The Hindu Business Line : On a collision course

The differences between telecom regulator TRAI and the communications ministry over access deficit charge are threatening to snowball. Even as most of India waits for phone connections.

THE battle lines and swords have been drawn out once again in the telecom sector and this time it is not the operators who have started it. . It's a battle between the Telecom Regulatory Authority of India (TRAI) on the one side, and the Communications Ministry, on the other, over who is the final authority in deciding the Access Deficit Charge (ADC) regime. And the industry has just joined the ranks.

While the Code Division Multiple Access (CDMA)-based operators have joined the Pradip Baijal-led TRAI camp, the Global System for Mobile (GSM)-based cellular service providers are in favour of an intervention from the Communications Minister, Dayanidhi Maran.

The point of disagreement is whether ADC is a policy issue or whether it is a matter for regulation.

For the uninitiated, ADC is a levy imposed on operators to collect a fund that can be used to finance the subsidy being offered by the Government to rural telephone subscribers. The mechanism was introduced in 2003 by the telecom regulator at the behest of the then Government. Since then, it has been TRAI that has stipulated the norms for collecting the deficit charges. The annual kitty at present is about Rs 5,000 crore of which 95 per cent goes to the state-owned Bharat Sanchar Nigam Ltd (BSNL) since it has the largest number of rural telephone lines. The Government and the GSM lobby, however, are not happy with the way TRAI has handled the regime in the past two years. What is irking the Government is an attempt by the telecom regulator to bring down the quantum of the ADC kitty by about half the present size without consulting it. "Offering subsidy to rural subscribers is a political decision made by the Government. Therefore TRAI cannot, on its own, decide one day that the subsidy has to come down. It was the Government that decided to ask TRAI to suggest a mechanism to collect the deficit in 2003 and the same Government can rightly ask TRAI to consult the communications ministry," says a senior DoT official.

The department recently shot off a missive to the telecom regulator asking it to keep the Government informed about its decisions or else the Government may invoke Section 25 of the TRAI Act, which, in effect, will allow the Government to take things into its own hands. A move supported by the GSM lobby led by the Cellular Operators Association of India.

"The Access Deficit Charges are an instrument of Government policy, which is used to ensure the affordability and accessibility of telecom services for all citizens. TRAI's powers on ADC are only recommendatory and not absolute. TRAI can make suitable recommendations to the Government on an ADC Regime, based on which the Government would take the final decision and issue the necessary guidelines. After this, the role of TRAI would be to ensure compliance with Government guidelines," says T.V. Ramachandran, Director-General, COAI. The Government move to issue a directive has, however, been rejected by TRAI.

TRAI has told the Government that such a move would shake the confidence of the investors in the telecom market and therefore, it is not advisable to invoke directives under Section 25 of the TRAI Act. "It is an internationally accepted fact that an independent and effective regulator increases the confidence of investors in any market. This is true of India also. TRAI reiterates that the proposed policy direction is not necessary."

Government officials point out that TRAI itself had committed to consult the Government on the ADC issue in one of its papers. Para 89 of the TRAI Regulation on ADC in October 2003 says, "In subsequent years, the Authority would review both the size of the ADC payments as well as who should be the beneficiaries of the ADC regime. It may even consider funding ADC based on a percentage of the annual revenues of the operators. However, such a regime can only be introduced after consultations with the Government, which the Authority would initiate."

TRAI has, however, told the Government that there was no need for government intervention as it was seized of all the issues and would implement the measures suggested in the DoT's letter, if it was feasible.

Defending the TRAI position, CDMA operators say that the telecom regulator is best placed to judge the pulse of the industry and therefore TRAI must continue to be the final authority on the matter. "TRAI has collected all the data and has the system to calculate, implement the ADC regime.

The regulator has also said that it was moving towards a revenue-share arrangement and also a reduction in the quantum of the ADC, which is in line with the industry demands. So one cannot understand the opposition by the GSM players," says a CDMA industry source.

While GSM operators, like the CDMA players, also want a reduction in the total quantum of the ADC kitty, they are favouring government intervention because they see TRAI as being pro-CDMA camp and therefore "have lost trust" in the regulator.

"TRAI has been promising that the ADC will be reduced for the last two years. It has not happened. We are running out of patience as this is impacting our revenues. We feel that the Government is sympathetic to our concerns more than the TRAI," says a GSM operator.

In a recent meeting between representatives of various GSM companies and Maran, the operators made a presentation of their concerns in this regard to the Minister. The CDMA camp alleges that COAI is cosying up to the Government to get a leg-up on the spectrum controversy. (See eWorld story No let-up in sight in the issue dated May 30, 2005).

GSM operators dismisses the allegations by saying its concerns were genuine. "How can we trust a regulator who in one shot reduced the ADC quantum from Rs 13,000 crore to Rs 5,000 crore in six months, that too after we voiced our concerns?" says a GSM player.

The COAI says the method of loading ADC on each telephone call is an open invitation for cheating as it provides huge arbitrage opportunities.

The telecom regulator says that it is already moving towards implementing an ADC regime based on revenue sharing and therefore no direction from the Government is necessary.

"If it agrees that revenue share is the best option, why is it not introducing this regime? Why is so much being made of Government giving a policy directive to introduce revenue share?" asks a GSM operator.

By the looks of it, the battle seems to be snowballing into a full-fledged war.

While the powers that be squabble over the issue, 90 per cent of the Indian population is still awaiting their first phone.

tkt@thehindu.co.in

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