How Regulation of Electronic Communications Can and Should Use Competition Law to Balance Divergent Stakeholder Interests

ISSUE ANALYSIES

Introduction

Telecom was identified as key priority for development after India got independence. But bureaucracy red-tape, ambiguities, lack of transparency along with weak independent regulator, jeopardized India’s development.  But Under pressure from domestic and foreign capital, international lending agencies, and foreign governments, India began to open its markets and divest its public sector enterprises in the 1980s and now Indian economy is on the path of resurgence. Progressive reforms such as industrial delicensing, removal of restrictions on foreign investments are the reasons for such economic growth. Such changes have had a positive impact on the telecommunication sector.

This report analysis telecommunication law dimensions influences, interpretations and implications. Then demonstrate how these regulations should use competition law to balance stake holders it also emphasis that introduction of transparent competition policies to India’s telecommunications sector is vital to the development and health of India’s economy.

Evolution of the Regulatory Framework

Industry structure before reform

Under the Indian constitution, only the central government can legislate on telecommunications. The central government has been the monopoly provider of telecommunications services through the Department of Telecommunications (DoT), which is under the jurisdiction of the central government’s Ministry of Communications.

Regulatory reform

Indian telecom regulatory reform can be divided in to 3 phase

Phase 1 ­- 1980s

India began the process of telecommunications reform during the 1980s, but until the 1990s it struggled to find reforms that would cause the performance of the industry to improve at a satisfactory rate. Reform started in 1986, when telecommunications was separated from postal services and some telephone services were corporatized. In 1986, telecommunications services were divided into three parts. Local service in Delhi and Mumbai was given to a corporatized state-owned enterprise, Mahanagar Telephone Nigam Limited (MTNL). The rest of local service and domestic long-distance service went to Bharat Sanchar Nigam Limited (BSNL), which remained a part of the Department of Telecommunications. Videsh Sanchar Nigam (VSNL) was created as a government-owned corporation to operate international telephone service.

Phase 2 – 1990 – 1998

The second phase started with liberalization of economy in early 1990’s and announcement of New Policy 1994 (NTP 94).

Phase 3 – 1999 – 2001

The NTP’94 failed because it did not address the fundamental causes. In addition to some of the objectives of NTP 1994 not being fulfilled, there was also far reaching developments in the recent past in the telecom, IT, consumer electronics and media industries world-wide. The Government of India recognizes that provision of world class telecommunications infrastructure and information is the key to rapid economic and social development of the country. As a result New Telecom Policy 1999 was introduced.

DIMENSIONS & INFLUENCES

Players in Regulation

India’s telecommunications sector is regulated by the Ministry of Communications through three government bodies — the Telecom Commission, the Department of Telecommunications (DoT), and the Telecom Regulatory Authority of India. The Telecom Commission performs the executive and policy-making function, the DoT is the policy-implementing body while the TRAI performs the function of an independent regulator.

Telecom Policies

New Telecom Policy 1999

The New Telecom Policy 1999 (NTP99) was developed at the backdrop of two major events witnessed by the Indian economy after the reform process began in 1991. First, although NTP94 was a right step to bring reform in the telecommunications industry, it failed to achieve a desired goal until 1997. Second, immediately after assuming power, the BJP-led government was keen on bringing further reform in telecommunications to attain an effective and efficient communications sector.

NTP99 is a comprehensive and progressive telecom policy framework. It addresses the outstanding issues of telecommunications development and the challenges of modern telecommunications technology. NTP 99 recognises the crucial role of private sector investment in the development process of the sector and to bridge the much-needed financial resources gap. The NTP99 has endorsed policies under 5 policy frameworks:

• Framework for Services Deployment

• Framework for Licensing of Telecom Services

• Framework for Restructuring of Telecom Organisations

• Framework for Further Liberalisation of Services

Communications Convergence Bill-2001.

To facilitate development of national infrastructure for information based society. To provide a choice of services to the people and to address the recent technological developments and emerging convergence, it became necessary to bring in a comprehensive legislation based on convergence. Accordingly, the government of India in August, 2001 introduced ‘The Communications Convergence Bill-2001’.

The new proposed law seeks to establish the Communications Commission of India (CCI) as the super-regulator in India in the context of convergence of telecommunications, broadcasting, data communication, multimedia and other related technologies and services.  The objectives of the proposed CCI range from developing communications sector in a competitive environment and in consumer interests to making the communication services available at affordable costs to all.  It further aims to increase access to information for greater empowerment of citizens and hopes to make strides in the direction of establishing a modern and effective communication infrastructure taking into account the convergence of Information technology, media, telecommunications and consumer electronics. The Communications Commission of India (CCI) seeks to establish an open licensing policy and ensure a level playing field for all operators and to promote equitable, non- discriminatory interconnection across various networks.

Telecom and Competition Policy

License Regime

The Department of Telecommunications (DoT) is responsible for Policy, Licensing and Coordination matters relating to telegraphs, telephones, wireless, data, services and other like forms of communications. A telecom company is required to obtain a license from the DoT and comply with the guidelines and license conditions.

Competition

New Telecom Policy 1999 has shifted the focus of telecom industry towards competition, with spectrum fees being converted into revenue sharing agreement and additional entrants being licensed. From 2001, private players were allowed to provide national long distance services and in 2002, the international long distance market too was liberalized. Foreign Direct Investment limit was increased from 49 per cent to 74 percent in telecom services. India now like most countries employs telecommunications regulators or a combination of both telecommunications regulators and competition authorities to implement competition policy in telecommunications. Another step taken by the government to promote fair competition was formation of Telecom Regulatory Authority of India (TRAI) with the objective of providing an effective regulatory framework and adequate safeguards to ensure fair competition.

With a view to further strengthen the regulator the TRAI Act, 1997 was amended in the year 2000 and a separate body, ‘The telecom Dispute Settlement and Appellate Tribunal’ (TDSAT) was constituted for resolution of disputes in telecom  sector.

Competition Act, 2002 (“Competition Act”)

The Competition Act was recently enacted to introduce further measures for facilitating a competitive environment. It plays an important role in telecommunication industries in India; the main areas of competition which the act focuses and governs with respect to telecommunication are.

 Anti Competitive Agreements

According to Section 3 No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of 

production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or likely to cause an appreciable adverse effect on competition within India.

 

Prohibition of abuse of dominant position

According to Section 4 entity having dominant position is not per se bad or illegal, but abuse of such dominance is illegal. Dominance is said to be abused when there is an appreciable adverse effect on competition due to the actions of a dominant undertaking.

 Regulation of Combination

The Act is also designed to regulate the operation and activities of Combinations, a term which contemplates acquisition, mergers, joint ventures, take over or amalgamations. Section 5 of the Act mandates that No person or enterprise shall enter into a combination which causes or is likely to cause an appreciable adverse effect on competition within the relevant market in India and such a combination shall be void.

Under Section 7 of the act Competition Commission of India (CCI) is established which has been vested with the responsibility of eliminating practices having adverse effect on competition, promoting and sustaining competition, protecting the interest of the consumers, and ensuring freedom of trade carried on by other participants in India.

 

Telecom Regulation, Policies and its Impact

Significant progress has been achieved in the area of telecommunications in the last ten years of economic liberalisation followed by the Government of India. One of the important features of the liberalisation process in India was that the entire spectrum of telecom services was thrown open for the private sector and the operation of market dynamics. The fixed line subscriber’s number has increased every passing year. Perhaps the most dramatic development in this decade has been the introduction of cellular mobile telephone services by the private sector. In 1999, both mobile phones and private sector separately accounted for 5 per cent of total number of phones. In October 2004, mobile phones accounted for 50 per cent of total phones and the private sector accounted for 44 per cent of total phones.

The mobile sector has grown from around 10 million subscribers in 2002 to reach 150 million by early 2007 registering an average growth of over 90%. The other reason that has tremendously helped the telecom Industry is the regulatory changes and reforms that have been pushed for last 10 years by successive Indian governments. Even though the fixed line market share has been dropping consistently, the overall (fixed and mobile) subscribers have risen to more than 200 million by first quarter of 2007. The telecom reforms have allowed the foreign telecommunication companies to enter Indian market which has still got huge potential. International telecom companies like Vodafone have made entry into Indian market in a big way.

 

The table below shows the subscribers numbers for both GSM and CDMA.

GSM and CDMA subscription numbers: Year

GSM Subscribers (millions)

GSM Annual growth

CDMA Subscribers (millions)

CDMA Annual growth

2000

3.1

94%

2001

5.05

76%

2002

10.5

91%

0.8

2003

22.0

110%

6.4

700%

2004

37.4

70%

10.9

70%

2005

58.5

57%

19.1

75%

2006

105.4

80%

44.2

131%

2007

180.0

71%

85.0

92%

 

Regulations Policies and Consumers Interest

One of the main objectives of all the telecom policy and regulations was to achieve universal service covering all villages as early as possible. By the expression universal service was the provision of access to all people for certain basic telecom services at affordable and reasonable prices. Policies also aimed at widest permissible range of services to meet the customer’s demand at reasonable prices.

The process of liberalization and opening up the sector for competition gave way for cheaper call charges to consumers. International long distance (ILD) call prices have fallen from a peak of Rs90/Minute to less than Rs9.0/Minute. National long distance (NLD) tariffs have fallen from Rs40 to Rs1.0 in. Local calls on Landlines have just halved, Figure 1 shows the clear picture of fall in tariff.  While that on Mobiles have fallen from Rs14.0/Minute in 1996-97 to Rs0.5/Minute depending on the scheme now.

The Telephone Regulatory Authority of India is committed to protect the interest of consumers and for the purpose of this the authority has issued regulations directions and orders under the TRAI Act 1997. Some of the important directions and regulations are

·         Telecom Consumer’s Protection and Redressal of Grievances Regulations 2007.

·         Regulation on Quality of Services of Basic and Cellular Mobile Services 2005

·         Quality of Services on Broadband Services Regulation 2006.

·         Telecom Unsolicited Commercial Communication Regulation 2007

 

The full details of all these regulations and other policies can be found in TRAI website under “A Hand book for Consumer from the Telecom Regulator”.

 

CONCLUSION  

Indian telecommunications today benefits from among the most enlightened regulation in the region, and arguably in the world. The different regulations and policies have created an impressive forward-momentum in Indian telecommunications, resulting in a vigorously competitive and fast-growing sector.

Although India’s 88.62 million strong telephone network, including mobile phones, is one of the largest in the world, with the low telephone penetration rate of about 8.20 phones per hundred populations, the country offers vast scope for growth. While tele-density has risen sharply, India continues to lag far behind countries like Brazil and China, The rural market of India is very large, 70% of the population lives there.  We need to create a competitive market if want see some changes. The telecom scenario in India is victim to a fundamental conflict of interests among the diverse roles that the government is attempting to play. Telecom growth in the country has been hampered by the authoritarian attitude of the DoT with regard to choice of technology.

In order to catch up with other developing countries there is a need to maintain vigorous procompetitive efforts in terms of public policy, rapidly shift to new technologies, encourage entry of new players, and drive prices down through competition.

 

Swaroop Kolatala
http://www.articlesbase.com/law-articles/how-regulation-of-electronic-communications-can-and-should-use-competition-law-to-balance-divergent-stakeholder-interests-718345.html

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