Telecom Bill 2022— Current Problems & Proposed Solutions
The whole purpose of “regulation” is to solve problems, and not to expand them.
Regulations are enacted with a purpose — to solve problems that the market has failed to resolve by itself, as leaving such problems unattended can be detrimental to our society, and therefore it is impending that the regulators take cognizance of it and act. The current attempt to replace the old Telegraph Act of 1885 should be seen in the light of this context. In this note, I plan to analyze what problems the regulator trying to mend, and how effective are these new provisions from the point of execution.
OTT Communication Apps
Current Problem
These apps ride on the existing telecom networks and totally bypass the existing framework laid out for regulating the conventional voice and data services offered by the telecom companies. This has driven the government into a situation of helplessness, as these problems (impersonation, fraud, fake news, etc) are detrimental to our society.
Proposed Solution (Bill)
Force the app providers to verify the customer's identity as is being done by the telecom operators. Also, ensure the app providers make available a live stream of data that can be decrypted for obtaining the information in a clear text format for the purpose of legal interception.
Solution’s Feasibility
Mapping the apps to a specific mobile number may be possible, but is laced with a lot of operational difficulties. For example, as of date, these apps allow a customer to change mobile numbers at his will, but with new provisions kicking in the process will become not only cumbersome but will also add huge costs to the app providers. Also, how will the OTT apps deal with accounts mapped to international mobile numbers where Indian laws can’t be extended? Even today, a lot of illegal activities (like kidnapping, blackmailing, extortion, etc.) are carried out using legacy mobile phones with international SIMs.
Access to legal interception is more tricky. Yes, it is desirable for the purpose of national security. But the said provisions will make very little impact on tracking and intercepting miscreants, who will have the capability to send messages by attaching a document that is encrypted on top of the encryption of the OTT app provider. In such a case the access to clear text information from the OTT app provider will serve no purpose, as in order to decrypt the information the regulators will need the password to open the document (word, PDF, JPEG, etc) send via the OTT app or via email. Hence, the concept of legal interception has to be extended to not only all text editors but to all kinds of mediums (email, HTTP servers, etc) carrying messages across them.
Hence regulating OTT apps in the manner envisaged in the bill may not be practically feasible, as any such attempt will cause more harm to the stakeholders. Also, the GoI will not gain fully as miscreants can use alternate means (that the regulator cannot regulate or tap into) and achieve the same objective.
Spectrum Auctions
Current Problem
The 2G scam of 2008 resulted in the SC judgment of 2012 — directing the central government to auction all spectrum for the purpose of commercial assignment. Now, the assignment of spectrum through auctions makes sense only when the demand is more than the supply, as using any other method in such a situation will compromise transparency. Also, in many other situations (where the demand is high and the usage is thin — like satellite communications), auctions may not be the best mechanism for assigning spectrum. Hence, it is important for the government to empower itself with laws to be able to take decisions in the best interest of all the stakeholders.
Proposed Solution
Enact provisions in the new act so that the DoT is fully empowered to take decisions based on a case-by-case basis and on the merit of the situation for all spectrum, and not just for those enlisted in Schedule 1 in the draft. The spectrum must be put up for auction only if these conditions are satisfied — a) the demand for spectrum in the specific geography is much more than the supply; b) auction is the only way to ensure that the spectrum is most efficiently used; c) auctions does not lead to long-lasting gatekeepers, thereby jeopardizing the interest of the consumers. Else, the spectrum should be assigned through administrative means as is being currently done in other international jurisdictions.
All other provisions related to the spectrum management are not broken but it is good to have these provisions (harmonization, sharing, trading, leasing, etc) enacted in the bill itself so that DoT does not have to rely on contractual obligations in order to execute them.
Insolvency & Bankruptcy
Current Problem
The Indian telecom market’s competitiveness has decreased significantly. There are only two healthy operators, and the rest are struggling to survive. Hence, the GOI needs to empower itself with regulatory powers so that the Indian market stays competitive, which is in the interest of the consumers.
Proposed Solution (Bill)
The provisions proposed in the draft bill (2022), empower the DoT to take drastic actions to prevent the market from becoming a duopoly. These actions include — a) Deferment of payment to DoT of license fees and spectrum annual installments; b) Conversion of such dues by DoT into shares of the licensed entity; c) Write-off such amounts or part thereof; d) Relief from payment of such amounts or part thereof.
Solution’s Feasibility
The solutions proposed in the bill will not serve the primary objective of keeping the market competitive. Why? In order to stay competitive, a telecom company needs to spend on Capex (Spectrum and Equipment). Any cash flow the company is able to generate will first have to be spent on meeting DoT’s obligations, and Capex will come later. Hence, if the company is unable to pay DoT, then it also not be able to spend on Capex and Equipment — the result is a loss of customers and market competitiveness. Now, if the DoT proactively decides to give concessions, then the same can’t be given directed to a specific company but to the market as a whole. The problem further aggravates because of the DoT’s refusal to treat airwaves as an asset, which if liquidated can allow a sick company to function efficiently by restructuring its debts.
Hence, the measure proposed in the draft bill won’t work as these provisions can’t be invoked arbitrarily in favor of a specific company but have to be taken for all the operators playing in the market — thereby defeating the whole purpose of these provisions. Only way it can work, is to allow a sick telecom company to restructure itself by allowing its spectrum to be treated as asset at par with any other assets, and DoT should treat itself as a lender at par with any other lender at the time of restructuring.
Right of Way
Current Problem
ROW (as per our constitution) is a state subject hence the states are using their leverage to earn revenues — resulting in increased cost of rolling out of telecom networks.
Proposed Solution (Bill)
The bill proposes to empower the central government with provisions to streamline the process of granting ROW through uniform rules and rates applicable across all states.
Solution’s Feasibility
It is not clear to me how the proposed solution will be different from the ROW Rules of 2016. Though an act is more empowering than rules, however, the difference isn't significant, as the 2016 rules drew their powers from the Telegraph Act of 1885. Hence, how will these provisions help when many of them are already part of the ROW Rules of 2016?
States not only have exclusive rights over land but also have the exclusive privilege to decide rates and fees relating to their use. The Center’s powers over land in the concurrent list is for a matter of only “Acquisition and requisitioning of property” (Section 42 of the Concurrent List). Hence, any law encroaching on State’s jurisdictions might get disputed, especially in those States which are not in alignment with the Center.
Universal Obligation Fund
Current Problem
The telecom operators pay 5% of their revenues as fees towards the USOF. The scope of the current act is limited to providing telecom services in rural and remote areas at affordable and reasonable prices.
Proposed Solution (Bill)
The proposed draft provisions (2022) expand this scope further, by including — a) urban areas; b)R&D of new telecom services, technology, and products; c) support skill development and training; d) support pilot projects, consultancy assistance, and advisory support towards the provision of USOF services; e) support introduction of new telecommunication services, technologies, and products.
Solution’s Feasibility
The solution is feasible, but the basic problem of USOF is not scope, but non-utilization (or partial utilization) of the existing fund.
Therefore, in my view, expansion of the scope of the fund will help, but the bigger impact will only happen when the efficiency of administering the fund can be enhanced, and this has to be done in parallel and has no direct linkage with the current process of enacting a new law with the increased scope of services under the USO purview.
TRAI’s Powers
Current Problem
DoT feels that lot of time is wasted in back and forth between it and the TRAI — preventing actions from being taken on time.
Proposed Solution (Bill)
The Draft Telecom Bill proposed to remove the mandatory requirement of the DoT to send back the recommendations with justifications back to the TRAI for its reconsideration, which if the TRAI reiterates, then the DoT has no obligation to accept and can reject them without assigning any reasons.
Solution’s Feasibility
The solution is feasible, but preventing the back and forth between the TRAI and DoT will deprive the public of the opportunity to see through the justifications on the basis on which the decisions are made, and an opportunity to provide additional inputs to the DoT if required.
If such a process (back and forth between TRAI and DoT) is considered a waste of time, then the same should extend to TRAI’s consultation process as well. Why waste such a huge amount of time if the decisions are made in advance and the reasons for taking those are not documented for public scrutiny and for future reference? In democracy following the process is as important as the intent itself, as it strengthens the system, ensures discipline, and makes the government more accountable by allowing public scrutiny.
Conclusion
As mentioned above in the opening sub-title — the whole purpose of a regulatory dictate is to solve the existing problems which the market is unable to resolve by itself. Also, the solutions proposed should be such that they help in containing the list (of problems) and not expanding them inadvertently. The current consultation process will help in realigning the provisions proposed in the bill so that the above-stated objective is met. In the end, all regulatory interventions should be light touch and enabling. Only then it will resonate with the interest of all the stakeholders including the consumers.
(Views expressed are my own and do not reflect that of my employer)
PS: Find the list of other relevant articles in the embedded link.
