Call Drops and Regulatory Costs

The recent amendment by the Telecom Regulatory Authority of India (TRAI) to the Telecom Consumers Protection Regulations (TCPR), 2012 is a bold move for two reasons: first, it turns the spotlight on the consumer in the telecom regulatory effort; and second, it uses TRAI’s regulation-making power to fashion a novel penalty on service providers, in the form of “notional compensation” for call drops.¹ Consumer-centric regulation should be welcomed, but the use of regulatory powers to impose monetary fines on service providers must also be seen in the context of the rather limited enforcement powers in TRAI’s arsenal to rein in regulated entities.

The omission of explicit statutory backing to the telecom regulator for levying penalties is a design flaw in the TRAI Act 1997. The provisions of the statute require TRAI to initiate a formal legal process for ensuring that regulated entities comply with its directions. The TRAI Act thus does not directly vest enforcement powers in the regulator, who needs to approach the appropriate civil court if its directions are violated. This could be a long-drawn-out process, and the attendant costs make the arrangement a poor substitute for effective enforcement powers being vested in the regulator. The under-delegation of regulatory power—by a statute in this case, even after the amendment established a tribunal that could theoretically oversee the exercise of such powers on the judicial side—is a peculiar feature of the regulatory structure in Indian telecom. This is in contrast with the statutory powers vested in financial regulators such as the Reserve Bank of India and Securities and Exchange Board of India enabling them to levy penalties on regulated entities for violations.² Involved as it is in a number of activities mandated under Section 11(1)(b) of the TRAI Act, the regulatory authority can naturally be expected to face violations of its directions and stipulations. The option of approaching the courts is not only time-consuming, but is also ill-suited to the telecom sector milieu in view of (1) the long-term incomplete nature of contracts where adopting adversarial positions in litigation steeply increases costs of adapting to changing circumstances, (2) technological uncertainties and information asymmetries that require the regulator to work in close cooperation with regulated entities, and (3) the procedural uncertainties associated with common law courts.