been waiting for issuance of license for the last more than twelve months by not dealing with their pending applications at all.

Furthermore, the DoT by accepting TRAI’s ad hoc recommendations on subscriber linked criteria, that are also wrong, technically incorrect and based on flawed assumptions, has in one stroke demolished the long queue of GSM operators who have been waiting in the queue for allotment of spectrum for months or even years based on their entitlement and eligibility under the earlier criteria and the said CDMA operator is now amongst the first in priority for allotment of GSM spectrum to the exclusion and detriment of the existing operators. It is submitted that what has been permitted is not just allotment of spectrum in an alternate technology but in fact the equivalent of grant of a brand new license inasmuch as:
< It requires the payment of an entry fee paid by a new UAS licensee;
< It allows the licensee to operate two mobile networks in the same service area, one based on GSM technology and the other based on CDMA technology; and
< It provides that the license fee and spectrum usage charges will be paid separately based on the revenue streams of both technologies.

This decision also violates several policy and licensing conditions inasmuch as it exempts the licensee from the requirement to go through with the due process to obtain a fresh license, thus dislodging other legitimate licensee applicants that have been waiting in the queue for a UAS license.

Further this decision is also in violation of the cross shareholding clause 1.4(ii) of the UAS license by not permitting a promoter person/company by having stakes in more that one licensee company in the same service area. This condition was prescribed so as to ensure that competition is not compromised. However, by allowing the UAS licensee to have two licenses and two networks under the garb of the same license the DoT decision is violating both the spirit and the intent of the cross shareholding clause.

It is also submitted that besides being legally untenable, any such change in the policy and licensing regime alters the very basis on which licenses have been acquired and obtained by operators and will alter irreversibly the competitive market situation. By allocating GSM spectrum to CDMA operators, the Government is in fact:
< Reducing the quantum of spectrum available to GSM operators and thus disadvantaging them;
< Allocating double quantum spectrum to (UAS) CDMA operators giving them an advantage over other players; and
< Dislodging legitimate licensee applicants from the queue and preferentially awarding the GSM spectrum (de facto license) to a (UAS) CDMA operator
It would also (be) a clear case of back-door entry of such CDMA operators and legally malafide. The DoT decision is also arbitrary and violative of the principle of level playing field and Articles 14, 19 (1)(g) and 21 of the Constitution. It is submitted that DoT’s decision is tantamount to amending the National Telecom Policy 1999 (NTP-99), which is a Cabinet approved policy decision (in fact, NTP-99 was also placed in the library of Parliament before its issuance). It may also be noted that even the addendum to NTP-99 issued in late-2003, was preceded by a decision by the Group of Ministers and was also approved by the Cabinet. Thus past conduct clearly evidences Cabinet involvement in significant changes in policy and licensing framework. It is submitted that such a sweeping change in the policy and licensing framework as being done through the impugned decision cannot be carried out through a mere administrative order/press release..
Despite there being a long overdue and immediate need to ensure availability of adequate and optimal bandwidth/spectrum first to the existing operators in order to meet their requirements of increasing tele-density as also maintaining quality of service, and despite there being an already existing mutually agreed and executed contract between the cellular operators and the Government and clear representations by the Government to ensure availability of adequate /optimal bandwidth/spectrum upto 15 MHz as per the criteria notified by it, and the cellular operators right to receive the same, DoT has completely failed to so allot the additional spectrum.
Further, the allocation of spectrum of 10 MHz to BSNL in all service areas (and 8 MHz in West Bengal) and 12.5 MHz to MTNL in Delhi and Mumbai in excess of its eligibility under the subscriber linked criteria and also out of turn vis-à-vis other entitled GSM applicants, and the raising the bar exorbitantly for private sector GSM licensees, the DoT has discriminated against the private GSM operators who have invested over Rs. 60,000 crore in the sector and has violated level playing field principles enunciated in NTP-99.

The DoT has wrongly held that a UAS licensee will be awarded spectrum subject to availability and if the said spectrum is not awarded, the licensee shall endeavour to
Roll out services using wireline technology. It is submitted that the grant of license itself carries as assurance of allotment of spectrum and that further there is no longer a provision for just a mobile license. Thus an operator desirous of offering mobile services and having paid the requisite entry fee for spectrum bundled with license cannot be denied spectrum on the grounds of non availability.
It is emphasised that the GSM industry has always welcomed introduction of further competition in the sector. It is, however, submitted that the same has to be done in a transparent manner following due process and must be in the ultimate interest of the consumer. It is submitted that the present impugned decision of DoT is facilitating/ enabling hoarding of spectrum and holding of multiplicity of licenses by one set of operators, thus completely compromising competition and harming consumer interest. It may be pertinent to note that by way of this impugned decision one large CDMA operator will now be entitled to hold four times the quantum of spectrum than the other operators in some service areas. Further, we verily believe that the said CDMA operator has also put in additional license applications in the name of shell/front companies, which if actioned, will further aggravate this travesty.