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Each time India's telecom watchdog barks, it is muzzled. Yesterday, the Telecom Regulatory Authority of India took a severe beating in an ugly row with telecom company MTNL. This has now put a question mark on its future.

TRAI Chairperson Justice S S Sodhi today told Rediff: "It is time for legislative action. The government has to decide as a matter of policy what it wants the role of the regulatory authority to be. It is really for the government to consider defining a policy now about what kind of environment they want in the telecom sector."

Sodhi's outburst comes a day after the Delhi high court shot down a show-cause notice that TRAI had issued on the Mahanagar Telephone Nigam Limited's new mobile phone business.

MTNL plans to provide mobile services in New Delhi and Bombay by using 'wireless in local loop' technology based on 'code division multiple access'.

It has fixed a tariff of Rs 1.20 for three minutes for outgoing call against the prevailing rate of Rs 6 per minute by private mobile operators who use cellular technology.

From November 1, the peak rate for private operators has been fixed at Rs 4 per minute with all incoming calls free.

But the TRAI issued a show-cause notice, claiming that MTNL violated specific directions from the regulator not to go ahead with the proposed tariff.

TRAI asked MTNL Chairman and Managing Director S Rajagopalan to explain why penal action should not be taken against him under the TRAI Act.

In response, MTNL moved the Delhi high court that imposed a stay on TRAI's show-cause notice. MTNL claims that TRAI has no jurisdiction in issuing the show-cause notice and demands that it should be quashed.

The move comes as no surprise to the information technology industry that has been following the controversy over MTNL's foray into mobile services.

Earlier, MTNL had moved the high court against TRAI's order against its entry as a cellular phone operator.

Rajagopalan, however, chooses to play down the fracas between MTNL and TRAI. "It is my misfortune that always TRAI's dispensation has been against me. But after I have approached the courts my stand has been vindicated. It is my misfortune that this has happened a few times."

But Rajagopalan too accepts that it is time for the lawmakers to step in and once and for all clear up the matter about TRAI: "One of the reasons why this kind of situation has arisen is that the TRAI Act itself is defective. It does not reflect the will of the legislator. The other problem is that the Indian Telegraph Act of 1885 contradicts the TRAI Act. So, the reason for this trouble is that we are using an old act and making decisions based on the new one."

He told Rediff that the government needs to draft a new act called the Indian Telecommunication Act. This act could include clauses from both the TRAI Act and the Indian Telegraph Act of 1885 and be the final word on regulation in the industry.

Thrusting the responsibility on the ministry of communications Rajagopalan said that MTNL should only be viewed as a telecom operator and not as a government owned business.

"My responsibility lies towards my shareholders. Finally, it is up to the government to implement the policies to regulate the industry," he said.

The skirmish between MTNL and TRAI only stresses the need to clearly define TRAI's role. When TRAI was set up it was to carry out three functions:

1. Adjudication and arbitration.
2. Tariff setting and
3. Offering recommendation on policy.

He says: "Everything is in a state of flux. I don't know what the role is supposed to be. It is time for the government to make a policy on this."

Rajagopalan is emphatic: "As long as the parameters it has set are met, the TRAI has no business to decide on what the tariff should be. As a telecom operator I have to only give them my tariff five days before it is implemented. After that they have no option but to approve it."

MTNL's mobile services launch has generated a lot of controversy as private cellular operators claim that the move raises crucial issues regarding tariffs and cross-subsidisation of mobile and basic telecom services.

The TRAI too has alleged that MTNL has cross-subsidised its mobile phone services using its basic telephony services.

Rajagopalan denies this. "We have not done any cross-subsidy. We will break even in two to three years. Our officials had explained the costing to TRAI. But the cellular industry in this country has always had prices that are very high and beyond their costing. My pricing is low not because of cross-subsidy. It is because costs of products are coming down and I am passing the benefit to the consumers," he justifies.

Allegations of cross-subsidy have always dogged MTNL. Private Internet service providers too have alleged that MTNL is indulging in cross-subsidy for its Internet services.

Private telecom operators claim that MTNL's monopoly in the basic telephony services in high teledensity circles of Bombay and Delhi gives it surplus cash reserves.

This makes it a player with deep pockets that can sustain low priced services till the necessary volumes are achieved.

Rajagopalan has maintained that these allegations are untrue.

To prove his point he cites the example of cellular operators in Tamil Nadu. "The cellular operators there are ready to offer calls at the rate of Rs 2 per three minutes. How is this possible for them? In my opinion we need to re-examine the cost structures," he says.

MTNL has promised to set up a separate subsidiary for its cellular services and has agreed to pay 15 per cent of annual gross revenue to the Department of Telecommunications, the same condition as applicable to other cellular mobile service providers.

Rajagopalan flaunts this to prove that MTNL is keeping its books clean.

"We are not doing any cross-subsidy. We are keeping separate accounts. We have complied with all the conditions laid out for cellular operators. We have taken the licence. We have promised to pay the DoT the required amounts," he says.

MTNL's low tariff rate for its mobile service has been a sore point with the TRAI. The regulatory authority has objected to MTNL launching its service with a very low tariff card without its approval.

Rajagopalan is emphatic that MTNL has not violated any rules because it has made it clear to consumers that the tariff proposed by it is provisional and subject to final determination by TRAI or the courts.

In his reply to the show-cause notice issued by TRAI, Rajagopalan has said:

The notice has been issued on the basis that the tariff's reported by us have been implemented with the launch of the CMTS, notwithstanding the intervention by the TRAI. Effectively, therefore, the TRAI is faulting MTNL for having launched the services prior to the approval of the reported tariff by TRAI, in spite of the fact that MTNL has declared categorically that the tariff as proposed will be subject to the approval by TRAI or the courts (which may be higher). The power sought to be exercised by TRAI, therefore, is in regard to launch of the service by MTNL, although the same has been licensed by the licensor. We make it clear that the tariffs will be determined under Section 11 (2) of the TRAI Act.

Earlier:

• Watchdog is bad dog!
  Regulator TRAI's show-cause notice on MTNL's mobile service stayed
• Interview with Justice S S Sodhi

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