“Mr.

Watson come here, I want you”

Alexander Graham Bell

March 1876

This was the first historical sentence on telephone by Alexander to Watson.

Once a status symbol, the telephone has now become a necessity at least in
bigger towns.

Telecommunications is one of the fastest growing areas of technology in the

world. Because of its rapid growth, businesses and individuals can access
information at electronic speed from almost anywhere in the world. By
including telecommunications in their operations, businesses can provide better
services and products to their customers. For individuals, telecommunications
provides access to worldwide information and services.This is largely due to the
rapid growth of trade and commerce, industry and urbanization in the last few
decades. More and more people now require faster means of communication.
To cater to these needs, modern technology has developed new and more
sophisticated services.

Many countries opening their telecom markets and privatizing incumbent

operators have established independent regulatory authorities and made them
responsible for regulating the sector. Before analyzing about settlement of
disputes in telecom sector, the concept of telecommunication should be made
clear as to what types of services would be included in telecommunication
service.

Telecommunications’ as an infrastructure sector brings within its ambit the

widest range of services under one infrastructure sector. The precise ambit of
the infrastructure services falling under the term ‘Telecommunications’ depends
not only on the technology being used but also the legal framework regulating
the telecom sector.

The following services would fall under the ‘Telecommunications’ sector due to
wide and overreaching definitions of certain term used in the statues governing
the telecommunications sector in India: (i) Land line or fixed network telephone
services (basic telecom services); (ii) GSM cellular telephone services (cellular
phone services or mobile phone services); (iii) Wireless in local loop mobile
services (WLL mobile phone services); (iv) Internet service; (v) electronic mail
services; (vi) V Sat communications services; (vii) voice mail services; (viii)
data services; (ix)e-commerce; (x) global mobile personal communications
services (GMPCS services or satellite communications services); (xi) wireless
broad band communications and (xii) broadcasting.1

Telecommunications is an infrastructure in which rapid technological advance

has been occurring and the risk of obsolesce is comparatively higher than other
infrastructural sectors. Telecommunications is also one of the few infrastructure
sectors, where facility is never really completed as the telecommunications
network that is established has to be either constantly expanded to achieve
higher consumer penetration or has to be constantly upgraded to allow the
network to provide the latest services possible.2
1
By the Government Notification No.39 dated 09.01.2004[S.O.44(E)] broadcasting is included in
‘Telecommunication services’
2
See Joshi Piyush(2001) ‘Law Relating to infrastructure Projects’ New delhi,Butterworths India at page 419
 Telecommunications is the communication of information by electronic means
usually over some distance. Telecommunication is the transmission and
reception of messages over long distances. Visual signaling with flags, lamps or
smoke was the earliest form of telecommunication. Today, the term refers to a
wide variety of electrical and electronic communication systems used
throughout the world. Modern telecommunication systems send and receive
sound, printed materials, and visual images in a fraction of a second.

Most telecommunication systems transmit messages by wire, radio or satellite.

Many telegraph messages and telephone conversations, as especially local calls,
travel over wires that are laid underground in cables. Cables on the sea floor
handle such communications that travel overseas. Television and radio
broadcast are sent through the air by radio waves. Radio waves called
microwaves transmit television signals over extremely long distances.
Microwaves are also used in most long distance telephone communication.

The definition of ‘telecommunication service’ is given in section 2(1) K of The

Telecommunication Regulatory Authority of India Act, 1997 as
telecommunication service means service of any description (including
electronic mail, voice mail, data services, audio tax services, video tax services,
radio paging and cellular mobile telephone services) which is made available to
users by means of any transmission or reception of signs, signals, writing,
images and sounds or intelligence of any nature, by wire, radio, visual or other
electro-magnetic means but shall not include broadcasting services;
[Provided that the central government may notify other services to be
telecommunication service including broadcasting services.]3

3
Inserted vide Telecom Regulatory Appellate Authority of India (Amendment)Act.2000
Absence of proper regulation in the field of Cable and Broadcasting Sectors led
the government to issues a notification4 that “broadcasting” and “cable” services
to be “telecommunication services” under TRAI Act, 1997.

Much of the telecom regulation comprises measures designed to open the

market to competition or deal with an entrenched lack of competition. In a
capital-intensive network industry such as telecom sector, the historic
investment and established customer relationships of the incumbent operator
often give it a tremendous advantage over new entrants. While the telecom
sector is no longer viewed as a “natural monopoly”, the cost of
telecommunication infrastructure investment is nevertheless high. Resistance to
such measures is an obvious way for dominant operators to hold back the tide of
open market competition. Such resistance often gives rise to a verity of disputes.
These include disputes between operators and consumers, disputes over the use
or abuse of frequency spectrum, disputes between regulation operators, as well
as disputes under international trade and investment agreements.

The success and failure of the sector regulation depends on the way disputes
are resolve and handled by the regulators. There is a close relation between
regulated matters and disputes arising over the provision of telecom services
and infrastructure has led legislatures in many countries to confer a dispute
resolution power on the body established to regulate the sector.

Thus effective dispute resolution mechanism is necessary for promoting growth

in telecom sector. If disputes are not resolved expeditiously, the result will be
uncertainty in the sector, which in turn, may affect investment climate. In the
light of these compulsions The Telecommunication Regulatory Authority of

4
Government Notification No.39 dated 09.01.2004[S.O.44(E)]
India was established in 1997 under the Telecommunication Regulatory
Authority of India Act, 1997.

The Telecommunication Regulatory Authority of India (TRAI) was first made

responsible for hearing dispute in the sector. However the adjudicatory powers
of TRAI were challenged before the Delhi high Court on the ground, inter alia,
that TRAI did not possess jurisdiction to issue directions to DoT in latter’s
capacity as Licensor. The Single Judge allowed the challenge, which was
subsequently confirmed by a Division Bench of the Delhi High Court. The High
Court held, inter alia, that TRAI does not possess the power to issue directions
to the Government in the latter’s capacity as Licensor 5. The Legislative
amendments created the Telecommunication Disputes Settlement and Appellate
Tribunal (TDSAT), giving it the power to hear disputes directly from disputing
parties, as well as to hear and dispose of appeals against any direction, decision
or order of the Authority (TRAI) as well as the government.6
However there are some disputes in telecom sector which does not fall directly
under the telecommunication laws and covered under different laws such as
disputes relating to infrastructure, investment, trade, liberalization or consumer-
related matters etc. Thus it could be said that dispute resolution in
telecommunication require various approaches for settlement.

5
Union of India Vs. TRAI 74(1998) DLT 282
6
The Telecommunication Regulatory Authority of India( Amendment) Act,2000 amended The
Telecommunication Regulatory Authority of India Act,1997
Therefore specific attention will have to be given to dispute resolution
mechanisms, which should be re-oriented to tackle new and emerging areas of
conflict in the sector. Dispute settlement principles must, therefore, find a
balance between the interests of various carrier services and customer
considerations, which include their perception of quality of service, price,
coverage, flexibility and field of choice available to them. There are various
common official and approaches to dispute resolution.

These range from regulatory adjudication, court adjudication, alternative dispute

resolution, negotiation and mediation to arbitration; and have their advantages
and disadvantages. Many countries are using use a mix of adjudication by the
regulator and adjudication by the courts. The determining principle of
regulatory adjudication is to ensure orderly development of the
telecommunication sector by promoting fair competition between the dominant
and new service providers through a series of measures like publishing a
standard reference interconnect offer, price cap on tariffs, checking predatory
pricing and monitoring compliance with licence terms and conditions.

Regulatory adjudication can have the advantages of well-structured channels of

decision-making, accountability of official decision-makers, established
mechanisms for coordinating decisions among agencies with related
responsibilities and availability of the State’s enforcement mechanisms. Service
providers or consumers also have an option to appeal against the decision of the
regulator and have the issue settled through court adjudication. As an approach,
court adjudication remains an important final recourse for many types of
disputes. It has the advantage of finality and official enforcement mechanisms,
but in spite of all the above advantages it has own disadvantages also such as
high costs arising from lengthy court procedures and a perceived lack of
telecommunication-specific expertise to deal with the many technical disputes
causing delays.

To cut down the high cost arising out of lengthy court procedure ADR
mechanism are being used in order to resolve disputes relating to
telecommunications. Negotiation, mediation and arbitration are the most
commonly practiced of these less official means of dispute resolution.

The ADR methods that use confidential processes are well-structured, time
saving and can help to maintain long-term commercial relationships. In the
mediation and arbitration processes, there also can be regulatory oversight
which sanctifies such processes. The ADR approach can help to smoothen
rough edges in a large number of cases but in certain areas involving
substantive issues where the stakes are very high, there may be no escape from
taking recourse to judicial intervention. In such situations, judicial and quasi-
judicial bodies like specialized tribunals, which also have enforcement powers,
become very relevant. In the emerging converged scenario, the dispute
settlement mechanism will have to be more flexible and less bureaucratic with
the requisite technical expertise to address new conflicts effectively.

EVOLUTION OF COMMUNICATION LAWS

This chapter traces the history of development of telecommunication in India.

The oldest telecommunication's service in India is the telegraph service, which
was introduced in 1851. The British Empire in India realized the advantages of
the industry and devoted much time and capital to the expansion of the
telegraph industry. Within four years, 7000 km of telegraph lines were erected,
connecting the North and South. With much labor put into the telegraph
industry, the network expanded rapidly to provide links to Malaysia, Tibet, and
Europe via Iraq and Iran. The telephone industry was introduced in 1882.
Unlike the telegraph industry, the development of telephones was entrusted to
the private sector and was limited to a few cities. With independence from the
British Empire in 1947, India had "321 telephone exchanges, with a capacity of
100,000 lines, 86,000 working connections, 426 long distance voice circuits,
338 long distance public call offices, and 3324 public telegraph offices.7"
Telecommunications and information technologies were developed in advanced
countries to serve their needs and interests. The new technologies brought about
speed, efficiency and a non-polluting environment. As the technologies became
chipper with greater volumes of users, business and administration needed
fewer and ever fewer workers.

7
See India: Adopting a Pro-Competitive Policy for Telecommunications by Ashok R. Menon for
Telecommunications Alliance dated 12 may, 1999.
2.2 INDIAN TELECOMUNICATION INDUSTRY – AN OVERVIEW

The telecom industry is an important infrastructure industry. The industry is

highly capital intensive and the payback period for investments can often be
very long. An efficient telecom network is vital for the economic development
of a nation. Indian telecom is more than 165 years old, beginning with the
commissioning of the first telegraph line between Kolkata and Diamond
Harbour in 1839. In 1948, India had 0.1 million telephone connections with a
telephone density of about 0.02 telephone per hundred population8.
The telecom services available in India include basic fixed line services, mobile
services (based on both GSM and CDMA technology), national long distance
services, international long distance services, internet services and pager
services.
Tele-density, which is defined as the number of telephone connections per 100
persons, is used to measure the reach of telecom services. As of May 2009,
India had a tele-density of 38.88. This growth was achieved on account of a
stupendous increase in the number of GSM cellular subscriptions. The total
telecom subscribers’ base as of 19 June 2009 was 452.91 million compared to
6.4 million and 3.6 million at the end of the March of 2002 and 2001
respectively. The total wireless subscribers (GSM, CDMA & WLL(F)) base
stood at 415.25 million at the end of May 2009. A total of 11.59 million
wireless subscribers have been added during the month of May 2009 as against
11.90 million wireless subscribers added during the month of April 2009.9
The growth is being led by companies like BSNL, Bharti, Reliance
Communication and Vodafone Essar, which together accounts for over 75% of
the telecom market share. As of quarter ended March 2008, BSNL leads the

8
Department of Telecommunications "Indian Telecommunication Statistics: Policy Framework, Status and
Trends", Economic Research Unit (Statistics Wing), Ministry of Communications, New Delhi.
9
Telecom regulatory Authority of India, the Press Release56/2009 dated-19 June 2009
pack with a market share of 24.07%, thanks to its near monopoly in the fixed
line services.
Indian Telecom Industry has grown to become the world’s second largest
market after China. It surpassed the number of connections in US in
march2008.It took 25 years, after independence to reach the 1 st 1 million mark;
today we add almost 9 million phones in a month, the highest monthly additions
in the world.The DoT has indicated that it has a target of 500 million telephone
connections in India by December 2010. The earlier DoT target of 250 million
subscribers by December 2007 was achieved in October 2007 highlighting the
rapid growth in tele-density in India10.

2.3 LEGAL FRAMEWORK

‘Telecommunications’ falls under the legislative competence of the Union and

not the states11.Consequently, the legal framework governing the
telecommunications sector is within the control of the Union Government and
the Parliament.
The legal framework governing the telecommunications sector in India is
provided by:
1. The Indian Telegraph Act 1885, and the rules made there under
2. The Wireless Telegraphy Act 1933 ,and the rules made there under
3. The Telegraph Wires (unlawful Possession) Act 1950, and the rules made
there under
4. The Cable Television Network (Regulation) Act 199612, and the rules
made there under

10
Telecom regulatory Authority of India, Consultation Paper No.17//2008 dated-31 December 2008
11
See Entry 31,list.Seventh Schedule, Constitution of India
12
This legislation seeks to regulate the possession of telegraph wires and covers only copper wires as it
defines telegraph wires to covers only copper wires.
 5. The Telecom Regulatory Authority of India Act 1997, and the rules
made there under

The control and regulation of the Union government over the

telecommunication sector is enshrined in section 4 of the Telegraph Act 1885,
read with Section 3 of the Wireless Telegraphy Act 1933.
Section 4(1) of the Telegraph Act 1885 specifically stats that:
Within India, the Central Government shall have exclusive privilege of
establishing, maintaining and working telegraphs:
Provided that the Central Government may grant a license, on such conditions
and in consideration of such payments as it thinks fit, to any person to establish,
maintain or work a telegraph within any part of India.

This provision has the following effect:

1. The establishing, maintaining and working of ‘telegraphs’ within India
has been clearly stated to be in the nature of a ‘privilege’.
2. The Central Government has been vested with the exclusive right of
establishing, maintaining and working of telegraphs.
3. The Central Government has the ability to grant a license to any person to
either establish or maintain, or work a telegraph in any part within India
on such conditions and in consideration of such payments as the Central
Government may deem fit.

The Central Government also has been vested with the powers to make rules for
governing the establishment, maintaining and working of:
 1. Telegraphs other than wireless telegraphs
2. Wireless telegraphs on ships within Indian territorial waters and on air
craft within or above India.13

The Central Government also has the specific power to makes rules for the
conduct of all or any telegraphs established, maintained or worked by the
government or by persons licensed under the Telegraph Act 1885 14.It is also
vested with the power to determine the rates at which and the other conditions
and restrictions subject to which messages shall be transmitted within India 15
and to any country outside India16.

The Indian Telegraph Act 1885,while providing for the regulation of the
establishment, operation and maintenance of a ‘telegraph’, effectively vests in
The Union Government with the Power to regulate the provision of all
telecommunication services as each of them involves either the establishment or
working, or operation and maintenance of a ‘telegraph’.

The Wireless Telegraphy Act 1933, while seeking to regulate the possession of
wireless communication apparatus effectively regulates the every aspect relating
to wireless communication including the use of frequencies and the place of
establishment of wireless equipment in any telecommunication network. The
Wireless Telegraphy Act 1933, clearly mandates that unless a person has been
exempted by the Union Government from the provisions of this Act; no person
shall possess wireless telegraphy apparatus except in accordance with a license
issued under the Telegraphy Act 1933.17The telegraph authority constituted
under the Indian Telegraph Act 1885, has been declared as the competent
13
See Second Proviso to Sec 4(1) of Telegraph Act 1885
14
See Sec.7(1) of Telegraph Act 1885
15
See Sec.7(2)(a) of Telegraph Act 1885
16
See Sec.6A(1) of Telegraph Act 1885

17
See Sec.4 read with Sec. 3 , Indian Wireless Telegraphy Act 1933
authority to issue licenses under the Wireless Telegraphy Act 1933,and it is
vested with the power to issue these licenses in such manner, on such conditions
and subject to such payments may be prescribed18.

Even though the Telegraph act 1885, and the Wireless Telegraphy Act 1933, do
provide for private participation in the establishment, working, operation and
maintenance of telegraphs and wireless telegraphy apparatus by providing for
the power of the Union Government to grant licenses, the framework created by
the Telegraph act 1885,does not provided for the crucial aspect for private
participation in the telecommunication sector namely, regulations to provide for
a level playing field with the incumbent operator.19

18
See Sec.5 of Indian Wireless Telegraphy Act 1933
19
See Joshi Piyush(2001) ‘Law Relating to infrastructure Projects’ New delhi,Butterworths India at page 427
2.4 HISTORY OF TELECOM IN INDIA-

Telecom in the real sense means transfer of information between two distant
points in space. The popular meaning of telecom always involves electrical
signals and nowadays people exclude postal or any other raw
telecommunication methods from its meaning. Therefore, the history of Indian
telecom can be started with the introduction of telegraph.
INTRODUCTION OF TELEGRAPH-
The postal and telecom sectors had a slow and uneasy start in India. In 1850, the
first experimental electric telegraph Line was started between Kolkata and
Diamond Harbour. In 1851, it was opened for the British East India Company 20.
The Posts and Telegraphs department occupied a small corner of the Public
Works Department, at that time. Construction of 4,000 miles (6,400 km) of
telegraph lines connecting Kolkata (Calcutta) and Peshawar in the north via
Agra, Mumbai (Bombay) through Sindwa Ghats, and Madras (Chennai) in the
south, as well as Ootacamund and Bangalore was started in November 1853.
Dr. William O'Shaughnessy, who pioneered telegraph and telephone in India,
belonged to the Public Works Department. He tried his level best for the
development of telecom throughout this period. A separate department was
opened in 1854 when telegraph facilities were opened to the public.
DEVELOPMENT OF TELECOMMUNICATION IN INDIA
In 1880, two telephone companies namely The Oriental Telephone Company
Ltd. and the Anglo-Indian Telephone Company Ltd. approached the
Government of India to establish telephone exchanges in India. The permission
was refused on the grounds that the establishment of telephones was a
Government monopoly and that the Government itself would undertake the
work. By 1881, the Government changed its earlier decision and a licence was

20
Dossani, R. (Ed.) 2002, Telecommunications reform in India. Quorum Books at, page -22
granted to the Oriental Telephone Company Limited of England for opening
telephone exchanges at Kolkata, Mumbai, Chennai (Madras) and Ahmedabad.
January 28, 1882, is a Red Letter Day in the history of telephone in India. On
this day Major E. Baring, Member of the Governor General of India's Council
declared open the Telephone Exchange in Kolkata, Chennai and Mumbai. The
exchange at Kolkata named "Central Exchange" was opened at third floor of the
building at 7, Council House Street. The Central Telephone Exchange had 93
numbers of subscribers. Bombay also witnessed the opening of Telephone
Exchange in 1882.
The telegraph Act of 1885 governed the telecommunications sector. Under this
Act, the government was in-charge of policymaking and provision of services.
Major changes in telecommunications in India began in the 1980s. Under the
Seventh Plan (1985-90), 3.6 percent of total outlay was set aside for
communications and since 1991, more than 5.5 percent is spent on it .  The
initial phase of telecom reforms began in 1984 with the creation of Center for
Department of Telematics (C-DOT) for developing indigenous technologies and
private manufacturing of customer premise equipment. Soon after, the
Mahanagar Telephone Nigam Limited (MTNL) and Videsh Sanchar Nigam
Limited (VSNL) were set up in 1986. The Telecom Commission was
established in 1989.
When telecom reforms were initiated in 1994, there were three incumbents in
the fixed service sector, namely DoT (Department of Telecom), MTNL and
VSNL. Of these, DoT operated in all parts of the country except Delhi and
Mumbai. MTNL operated in Delhi and Mumbai and VSNL provided
international telephony. 
Given its all-India presence and policy-making powers, the Department of
telecommunication (DoT) enjoyed a monopoly in the telecom sector prior to the
major telecom reforms. However, subsequent to the second phase of reforms in
1999, which included restructuring the DoT to ensure a level playing field
among private operators and the incumbent, the service-providing sector of DoT
was split up and called Department of Telecom Services (DTS). DTS was later
corporatized and renamed Bharat Sanchar Nigam Limited (BSNL). This meant
separation of the incumbent service provider from the policy-maker. Broadly,
DoT is now responsible for policy-making, licensing and promotion of private
investments in both telecom equipment and manufacture and provision of
telecom services. BSNL, a corporate body, is responsible for the provision of
services21.
A crucial aspect of the institutional reform of the Indian telecom sector was
setting up of an independent regulatory body in 1997 – the Telecom Regulatory
Authority of India (TRAI), to assure investors that the sector would be regulated
in a balanced and fair manner. TRAI has been vested with powers to ensure its
independence from the government22. The government has retained the
licensing function with itself. The main issue with respect to licensing has not
been whether it should be with the regulator but that the terms and conditions of
licensing should involve consultations with TRAI to ensure transparency in the
bidding process Some of the main functions of TRAI include fixing tariffs for
telecom services, dispute-settlement between service providers, protecting
consumers through monitoring of service quality and ensuring compliance to
license conditions, setting service targets and pricing policy for all operators and
service providers23.
Further changes in the regulatory system took place with the TRAI Act of 2000
that aimed at restoring functional clarity and improving regulatory quality.
TRAI can frame regulations and can levy fees and charges for telecom services
as deemed necessary.  The regulatory body also has a separate fund (called the
TRAI General Fund) to facilitate its functioning. To fairly adjudicate any
21
Raghavan Vikram (2007), Communications laws in India (legal aspects of telecom, broadcasting and cable
services), Lexis Nexis Butterworth at page 34
22
Ibid., at page 38
23
Ahluwalia, MS. 2001, "State level performance under economic reforms in India" Working Paper No. 96,
Center for Research on Economic Development and Policy Reform, Stanford University at page 8
dispute between licensor and licensee, between service provider, between
service provider and a group of consumers, a separate disputes settlement body
was set up called Telecom Disputes Settlement and Appellate Tribunal
(TDSAT).
Some administrative and functional aspects of the telecom sector in India are
discussed below:
Administration and Control-
Department of Telecommunications (DoT)-
The Telecom Commission set up in April 1989 has the administrative and
financial powers of the Government of India to deal with various aspects of
telecommunications. The Commission and the Department of
Telecommunications (DoT) are responsible, inter alia, for policy formulation,
licensing, wireless spectrum management, administrative monitoring and
control of the Public Sector Undertakings (PSUs) engaged in
telecommunication services, research and development, standardization/
validation of equipment, and international relations24.

The Centre for Development of Telematics (C-DOT)-

The Centre for Development of Telematics (C-DOT) is an autonomous body

established in 1984 with the objective of developing a new generation of digital
switching items. It has developed a wide range of switching and transmission
products both for rural and urban applications.
Two important wings of DoT are the Telecom Engineering Centre (TEC) and
the Wireless Planning and Coordination (WPC) wing. TEC is devoted to
product validation and standardization for user agencies. It also provides
technical and engineering support to the Telecom Commission and the field
units.

24
Business Standard: August 22, 2007
The Wireless Planning and Coordination wing deals with the policies of
spectrum management, wireless licensing, frequency assignments, international
coordination for spectrum management and administration of Indian Telegraph
Act, 1885 for radio communication systems and Indian Wireless Telegraphy
Act, 193325. In order to administer the use of radio frequencies, the
licences/renewals for use of wireless equipment and the frequencies are
authorised by WPC. The licences are granted for specific periods on payment of
prescribed licence fees and royalty in advance and are renewal on expiry of the
validity periods.

Regulatory control

The entry of private service providers in 1992 brought with it the inevitable
need for independent regulation. The Telecom Regulatory Authority of India
(TRAI) was thus established with effect from 20 February 1997 by an Act of
Parliament, called the Telecom Regulatory Authority of India Act, 1997, to
regulate telecom services, including fixation/revision of tariffs for telecom
services, which were earlier vested in the DoT26. The TRAI Act was amended
by an ordinance, effective from 24 January 2000, establishing a
Telecommunications Dispute Settlement and Appellate Tribunal (TDSAT) to
take over the adjudicatory and disputes functions from TRAI. TDSAT was set
up to adjudicate any dispute between a licensor and a licensee, between two or
more service providers, between a service provider and a group of consumers,
and to hear and dispose of appeals against any direction, decision or order of
TRAI. The 2000 Amendment took away the TRAI’s dispute resolution function
and entrusted the same to the Telecom Disputes Settlement Tribunal (TDSAT).

25
Dossani, R. (Ed.) 2002, Telecommunications reform in India. Quorom Books at pages 18-19
26
Raghavan Vikram (2007), Communications laws in India (legal aspects of telecom, broadcasting and cable
services), Lexis Nexis Butterworth.at pages 12-15
Following structure gives a cursory glance of the present regulatory structure in
the telecom sector f India in brief.

REGULATORY STRUCTURE OF THE INDIAN TELECOM SECTOR

REGULATORY FUNCTIONS COMMENT

BODY
DOT -Department Licensing, license Policymaking and
of Telecom fee, frequency enforcing body
management of telecom
sector

Telecom Commission Executive and policy Part of DOT

making function of
ministry

WPC- Wireless Planning The national radio Country's spectrum

Commission regulatory authority management
responsible for spectrum
management, including
licensing. Caters for the
needs of all wireless
users in the country,
government or private,
security or non security.

GOTIT-( Group on Decides on ad hoc issues Prime Minister's

Telecom and IT) depending on the council
immediate needs

TRAI –Telecom Regulating, issuing Day to day

Regulatory of India directions and settlement management of sector
of disputes between
various service
 providers. Mandatory for
DOTto seek
recommendation of
TRAI in respect of
specified matters and
then setting up separate
dispute settlement
mechanism. Also has the
power to call for any
information,conduct
investigations and to
issue directions
(directives)

TDSAT-Telecom To adjudicate any Dispute settlement

Dispute Settlement dispute: (1) between a body
Appellate Tribunal licensor and a
Licensee
(2) between two or more
service providers
(3) between a service
provider and a group of
consumers

2.5 PRE REFORM PERIOD AND TELECOMMUNICATIONS IN INDIA

Before 1990's Telecommunication services in India were complete government

monopoly i.e. the Department of Telecommunication (DoT). Government also
retained the rights for manufacturing of Telecommunication equipments.
MTNL and VSNL were created in the year 1986.Early 1990's saw initial
attempts to attract private investment. Telecommunication equipment
manufacturing was delicensed in the year 199127.
A notable revolution has occurred in the telecom sector. In the pre reforms era,
this was entirely in the hands of the central government and due to lack of
27
"That old Gandhi magic", The Economist, November 27, 1997
competition, the call charges were quite high. Further, due to lack of funds with
the government, the government could never meet the demand for telephones.
In fact, a person seeking a telephone connection had to wait for years before he
could get a telephone connection. The service rendered by the government
monopoly was also very poor. Wrong billing, telephones lying dead for many
days continuously due to slackness on the part of the telecom staff to attend to
complaints, cross connections due to faulty / ill maintained telephone lines,
obsolete instruments and machinery in the telephone department were the order
of the day in the pre reforms era.
Today, there are many players in the telecom sector. The ultimate beneficiary
has been the consumer. Prices of services in this sector have fallen drastically.
Telephone connections are today affordable to everyone and are also easily
available. Gone are the days, when one had to wait for years to get a telephone
connection. The number of telephone connections which was only 2.15 million
(fixed lines) in 1981 increased to 5.07 million(fixed lines) in 1991. Today (as in
2003), there are 54.62 million telephone connections of which 41.33 million are
fixed line telephone connections, 12.69 million are cellular mobiles and the
remaining 0.60 million are WLL telephones1. Wireless in Local Loop (WLL)
telephones and cellular mobile telephones were unknown in India a few years
ago. Cell phones charges have come down so much that today one can see even
a common man going around with a cell phone in his hand. The private
companies are giving various incentives to attract customers, a situation which
is entirely opposite to the conditions prevailing in the pre reforms era when one
had to wait for years to get a telephone connection28.
The first step toward deregulation and beginning of liberalization and private
sector participation was the announcement of National Telecom Policy
1994.NTP 1994, for the first time, allowed private/foreign players to enter the
'basic' and the 'new cellular mobile section. Foreign Direct Investment (FDI) up
28
Panagariya, Arvind (2004). "India in the 1980s and 1990s: A Triumph of Reforms" at page 25
to 49% of total equity was also allowed in these sectors. The policy allowed one
private service provider to compete in basic services with the incumbent
Department of telecommunication (DoT) in each DoT internal circle. It allowed
duopoly in cellular mobile services in each circle. As part of the implementation
of the National Telecom Policy (NTP) 1994, licenses were issued against
license fees through a bidding process. This policy initiated the setting up of an
independent regulator–the Telecom Regulatory Authority of India (TRAI),
which was established in 1997. The main objective of TRAI is to provide an
effective regulatory framework to ensure fair competition while, at the same
time, protecting the interest of the consumers.
2.6 LIBERALIZATION AND REFORMS IN TELECOM SECTOR :A
REVIEW
1991-92:

1.On 24th July 1991, Government announced the New Economic Policy.
2. Telecom Manufacturing Equipment license was delicensed in 1991.
3Automatic foreign collaboration was permitted with 51 per cent equity by the
collaborator.

1992-93:
Value added services were opened for private and foreign players on franchise
or license basis. These included cellular mobile phones, radio paging, electronic
mail, voice mail, audiotex services, videotex services, data services using
VSAT's, and video conferencing.
1994-95:
1. The Government announced a National Telecom Policy 1994 in September
1994. It opened basic telecom services to private participation including foreign
investments.
2. Foreign equity participation up to 49 per cent was allowed in basic telecom
services, radio paging and cellular mobile. For value added services the foreign
equity cap was fixed at 51 per cent. .

3. Eight cellular licensees for four metros were finalized.

1996-97:
1. TRAI was set up as an autonomous body to separate the regulatory
functions from policy formulations and operational functions.
2. Coverage of the term "infrastructure" expanded to include telecom to
enable the sector to avail of fiscal incentives such as tax holiday and
concessional duties.
 3. An agreement between Department of Telecommunication (DoT) and
financial institutions to facilitate funding of cellular and basic telecom
projects.
4. External Commercial Borrowing (ECB) limits on telecom projects made
flexible with an increased share from 35 per cent to 50 per cent of total
project cost.
5. Internet Policy was finalized.

1998-99:
FDI up to 49 per cent of total equity, subject to license, permitted in companies
providing Global Mobile Personal Communication (GMPC) by satellite
services.
1999-00:
1. National Telecom Policy 1999 was announced which allowed multiple fixed
Services operators and opened long distance services to private operators.
2. TRAI reconstituted: clear distinction was made between the recommendatory
and regulatory functions of the Authority.
3. DOT/MTNL was permitted to start cellular mobile telephone service.
4. To separate service providing functions from policy and licensing functions,
Department of Telecom Services was set up.
5. A package for migration from fixed license fee to revenue sharing offered to
existing cellular and basic service providers.
6. First phase of re-balancing of tariff structure started. STD and ISD charges
were reduced by 23 per cent on an average.
7. Voice and data segment was opened to full competition and foreign
ownership increased to 100 per cent from 49 per cent previously29.

2000-01:
1. TRAI Act was amended. The Amendment clarified and strengthened the
recommendatory power of TRAI, especially with respect to the need and timing
of introduction of new services provider, and in terms of licenses to a services
provider.
2. Department of Telecom Services and Department of Telecom operations
corporatized by creating Bharat Sanchar Nigam Limited.
3. Domestic long distance services opened up without any restriction on the
number of operators.
4. Second phase of tariff rationalization started with further reductions in the
long distance STD rates by an average of 13 per cent for different distance slabs
and ISD rates by 17 per cent.

29
Department of Telecommunications "Indian Telecommunication Statistics: Policy Framework, Status and
Trends", Economic Research Unit (Statistics Wing), Ministry of Communications, New Delhi
5. Internet Service Providers were given approval for setting up of International
Gateways for Internet using satellite as a medium in March 2000.
6. In August 2000, private players were allowed to set up international gateways
via the submarine cable route.
7. The termination of monopoly of VSNL in International Long Distance
services was antedated to March 31, 2002 from March 31, 200430.
2001-02:
1. Communication Convergence Bill, 2001 was introduced in August 2001.
2. Competition was introduced in all services segments. TRAI recommended
opening up of market to full competition and introduction of new services in the
telecom sector. The licensing terms and conditions for Cellular Mobile were
simplified to encourage entry for operators in areas without effective
competition.
3. Usage of Voice over Internet Protocol permitted for international telephony
service.
4. The five-year tax holiday and 30 per cent deduction for the next five years
available to the telecommunication sector till 31st March 2000 was reintroduced
for the units commencing their operations on or before 31st March 2003. These
concessions were also extended to internet services providers and broadband
networks.
5. Thirteen ISP's were given clearance for commissioning of international
gateways for Internet using satellite medium for 29 gateways.
6. License conditions for Global Mobile Personal Communications by Satellite
finalized in November 2001.
7. National Long Distance Service was opened up for unrestricted entry with the
announcement of guidelines for licensing NLD operators. Four companies were

30
Economic Survey, Annual Reports(2001-2003) of the Department of Telecommunications, Ministry of
Communications and Technology and the Telecom Regulatory Authority of India (TRAI)–various issues.
issued Letter of Intent (LOI) for National Long Distance Service of which three
licenses have been signed.
8. The basic services were also opened up for competition. 33 Basic Service
licenses (31 private and one each to MTNL and BSNL) were issued up to
31stDecember 2001.
9. Four cellular operators, one each in four metros and thirteen were permitted
with 17 fresh licenses issued to private companies in September/October 2001.
The cell phone providers were given freedom to provide, within their area of
operation, all types of mobile services equipment, including circuit and/or
package switches that meet the relevant International Telecommunication Union
(ITU)/ Telecom Engineering Centre (TEC) standards.
10. Wireless in Local Loop (WLL) was introduced for providing telephone
connection in urban, semi-urban and rural areas.
11. Disinvestment of PSU's in the telecom sector was also undertaken during
the year. In February 2002, the disinvestment of VSNL was completed by
bringing down the government equity to 26 per cent and the management of the
company was transferred to Tata Group, a strategic partner. During the year,
HTL was also disinvested.
12. Government allowed CDMA (Code Division Multiple Access) technology
to enter the Indian market.
13. Reliance, MTNL and Tata were issued licenses to provide the CDMA(Code
Division Multiple Access) based services in the country.
14. TRAI recommended deregulating regulatory intervention in cellular tariffs,
which meant that operators need no longer have prior approval of the regulator
for implementing tariff plans except under certain conditions.

2002-03
1. International long distance business opened for unrestricted entry.
2. Telephony on internet permitted in April 2002.
3. TRAI finalized the System of Accounting Separation (SAS) providing
detailed accounting and financial system to be maintained by telecom service
providers31.

2003-04
1. Unified Access Service Licenses regime for basic and cellular services was
introduced in October 2003. This regime enabled services providers to offer
fixed and mobile services under one license. Consequently 27 licenses out of 31
licenses converted to Unified Access Service Licenses.
2. Interconnection Usage Charge regime was introduced with the view of
providing termination charge for cellular services and enable introduction of
Calling Party Pays regime in voice telephony segment.
3. The Telecommunication Interconnection Usage Charges Regulation 2003
was introduced on 29th October 2003 which covered arrangements among
service providers for payment of Interconnection Usage Charges for
Telecommunication Services and covered Basic Service that includes WLL (M)
services, Cellular Mobile Services, and Long Distance Services (STD/ISD)
throughout the territory of India.
4. The Universal Service Obligation fund was introduced as a mechanism for
transparent cross subsidization of universal access in telecom sector. The fund
was to be collected through a 5 per cent levy on the adjusted gross revenue of
all telecom operators32.
5. Broadcasting notified as Telecommunication services under Section 2(i)(k) of
TRAI Act.
2004-05:

31
See Telecom Sector Report prepared by vishwa doshi for way2wealth Securities Prt.Ltd. available at
http://www.way2wealth.com
32
See at Department of Telecommunications, Annual Report 2002-2003, Ministry of Communication and
Information Technology, New Delhi
1. Budget 2004-05 proposed to lift the ceiling from the existing 49 per cent to
74 per cent as an incentive to the cellular operators to fall in line with the new
unified licensing norm.
2. 'Last Mile' linkages permitted in April 2004 within the local area for ISP's for
establishing their own last mile to their customers.
3. Indoor use of low power equipments in 2.4 GHz band de-licensed from
August 2004.
4. Broadband Policy announced on 14th October 2004. In this policy,
broadband had been defined as an "always-on" data connection supporting
interactive services including internet access with minimum download speed of
256 kbps per subscriber.
5. The Telecommunications (Broadcasting and Cable Services) Interconnection
Regulation 2004 was introduced on 10th December 2004.
6. BSNL and MTNL launched broadband services on 14th January 2005.
7. TRAI announced the reduction of Access Deficit Charge (ADC) by 41 per
cent on ISD calls and by 61 per cent on STD calls which were applicable from
1st February 200533.

2005-2006 :

1. Budget 2005-2006 cleared a hike in Foreign Direct Investment (FDI) ceiling

to 74 per cent from the earlier limit of 49 per cent. 100 per cent FDI was
permitted in the area of telecom equipment manufacturing and provision of IT
enabled services.
2. Annual license fee for National Long Distance (NLD) as well as
International Long Distance (ILD) licenses reduced to 6 per cent of Adjusted
Gross Revenue (AGR) with effect from 1st January 2006.

33
See at Telecommunication Services and Economic Growth: Evidence from India available at http://www.e.u-
tokyo.ac.jp/cirje/research/03research02dp.html
3. BSNL and MTNL launched the 'One-India Plan' with effect from 1st March
2006 which enable the customers of BSNL and MTNL to call from one end of
India to other at the cost of Rs. 1 per minute, any time of the day to phone.
4. TRAI fixed Ceiling Tariff for International Bandwidth, Ceiling Tariff for
higher capacities reduced by about 70 per cent and for lower capacity by 35 per
cent.
5. Regulation on Quality of Service of Basic and Cellular Mobile Telephone
Services 2005 introduced on 1st July 2005.
6. BSNL announced 33 per cent reduction in call charges for all the countries
for international calls.
7. Quality of Service (Code of Practice for Metering and Billing Accuracy)
Regulation 2006 introduced on 21st March 200634.

11th plan (2007-2012):

Foreign Direct Investment (FDI) in Telecom sector has increased in recent years
with value of 81.62 billion with share of 10% in total inflow during January
2000 to June 2005. This is mainly in telecom services and not in telecom
manufacturing sector. Therefore, it is essential to enhance the prospect for
inflow of increased funds. The National Telecom policy (NTP) 1999 sought to
promote exports of telecom equipments and services. But till date export of
telecom equipment remains minimal. Most of the state-of-the-art telecom
equipments including mobile phones are imported from abroad. There is thus
immense potential for indigenous manufacturing in India. Certain measures like
financial packages, formation of a telecom export promotion council, creation
of integrated facilities for telecom equipment through Special Economic Zones
(SEZ) and encouraging overseas vendors to set up facilities in India, are

34
Ahluwalia, MS(2007). , "State level performance under economic reforms in India" Working Paper No. 96,
Center for Research on Economic Development and Policy Reform, Stanford University
required for making India a hub for telecom equipment manufacturing and
attract FDI. The telecom sector has shown robust growth during the past few
years. It has also undergone a substantial change in terms of mobile versus fixed
phones and public versus private participation. The following discussions from
the report of the working report on the telecom sector for the 11th plan (2007-
2012) will show the growth of telecom sector since 200335.

National Telecom Policy, 1994

The new economic policy adopted by the Government aims at improving India's
competitiveness in the global market and rapid growth of exports. Another
element of the new economic policy is attracting foreign direct investment and
stimulating domestic investment. Telecommunication services of world class
quality are necessary for the success of this policy. It is, therefore, necessary to
give the highest priority to the development of telecom services in the country.

Objectives:

2.The objectives of the New Telecom Policy will be as follows :

 The focus of the Telecom Policy shall be telecommunication for all and
telecommunication within the reach of all. This means ensuring the
availability of telephone on demand as early as possible.
 Another objective will be to achieve universal service covering all
villages as early as possible. What is meant by the expression universal
service is the provision of access to all people for certain basic telecom
services at affordable and reasonable prices.

35
TRAI (March 20, 2006), Recommendations on Issues relating to Broadcasting and Distribution of TV
channels
  The quality of telecom services should be of world standard. Removal of
consumer complaints, dispute resolution and public interface will receive
special attention. The objective will also be to provide widest permissible
range of services to meet the customer's demand at reasonable prices.
 Taking into account India's size and development, it is necessary to ensure
that India emerges as a major manufacturing base and major exporter of
telecom equipment.
 The defence and security interests of the country will be protected.

Revised Targets:

In view of the recent growth of the economy and the reassessed demand, it is
necessary to revise the VIII Plan targets as follows:
 Telephone should be available on demand by 1997.
 All villages should be covered by 1997.
 In the urban areas a PCO should be provided for every 500 persons by
1997.
 All value-added services available internationally should be introduced in
India to raise the telecom services in India to international standard well
within the VIII Plan period, preferably by 1996.
Value Added Services:

In order to achieve standards comparable to the international facilities, the sub-

sector of value-added services was opened up to private investment in July 1992
for the following services :
 Electronic Mail
 Voice Mail
 Data Services
 Audio Text Services
 Video Text Services
 Video Conferencing
 Radio Paging
 Cellular Mobile Telephone