Regulating the Regulator

Maran and Baijal are sparring over whether ADC is a policy issue or a matter for regulation.

By Ravi Visvesvaraya Prasad

For several months, telecom circles have been abuzz with talk of a bitter battle between communications minister Dayanidhi Maran and Telecommunications Regulatory Autho- rity of India chairman Pradip Baijal. Both of them want to appropriate the credit for decreasing telecom tariffs, the rapid growth in the number of subscribers nationally, and subsidising rural telephony.

Baijal, considered to be a protégé of Arun Shourie, the telecom minister in the previous NDA government, is alleged to be a spokesman for the private sector, while Maran wants to protect the public sector companies – Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd – from private sector competition. A major reason for Baijal’s perceived proximity to the private sector is his alleged support for Reliance Infocomm – an issue repeatedly highlighted in the media. Such favouritism has seen many political leaders, specially CPI (M) member of parliament Nilotpal Basu, seeking Baijal's dismissal.

The battle between the two telecom bosses became so bitter in recent days that Maran prevented Baijal from going abroad to chair a conference of international telecom regulators. Earlier in May this year, when TRAI released its recommendations on spectrum allocations to telecom operators, Maran snubbed it, stating that TRAI had exceeded its terms of reference. Instead, Maran pointedly said that the department of telecommunication's wireless planning and coordination wing was fully equipped to handle all spectrum issues “efficiently and impartially”.

In its report, TRAI had recommended the setting up of a national interconnection exchange, which would have greatly reduced interconnection costs of all operators. But this would have cut into the artificially inflated revenues of BSNL, which had a legally mandated monopoly on interconnection. The telecom minister immediately killed the regulator’s proposal.

The latest dispute between the two is over access deficit charges or ADC, a cross-subsidy paid by the private operators to BSNL and MTNL. The ADC is a fraction of the charges of each international and long-distance call made by the subscribers of the private operators, and is used to subsidise the rentals charged by both BSNL and MTNL from their subscribers.

TRAI wanted to drastically reduce the ADC, which was a consumer friendly move since it would have greatly reduced the charges that subscribers of private operators would have to pay.

Legally, setting tariffs is the responsibility of TRAI alone and the ministry has no locus standi whatsover. So, to protect the revenues of BSNL and MTNL, Maran resorted to the legal legerdemain of issuing a policy directive to TRAI under section 25 of the TRAI Act 1997. This section says that the government may issue policy directives “in the interests of the sovereignty and integrity of India, the security of the state, friendly relations with foreign states, public order, decency or morality”.

It is difficult to see how the reduction of ADC, a consumer friendly move, affects the “sovereignty and integrity of India, the security of the state, friendly relations with foreign states, public order, decency or morality”.

On receiving the policy directive, the telecom regulator retaliated by saying that it would make the telecom minister's letter (marked ‘Top Secret’) public. TRAI asserted that under section 11 (4) of the TRAI Act, it was required to “ensure transparency while exercising its powers and discharging its functions,” and so it would have to make public all the confidential directives issued to it by the government.

Admittedly, disputes between dominant operators / ministries and statutory regulators are not unique to India, as is evident from the prolonged battles between AT&T and Federal Communi- cations Commission in the US; between British Telecom and OFTEL in the UK; between Telstra and the Australian Communications Authority in Australia; and between Singapore Telecom and the Telecommunications Authority of Singapore.

However, a saving grace is that the Indian regulator has far more powers and independence than regulators in most other countries, at least on paper, if not in practice.

The French and German regulators are for all practical purposes under the thumb of France Telecom and Deutsche Telekom, respectively. Both Autorité de Régulation des Télécommunications and Bundesministerium für Post und Telekommunikation have been strongly criticised by the European Commission on several occasions for not even attempting to prevent abuses of their dominant market position by these two leading operators.

Even FCC and OFTEL, often held up to be role models for regulators, are in practice executive branches of their respective government.

In the US, real clout over operators is wielded not by the FCC but by the utilities regulatory commissions in each state, which have the power to penalise operators. In the UK, the director general of OFTEL is subservient to the minister for trade and industry. In contrast, India’s TRAI is an independent statutory regulatory body.

The battle between Maran and Baijal has since reached the Prime Minister's Office. It is learnt that the PMO has advised the communications minister to bide his time until Baijal retires in a few months time.