TELECOM DISPUTES
SETTLEMENT & APPELLATE
TRIBUNAL
DATED 23RD JANUARY 2009
Appeal No.8 of 2007
Bharat Sanchar Nigam Limited … Appellant
v.
Telecom Regulatory Authority of
Appeal No. 9 of 2007
Mahanagar Telephone Nigam Limited … Appellant
v.
Telecom Regulatory Authority of
BEFORE:
HON’BLE MR. JUSTICE ARUN KUMAR CHAIRPERSON
HON’BLE MR. G. D. GAIHA MEMBER
Appeal No. 8 of 2007
For Appellant Mr.
Maninder Singh
Mr.
Yoginder Handoo
Mr. Kunal Sood
Mr. Mansimran Singh, Advocates
For Respondent Mr.
Saket Singh, Advocate
Appeal No. 9 of 2007
For Appellant Mr. Samir Vasisht, Advocate
For Respondent Mr.
Saket Singh, Advocate
ORDER
Bharat Sanchar Nigam Limited (BSNL) and Mahanagar
Telephone Nigam Limited (MTNL) have filed these appeals challenging the
Domestic Leased Circuits Regulations 2007 (10 of 2007) dated 14.9.2007 issued
by the Respondent -Telecom Regulatory Authority of India (TRAI) (hereinafter referred to as Authority). The pleadings in both the
cases being similar, it was decided to take up and dispose of these two appeals
together. The arguments on behalf of BSNL were marshalled by Mr. Maninder
Singh. Mr. Vasisht, counsel for MTNL adopted his arguments. As such, for
convenience, we will refer to the arguments of Mr. Maninder Singh as those of
the counsel for Appellants.
2. The
Appellants’ claim is that the impugned Regulations have been issued by the
Respondent without jurisdiction and that they have been issued in complete
disregard of the terms and conditions of the licences granted to service
providers when, in fact, as per the TRAI Act, it is incumbent upon the
Authority to ensure that the licence conditions are implemented. It is also
their contention that instead of the Respondent sending recommendations, if
considered necessary, to the Government, the Authority has itself issued the
impugned Regulations without any power to do so. It is also their contention
that under the TRAI Act, 1997, TRAI has been constituted for the Regulation of telecommunication services
and that Domestic Leased Circuits (hereinafter referred to as DLC) do not constitute a
telecommunication service. Likewise, the Appellants’ case is that since a
leased circuit does not constitute a facility for the general class of
consumers of the seeker, it does not fall within the purview of providing
interconnection and any Regulation in this regard by TRAI is completely without
jurisdiction and void ab initio. On merits, the Appellants contend that these
Regulations make it mandatory for a service provider to provide its
infrastructure to another service provider to enable the latter to discharge
its obligation to a subscriber to provide the domestic leased circuits. In
doing so, the impugned Regulations seek to create obligations which are not
permissible under the licence conditions, and not within the jurisdiction of TRAI
as per the TRAI Act, 1997. They contend that the licence conditions in the
Unified Access Services Licence (UASL)
stipulate that the licensee shall make its own arrangement for installation,
networking and operation of all infrastructure for providing the services.
While it is open to the Appellants to provide its infrastructure as part of a
contract, TRAI cannot impose such an obligation on them. In short, the Appellants challenge the
impugned Regulations on the ground that they are arbitrary, irrational, and
impermissible, without jurisdiction and void ab initio. The Appellants pray that the Tribunal may quash the
Domestic Leased Circuit Regulations 2007 (10 of 2007) dated 14.09.2007 as
illegal, non est and void ab initio, besides passing any such
orders as the Tribunal may deem fit and proper.
3. Arguing
that the Appellants’ contentions are devoid of merit, the Respondent states
that the impugned Regulations have been issued in consonance with the
provisions of the TRAI Act. It is pleaded that DLC fall squarely within the
definition of ‘telecommunication service’ and also form part of
interconnection. The Respondent’s contention is that leased circuit is crucial
for the development of various segments of economy using Information Technology
and that it is essential to provide DLC in an atmosphere which is free from
anti-competitive and monopolistic tendencies so as to ensure that consumers get
the best price and the best service. Its contention is that the impugned
Regulations aim to provide a broad framework based on transparency,
predictability and reasonableness. The basic objective of issuing the DLC
Regulations is to ensure effective utilisation of resources with flexibility
given to the service providers to use this resource in consumer interest and to
ensure growth in telecom sector and reasonableness. According to the
Respondent, the impugned Regulations do not impose any obligation on any
specific single service provider but uniformly apply to all service providers
in the telecom sector. It is also contended that the impugned Regulations have
been issued only to bring in clarity and enforceability to the
Telecommunication Tariff Order, 1999 as amended from time to time; and that it
is pertinent to note that the said Telecom Tariff Order has never been
challenged. The Respondent also pleads that the DLC Regulations have been
issued by the Respondent in exercise of the powers conferred upon it under
Section 36 of the TRAI Act, read with sub-clauses (ii), (iii), (v) and (vi) of
section 11 of the TRAI Act and is in the nature of subordinate legislation and
as such an appeal against the subordinate legislation is not maintainable
before this Tribunal.
4. In
dealing with this case therefore, the following issues arise for determination:
A. Whether TRAI has jurisdiction to
issue the impugned Regulations?
B. Whether the impugned Regulations are
arbitrary, deserving to be set aside?
C. Whether the Appellants are entitled
to any relief?
5. Before
we set out to address ourselves to the issues posed above, it is necessary to
first settle the threshold challenge posed by the Respondent that this appeal
is not maintainable before this Tribunal in as much as the impugned Regulations
are in the nature of subordinate legislation, laid before the Parliament, and
that it is only the Parliament which can modify or annul these Regulations. The
Respondent has taken support of the judgement of the Hon’ble Supreme Court in West Bengal Electricity Regulatory
Commission v. CESC Ltd [AIR 2002 SC 3588] as also in L. Chander Kumar v. Union of India and others [ JT 1997 (3) SC 589].
We have noted that although the Respondent raised this issue in its pleadings,
this was not pursued in the course of arguments as also evidenced by the
written submissions. As such, it would not be inappropriate to dismiss this
contention straightaway. Nevertheless, we will deal with this contention since
it has been raised.
6. In its
judgement dated 28.4.2005, in the case of Videsh Sanchar Nigam Limited v. Union
of India (Appeal no. 5 of 2005), this Tribunal had dealt with the issue of
maintainability of Appeals against the decisions /orders of TRAI. In that case,
the issue was one of maintainability of an appeal against a tariff order. The
Respondent- TRAI- had contended, in that case too, that the Tariff Order having
been issued as subordinate legislation, TDSAT could not hear an appeal against
the same. At that time too, the Respondent had relied on the
“TDSAT
was required to exercise its jurisdiction in terms of Section 14-A of the
Act. TDSAT itself is an expert body and
its jurisdiction is wide having regard to sub-section (7) of Section 14-A
thereof. Its jurisdiction extends to
examining the legality, propriety or correctness of a direction/order or
decision of the authority in terms of sub-section (2) of Section 14 as also the
dispute made in an application under sub-section (1) thereof. The approach of the learned TDSAT, being on
the premise that its jurisdiction is limited or akin to the power of judicial
review is, therefore, wholly unsustainable.
The extent of jurisdiction of a court or a tribunal depends upon the
relevant statute. TDSAT is a creature of
a statute. Its jurisdiction is also
conferred by a statute. The purpose of
creation of TDSAT has expressly been stated by Parliament in the amending Act
of 2000. …. (
7. Dealing
with the West Bengal Electricity
Regulatory Commission Case, the Tribunal referred to the Observations of
the Hon’ble Supreme Court which held that “there is no doubt that the power of
the High Court as an appellate court is coextensive with that of the trial
court. But then the next question would
be: is such power wholly unlimited or in any manner controlled by any principle
in law? ….. We have perused the above
judgments as also the arguments of learned counsel, and we have no hesitation
in holding that the appellate power of the High Court statutorily is not hedged
in by any restriction, but in our opinion, the High Court merely because it has
unrestricted appellate power, should not interfere with the considered order of
the Commission unless it is an expert body”. The Tribunal then observed that
“Here lies a difference between the High Court and the TDSAT, an expert
appellate body….the Supreme Court commended on the constitution of the TDSAT
and in fact, suggested constitution of a similar appellate body under the Electricity Regulatory Commission Act,
1998 to hear appeals against the order of the State Electricity Commissions….
As noted above, against any order or decision, appeal against the order of TRAI
lies to TDSAT. No limitation can be
imposed on the power of the TDSAT while hearing the appeal. An appellate body can confirm the order
appealed against, modify it, reverse it or even remand the matter to the lower
Authority. TDSAT can certainly go into the question if there was any
need for the TRAI to examine any issue, the procedure adopted by it and the
correctness of its order. TDSAT in itself, can modify the tariff fixed by TRAI.”
8. The
Telecom Regulatory Authority of
“16. General
16.1 The LICENSEE
shall be bound by the terms and conditions of this Licence Agreement as well as
by such orders/directions and/regulations of TRAI as per provisions of the TRAI
Act, 1997 as amended from time to time and instructions as are issued by the
Licensor/TRAI.
16.2 All disputes relating to this Licence will be
subject to jurisdiction of Telecom Disputes Settlement and Appellate Tribunal
(TDSAT) as per provisions of TRAI Act, 1997 including any amendment or
modification thereof.”
9. It is
the contention of the Respondent that the impugned Regulations have been issued
in furtherance of the licence conditions which, according to it, provide for
provision of DLC. As can be seen from clause 16 of the licence, all disputes
relating to the licence are subject to the jurisdiction of the TDSAT. This
being so, the Respondent cannot take the plea that an appeal against the
Regulations is not maintainable before this Tribunal.
10. A
similar contention was raised by the Authority before the Delhi High Court in
civil writ petition no. 2838/2005 in TRAI v. TDSAT and another in relation to
The Telecommunication Interconnection Usage Charges (Fourth Amendment)
Regulation (1 of 2005) dated 6.1.2005.
Examining this issue, Justice Mittal observed as follows:
“25. The conflict of jurisdiction between an expert
appellate tribunal as the TDSAT vis-a-vis the expert board has arisen for
consideration in cases hitherto before the
26 to 30. .....
31. Examination of the scheme of the TRAI Act, 1997
shows that there is no restriction in the powers of the TDSAT which is an
expert forum constituted under Section 14 of the statute.....
37. The
authority and jurisdiction of an appellate expert forum, its importance and
necessity, therefore, cannot be belittled or narrowed down by strict or a
narrow interpretation of the statutory provisions. ......
54. It is well settled that a tribunal is fully
empowered to examine an issue relating to its jurisdiction. ....”
11. The
Delhi High Court cited the observations of the Hon’ble Supreme Court in Sukhdev Singh v. Bhagat Ram [(1975) 1 SCC
421] where the Apex Court observed that "there is no substantial
difference between a rule and a regulation inasmuch as both are subordinate
legislation under powers conferred by the statute. A regulation framed under a
statute applies uniform treatment to everyone or to all members of some group
or class. The Oil and Natural Gas Commission, the Life Insurance Corporation
and Industrial Finance Corporation are all required by the statute to frame
regulations inter alia for the purpose of the duties and conduct and conditions
of service of officers and other employees. These regulations impose obligation
on the statutory authorities. The statutory authorities cannot deviate from the
conditions of service. xxxxx This court has repeatedly observed that whenever a
man's rights are affected by decision taken under statutory powers, the court
would presume the existence of a duty to observe the rules of natural justice
and compliance with rules and regulations imposed by statute."
12. The
Delhi High Court went on to observe as follows:
“66. It is the contention of the petitioner to the
effect that TRAI can make regulations in respect of all its functions under all
statutory provisions and that the jurisdiction of the TDSAT to examine disputes
in respect thereof would be barred. If this objection were to be sustained, it
would not be open to any person to impugn any action of the petitioner on the
ground that the same was an exercise of legislative powers under the statute.
Such could never have been the intention of the legislature. The result, in
case such a contention was to be sustained, would be that the jurisdiction of
TDSAT to examine the disputes being raised by different persons including
service providers would be ousted in almost all the cases inasmuch as the TDSAT
has been held to be legally incapable of examining the vires of the statutory
provisions and subordinate legislation which confer power and jurisdiction on
the tribunal”
13. We feel
that this should set at rest all doubts regarding the maintainability of these
appeals before this Tribunal. We accordingly reject the contention of the
Respondent in this regard. We would also like to point out that once a
principle has been unequivocally settled and continues to hold ground, it was
not appropriate for the Respondent to continue to make the same submissions
before this Tribunal.
14. Having
dealt with the threshold challenge, and before we proceed to deal with the
issues listed in para 4 above, it would be useful to set out the concept of DLC
and recapitulate the background of the entire issue, so as to facilitate a
better appreciation of the issues involved.
15. The
impugned Regulations are titled the Domestic Leased Circuits Regulations, 2007.
According to these Regulations, Domestic
Leased Circuit means “a leased circuit to the premises of a subscriber when
such premises are located within
16. On
17.11.2006, the Authority issued a Consultation Paper to discuss various issues
related to promotion of competition in country’s Domestic Leased Circuits (DLC)
market, seeking the views of stakeholders thereon. Stating that the services
provided by the service providers to their end-users largely depends on the
quality and timely availability of such leased circuits, the paper states that
the new telecom service providers are generally dependent on the transmission
infrastructure in the form of leased circuits from the existing/incumbent
operators. The paper notes that the incumbents have 68% of the total transmission
network in the country and quotes a 2005 report by Gartner that a limited
number of players compete and only the incumbent carrier BSNL can provide
comprehensive national coverage, as a result of which the prices in
17. The Explanatory Memorandum to these
Regulations sets out the various aspects including the examination of the
comments made and issues raised by stakeholders on the issues that were posed in the consultation paper. This
explanatory memorandum states that the Domestic Leased Circuits market is
growing at a very fast pace and that the revenue thereof which was of the order
of Rs. 1405.63 core in 2006-07 is projected to reach Rs. 3000 crore by 2008 and
Rs. 4500 crore by 2010. Stating that the leased lines are a key component for
the economic growth of the country, the memorandum identifies e-business,
e-governance, BPO and IT industry, Manufacturing and Banking sectors as well as
Government and Education sectors as those where there will be a significant
growth of DLC requirement. The explanatory memorandum states that the Authority
is of the view that the customer should have the ability to choose their
preferred service provider of DLC without artificial and anti-competitive
constraint on limiting their choices, as they are able to do in other segments
of the telecom sector. Accordingly, the Authority is of the opinion that
service providers should meet other service providers’ request for a complete
DLC or access in terms of local lead and that, after due diligence, the
Authority decided to issue these Regulations so as to provide a framework which
would ensure transparency, predictability and reasonableness to allow the
provision of DLC/local lead in non-discriminatory manner. At the same time, it
states that the Authority has not opted for compulsory mandation.
18. On the factors that limit competition in
the DLC market in India, the explanatory memorandum concludes, after taking
note of the steps taken by the Government, that there should be a mandation to
provide local leads, that further steps need to be taken to enhance competition
to exploit the full potential of the DLC segment and to remove the remaining
limiting factors. The memorandum however does not state what exactly are the
‘limiting factors’; how ‘competition’ is defined and why mandation is required.
The consultation paper had indicated that barring the North-East, Himachal
Pradesh, Jammu & Kashmir and Andaman & Nicobar, each of the Telecom
Circles has at least 3 private operators and 2 to 3 IP-II operators, besides
the public sector operator (BSNL/MTNL). In some cases, the number is larger. On
the issue that the operator with Significant Market Power (SMP) should be
mandated to provide local lead for DLC, the Authority concludes that the concept
of SMP is not very relevant at this stage and that mandation for provision of
DLC already exists in the Telecom Tariff Order 2005. After examination of the
issues relating to security, the Authority concludes that it should be the
responsibility of the prime service provider who is having an agreement with
the customer. On considering provision of DLC as an interconnection element,
the Authority does not arrive at any conclusion but states that the Authority
would prefer to watch the developments after the promulgation of the
Regulations and that inclusion of provision of DLC/leased circuits in the
Reference Interconnect Order is not being considered necessary at this stage.
19. We now
proceed to deal with each of the issues listed in para 4 above. The contention
of the Appellants is that the impugned Regulations have been issued without
jurisdiction. The arguments on this count are as follows:
(i) That a Domestic Leased Circuit is
not a telecommunication service;
(ii) That provision of DLC does not
constitute an Interconnection;
(iii) That the impugned Regulations
violate the conditions of the licence issued by the licensor to the service
providers;
(iv) That the Authority has no power to
issue the Regulations when as per the TRAI Act, the Authority ought to send
recommendations to the Central Government;
(v) That the provisions of the TRAI Act
do not provide for the issue of the impugned Regulations.
20. The
first contention of the Appellants is that TRAI which has been constituted
under the TRAI Act can regulate only in respect of a telecommunications
service. In this connection, reference was made to the preamble of the TRAI Act
which states that it is an Act to provide for the establishment of TRAI and
TDSAT to regulate the telecommunication
services. According to the Appellants, the definition of the term ‘leased
circuit’ show that the same does not constitute a 'telecommunication service'
as defined in the TRAI Act. Refuting this argument, the Respondent, in its
pleadings, invited attention to the judgements passed by this Tribunal on
19.3.2007 in petition no. 148 of 2005 as well as in petition no. 218 of 2006,
to show that leased circuit is a telecommunication service. Its contention is
that the impugned Regulations will ensure effective utilisation of national
resource.
21. We have
examined the matter. Insofar as the
judgements in the two petitions mentioned by the Respondent, we find that they
do not have any relation to the present case. The dispute in those cases
related to the charges levied by MTNL on the petitioners for the terminal
equipment that was placed in their exchanges by way of interconnecting links
and it was held that the dispute between the two parties was one between
telephone service providers. In the present case, it would be useful to go by
the definitions given above as well as the definition of the term ‘Telegraph’
in the Indian Telegraph act, 1885. The term ‘Telegraph’ has been defined in the
Indian Telegraph Act to mean "any appliance, instrument, material or
apparatus used or capable of use for transmission or reception of signs,
signals, writing, images and sounds or intelligence of any nature by wire,
visual or other electro-magnetic emissions, radio waves or Hertzian waves,
galvanic, electric or magnetic means." The definition of the term ‘telecommunication
service’ in section 2 (k) of the TRAI Act
reads as follows: “ ‘telecommunication
service’ means service of any description (including electronic mail,
voicemail, data services, audio tex services, video tex 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 service to be telecommunication
service including broadcasting services.”
22. Now,
the term ‘Service’ is not defined in the TRAI Act or any of the Regulations. On
the other hand, the license agreement for provision of Unified Access Services,
signed between the licensor and the service provider, defines ‘Service’ in
clause 2 which reads as follows:
“2. This LICENCE is granted to provide SERVICE as
defined in
2.2 (a) The services cover collection, carriage,
transmission and delivery of voice and and/or non-voice MESSAGES over the
LICENSEE's network in the designated SERVICE AREA and includes provision of all
types of access services. In addition to this, except those services listed in
2.2 (b) (i)
Further, the LICENSEE can also provide Voice Mail, Audiotex services,
Video Conferencing, Videotex, E-Mail, Closed User Group (CUG) as Value Added
Services over its network to the subscribers falling within its SERVICE
AREA on non-discriminatory basis. The Licensee cannot provide any service
except as mentioned above, which require a separate license. However, an
intimation before providing any other VALUE ADDED SERVICE has to be sent to the
LICENSOR and TRAI.” (emphasis supplied)
23. The
definition of the term ‘leased circuit’ in the impugned Regulations reads as
follows: "(d) “leased
circuit” means virtual private network using circuit or packet switched
(Internet Protocol) technology apart from point-to-point non-switched physical
connections or transmission bandwidth and to which the public network is not
connected;" It is seen that The Telecommunication Tariff Order 1999 defines leased circuits to mean telecommunication
facilities leased to subscribers or service providers to provide for technology
transparent transmission capacity between network termination points which the
user can control as part of the leased circuit provision and which may also
include systems allowing flexible use of leased circuit bandwidth.” During the course of arguments, the counsel for Appellants
referred to Para 4.8 of the consultation paper issued by the Authority in
November 2006 which states that a
‘Closed User Group’ is basically used for internal communication within the
group of organisations with commonality of interest and not to provide any
telecom service to any third party. The counsel argues that this clearly shows
that leased circuit provided for a closed user group is not a telecom service.
We are unable to agree with this contention. Para 4.8 of the consultation paper
states that the circuit provided to a closed user group is not intended to
provide any telecom service (by the CUG) to any third party. This does not in
any way mean that what is being provided to the CUG in itself is not a
telecommunication service. Provision of a leased circuit involves provision of
bandwidth, and this is a telecommunication service. The definitions of the
terms ‘Telegraph’ as well as ‘telecommunication service’ clearly indicate that
what is being provided by way of a leased circuit is a telecommunication
service. Besides, the licence itself lists out that CUG is a permitted
activity, so long as it is on its own network and to the subscribers falling
within its Service area. We will revert to this aspect separately when we
examine the issue regarding ‘interconnection’ in paras 24 to 30 below. But for
the moment, these definitions make it clear that provision of a leased circuit
is a telecommunication service. It is noteworthy that as far back as 1999, the
Telecom tariff Order included leased circuits in its definitions and has also
stipulated the tariff for providing the same. It could not have been possible
to do so unless a leased circuit was itself a telecom service. We accordingly
reject the contention of the Appellants and hold that provision of a leased
circuit is a telecommunication service.
24. The
next contention of the Appellants is that provision of DLC does not constitute
an ‘Interconnection’ and therefore the impugned Regulations are without
jurisdiction. According to the Appellants, the definition of a leased circuit
either by the Authority or by the International Telecom union (ITU) shows that
it is a dedicated link to be provided by
a service provider for the exclusive facility of a consumer and is therefore
not interconnection. Their contention is
that since the impugned Regulations are issued invoking the provisions of
section 11 of the TRAI Act and since this section deals only with issues of
interconnection, and since the leased circuit does not constitute
interconnection, the impugned Regulations are void ab initio. The contention of the Respondent on the other hand is
that the Appellants are trying to take a very narrow definition of the term
interconnection and that the definition provides for a situation where the
customer of one service provider may have access to the customers of other
service providers or to the networks alone or services alone of other service
providers. Viewed in this context, he argues, leased circuit does constitute
interconnection and that the impugned Regulations are therefore perfectly
legal.
25. We have
examined the different interpretations. The International Telecom Union defines
a leased circuit as "a two-way link for the exclusive use of a subscriber
regardless of the way it is used by the subscriber ...". TRAI has, in
Regulation 3 of the impugned Regulations, defined leased circuit as follows
"... (d) "Leased circuit” means a virtual private network using
circuit or packet switched (Internet protocol) technology apart from point-to-point
non-switched physical connections or transmission bandwidth and to which public
network is not connected ...". From both these definitions, it is clear
that a leased circuit is meant for the exclusive use of a subscriber and is not
intended to be connected to a public switched network.
26. Now,
let us turn to the term ‘interconnection’. Interconnection is provided for in
the licence conditions as well as in the Regulations issued by the Authority.
The term interconnection is not defined in the TRAI Act nor does it figure in
the Indian Telegraph Act. As indicated by the Counsel for Respondent, the
various licences issued by the Department of Telecommunications, which is the
licensor, state that ‘interconnection’ will be as defined by TRAI. The
Telecommunication Interconnection Usage Charges Regulation 2003 issued by TRAI
defines ‘interconnection’ to mean "the
commercial and technical arrangements under which service providers connect
their equipment, networks and services to enable their customers to have access
to the customers, services and networks of other service providers." According to the Counsel for Appellants,
while the TRAI Act does provide for interconnection between service providers,
a dedicated link to be provided by one service provider for any of its own
consumers, for the exclusive facility of that very consumer, does not
constitute interconnection. The
Appellants’ case is that since a leased circuit does not constitute a facility
for the general class of consumers of the seeker (service provider seeking the
DLC or Local Lead), it does not fall within the purview of providing
interconnection and any Regulation in this regard by TRAI is completely without
jurisdiction and void ab initio.
27. There
are two main aspects in dealing with this issue. Firstly, a perusal of the
definition of the term ‘interconnection’ shows that it is intended to enable
one set of customers to have access to another set of customers. The Respondent
has argued that it is not essential that there should be two sets of customers
and that it is sufficient if a customer of one service provider has access to
the service of another service provider. Let's test this argument. Let us take
the case of a client ‘X’ who wants a leased circuit for his business, from
place ‘R’ to ‘S’. While at place ‘R’, there are two service providers ‘A’ and
‘B’, at place ‘S’, only ‘B’ is present. Let us assume that the client prefers
the service provider ‘A’. In order to provide service to client ‘X’, the
service provider ‘A’ seeks and obtains a circuit from service provider ‘B’ at
place ‘S’. Having obtained the same, he provides a leased circuit to the client
‘X’ from place ‘R’ to place ‘S’. Once he has obtained the circuit from ‘B’ at
place ‘S’ and as long as he is paying ‘B’ for the same, the service to client
‘X’, right from place ‘R’ to place ‘S’, is being provided by ‘A’ only and the
consumers or Network or service of ‘B’
do not come into the picture. In other words, there is a single service
provider. The argument of the counsel for Respondent is that the definition of
the term interconnection contemplates a situation where customers of one
service provider may have access to the services alone of the other service
provider. He therefore agrees, by his own argument, that ‘Interconnection’ necessarily
involves two or more service providers. But as seen from the example above, in
case of a leased circuit there is only one service provider. Therefore, leased
circuit does not constitute a case of interconnection.
28. It is
also relevant to refer ourselves to the Telecommunication Interconnection Usage
Charges Regulation 2003 issued by the respondent on 29.10.2003. The terms
‘interconnection provider’ and ‘interconnection seeker’ have been defined very
clearly. ‘Interconnection provider’ means the service provider to whose network
an interconnection is sought for providing telecommunication services.
‘Interconnection seeker’ means the service provider who seeks interconnection
to the network of the interconnection provider. In other words, interconnection
involves interconnection to the network. That this is so is also evidenced by
the manner in which the impugned Regulations have been issued. If truly the
respondent believed that provision of DLC is a case of interconnection, the
terms ‘interconnection seeker’ and ‘interconnection provider’ would have been
used in the impugned Regulations. On the other hand, a new terminology -- specified service provider -- is used.
There are two categories of service providers -- specified service provider who
makes the request and specified service provider to whom request has been made.
29. It is
also to be noted that at para 2.3.2 of the explanatory memorandum to the
impugned Regulations, in relation to issue no.2 -- whether the operator with
significant market power (SMP) be mandated to provide local lead for DLC and
also for engineering CUGs to other operators -- the Respondent states that
“narrowing the obligation to only selected service providers would be a
retrograde step. The concept of SMP is therefore not very relevant at this
stage.” The concept of SMP has been incorporated in the Interconnection Usage
Charges Regulation of 29.10.2003 where it has been defined as "a service
provider having a share of at least 30% of total activity in a licensed telecommunication
service area." The consultation paper states, at para 2.2.5, that the
incumbents have 68% of the total transmission infrastructure available within
the country. Of the two incumbents -- BSNL and MTNL -- BSNL operates in
virtually the entire country since MTNL operates only in the two cities of
Mumbai and
30. Counsel
for Respondent pointed out that worldwide, a leased circuit is treated as part
of interconnection regulatory system in several countries such as
31. For
reasons indicated in Paras 24 to 30, we uphold the contention of the Appellants
that provision of a leased circuit does not constitute an Interconnection.
32. The
next contention of the Appellants is that the impugned Regulations are
violative of the licence conditions. According to them, the Authority has
issued the impugned Regulations invoking the provisions of section 11 (1) (b)
(i) to (vi) of the TRAI Act. The Appellants’ claim is that the impugned
Regulations have been issued by the Respondent in complete disregard of Section
11 (1) (b) (i) which enjoins upon the Authority to ensure compliance of the
terms and conditions of license. The learned counsel for Appellants argued that
granting a licence along with its attendant conditions is the exclusive power
of DoT. The licence conditions are to be
decided / incorporated only by the Department of Telecommunications. The TRAI Act, 1997 lays down that as regards
licence conditions / terms of licence, TRAI can only make recommendations and
cannot modify the same by itself. Referring to the letter dated 15.7.2003
issued by the DOT, he stated that the licensor itself has clarified that the
arrangement between the various service providers is to be resolved through
mutual agreements between themselves.
33. The
Appellants contend that while the Unified Access Services Licence conditions
stipulate that the licensee shall make its own arrangement for installation,
networking and operation of all infrastructure for providing the services, the
impugned Regulations make it mandatory for a service provider to provide and
even establish its infrastructure for another service provider, who is not
complying with the licence conditions, to enable the latter to discharge its
obligation to a subscriber to provide the domestic leased circuits. In doing
so, the impugned Regulations seek to create obligations which are not
permissible under the licence conditions, and which are, therefore, not within
the jurisdiction of TRAI as per the TRAI act. Stating that TRAI has no
jurisdiction under the Act to make such
Regulations which have the effect of amending, altering or modifying the terms
and conditions of the telecommunication license, the Appellants cite this
Tribunal’s judgement dated 27.4.2005 in Appeal no.s 11 of 2002 (BSNL v. TRAI)
and 12 of 2002 (MTNL v. TRAI) where, relying on the judgement of the Delhi High
Court in the case of MTNL v. TRAI –
[2000 AIR DEL 208], it was held that TRAI has no jurisdiction to override
the terms and conditions of licence granted to the service providers by the
DOT. The same principle was reiterated by the Tribunal in its judgement dated
03.05.2005 in Appeal no. 31/2003 (BSNL v. TRAI).
34. The
Respondent rebuts the case of the Appellants, in citing the judgement in Appeal
no.31 of 2003, as irrelevant, and cites instead the Tribunal's judgement dated
24th of August 2007 in Appeal no. 14 of 2006 (BSNL v. TRAI and others) where it
held that TRAI was legally competent to interfere with private agreements, and
that TRAI Act requires it to regulate
arrangements among service providers and that this power overrides private
arrangements and, as a matter of law, TRAI is empowered to lay down provisions
which may require modifications or suppression of such mutual agreements. The
Respondent also states that the DLC Regulations do not disregard or override
the terms and conditions of licence issued to service providers in any way. In
fact, the contention of the Respondent is that the Regulations actually
facilitate the furtherance of the licence conditions since the circular dated
15.7.2003 issued by the licensor indicates that provision of DLC has been
permitted under the licence. Vide this circular, the licensor has allowed the
sharing of DLC resources amongst multiple service providers and utilisation of
the DLC resources and that this condition has to be read as part of the
licence. The counsel for Respondent pointed out that the Regulations do not
specify compulsory mandating but only provide the procedure for an activity
permitted under the licence. In this context, he argued that sub-clause (vi) of
clause (b) of sub-section (1) of section 11 of the TRAI Act specifically confers upon the Respondent the
power to “lay down and ensure the time period for providing local and long-distance
circuits of telecommunication between different service providers". The Respondent also stated that the rejoinder
filed by the in Appeal No.9 of 2005
wherein the 1st Appellant has admitted that leased lines/circuits
are taken by subscribers/consumers as well as by Telecom service providers and
that the provisions of section 11 (1) (b) (vi) of the Act, only applies to
leased lines for local and long-distance circuits for telecommunication. The
Respondent also contends that the provision of leased circuits is part of the
license conditions and that the Authority had not altered the conditions in any
way.
35. In
their rejoinder, the Appellants contend that the judgement of the Tribunal in
appeal no. 14 of 2006 has no relevance to the present case since the Tribunal
did not lay down that the licence conditions are not to be followed or that
TRAI is not obliged to ensure compliance with licence conditions.
36. We have
examined the relative contentions of both the parties. As indicated above, the
Respondent's contention is that the provision of DLC is already contained in
the licence conditions by virtue of the circular dated 15.7.2003 of the
Department of Telecommunications and that the impugned Regulations are only in
furtherance of the licence conditions. In other words, the Respondent agrees
that it has no Authority to change the terms and conditions of the licence
issued to the service providers and that what it is doing is only acting in
furtherance of the conditions already stipulated. In order to appreciate this
argument properly, it is necessary to examine the conditions of the licence.
But for specific variations, if any, the licence conditions are generally
common for all service providers.
37. Clause
2.6 of the licence reads as follows:
"2.6 LICENSEE shall make its own arrangements for
all infrastructure involved in providing this service and shall be solely
responsible for installation, networking and operation of necessary equipment
and systems, treatment of subscriber complaints, issue of bills to its
subscribers, collection of revenue, attending to claims and damages arising out
of his operations."
38. Clause
34 of the licence reads as follows:
“34. Roll-out obligations:
34.1 LICENSEE shall be
solely responsible for installation, networking and operation of necessary
equipment and systems for provision of SERVICE, treatment of SUBSCRIBER
complaints, issue of bills to its subscribers, collection of its component of
revenue, attending to claims and damages arising out of his operations.
34.2 LICENSEE shall
ensure that
(i) At
least 10% of the District Headquarters (DHQs) will be covered in the first year
and 50% of the District Headquarters will be covered within three years of
effective date of licence.
(ii) The
licensee shall also be permitted to cover any other town in a District in lieu
of the District Headquarters.
(iii) Coverage
of a DHQ/town would mean that at least 90% of the area bounded by the Municipal
limits should get the required street as well as in-building coverage.
(iv) The
District Headquarters shall be taken as on the effective date of licence.
(v) The
choice of District Headquarters/towns to be covered and further expansion
beyond 50% District Headquarters/towns shall lie with the Licensee depending on
their business decision.
(vi) There
is no requirement of mandatory coverage of rural areas.”
39. Clause
33 of the licence reads as follows:
“33. Sharing of infrastructure between UASPs and any other Telecom
Service Provider in their area of operation:
The sharing of
infrastructure by the LICENSEE is permitted as below:
(i) Sharing
of “passive" infrastructure viz., building, tower, dark fibre etc. is
permitted.
(ii) Provision
of point-to-point bandwidth from their own infrastructure within their Service
Area to other licensed telecom service providers for their own use (resale not
to be permitted) is also permitted.
(iii) Sharing
of switch by the LICENSEE for providing other licensed services is permitted.”
40. Clause
5 of the licence reads as follows:
“5.
Modifications in the Terms and
Conditions of Licence
5.1
The LICENSOR reserves the right to modify at any time the terms and
conditions of the LICENCE, if in the opinion of the LICENSOR it is necessary or
expedient to do so in public interest or in the interest of the security of the
State or for the proper conduct of the telegraphs. The decision of the LICENSOR
shall be final and binding in this regard.
41. The
circular dated 15.7.2003 of the Department of Telecommunications is reproduced
here under to facilitate a clear understanding of the issue.
Government of
Ministry of Communications & IT
Department of Telecommunications
Sanchar Bhavan, 20,
(LR cell)
No. 824-42/2000-LR Dated
15.07.2003
To
All Basic/NLD/ILD Operators
Sub: Utilisation of resources by CUG customer through multiple
licensed service operators for setting up of CUG network
The above matter has been considered by Department of Telecommunications
and I am directed to intimate you in this regard as follows: --
1. Under the terms and conditions of existing licence, wherever
permitted, operators are free to provide leased lines to their customers for
setting up of Closed User Group (CUG) network. CUG may be a network of leased
lines connected in a particular configuration. Customers do not require any
approval/permission from DOT for availing the facility of leased lines
through licensed telecom operators.
2. The arrangement of telecom resources from various service
providers for setting up CUG network as requested by customer is to be resolved
by entering into mutually agreed commercial agreements between the operators.
3. DTS circular No. 112-8/94-PHC (Pt) Dated 31.05.2000 will not be
applicable in the multi-operator scenario.
4. It shall be responsibility of operators to ensure that the telecom
resources are used for genuine and lawful purposes.
Sd/-
(Rajvir Sharma)
Director (LR-III)
Tel. 2303 6509
(emphasis supplied to facilitate better understanding)
42. From an analysis of the licence
conditions listed above, it is clear that the licence conditions stipulate that
each service provider should install and operate its own network as well as
equipment and systems in accordance with the roll out obligations stipulated in
clause 34. The sharing of infrastructure has been stipulated in clause 33 of
the licence and it clearly prohibits resale. What is permitted is the sharing
of dark fibre. The use of the term dark
fibre clearly stipulates that the fibre should not be used for providing
any service to another subscriber by the service provider who is taking the
dark fibre. The moment the dark fibre
is used for sending any communication, it becomes a lit fibre. That is why the licence clearly stipulates the term dark fibre. Besides, the licence
condition also clearly prohibits resale. In the example given Para 27 above, if
the service provider ‘A’ uses the dark fibre for providing a CUG network for
client ‘X’, it amounts to resale of this resource which is clearly prohibited.
43. In so far as the CUG network is
concerned, the circular dated 15.7.2003 Department of telecommunications
clearly provides that it relates to utilisation
of resources by CUG customer through multiple licensed service operators.
What is permitted by the circular dated 15.7.2003 is utilisation by the CUG
customer. Clause 1 of this circular clearly states that customers do not require
any approval/permission from DOT through licensed telecom operators. In other
words, if a subscriber wants to set up a CUG network, it is for that subscriber
to approach different service providers to provide the leased lines. And such
service providers have to be licensed service providers and each of the service
providers has to be licensed to operate in that service area.
44. Another important aspect is that, as
brought out in para 22 above, the licence conditions stipulate that CUG is a
permitted activity, so long as it is on the service provider’s network
and to the subscribers falling within its Service area. We will revert to this
aspect separately. Clause 2.2 (b) (i) states that the licensee cannot provide
any service except as mentioned therein, and any other service would require a
separate licence. It is apparently only to overcome this clause that the DOT
had issued the circular dated 15.7.2003 providing a certain facility to the CUG
customers but not to the service providers. There is no indication in that
circular that service providers can enter into agreements between themselves or
that the resources must be shared. Any such interpretation would be going far
beyond the intention behind the circular issued by the Central Government as
licensor.
45. An examination of the impugned
Regulations does not indicate that they are in conformity with the licence
conditions as well as the letter dated 15.7.2003 from the Department of
Telecommunications. Clause 2 of the Regulations states that "these Regulations
shall be applicable to every service provider who can access the subscribers
directly for provision of leased circuits under the terms and conditions of its
licence." Clause 4 in chapter II of the Regulations reads as follows:
4. Request for Provision of Domestic Leased Circuits
or Local Lead of Domestic Leased Circuit. ...... (1) Any specified service provider,..
(a) who has an obligation under a
contract with its subscriber or has any
other arrangement with its subscriber to provide Domestic Leased Circuits; and
(b) who does not have adequate
Domestic Leased Circuits or resources for to provide the same under such
contract or arrangement,
may make a request in writing to any
other specified the service provider for providing Domestic Leased Circuits or
Local Lead of Domestic Leased Circuit, as the case may be.
(2) .......”
46. Clause
5 of the Regulations reads as follows:
“5. Obligation of the specified service provider, to
whom request has been made under regulation 4, to provide Domestic Leased
Circuits or Local Lead of Domestic Leased Circuit (s)....... (1) The specified service provider to whom
request has been made under regulation 4 for provision of the Domestic Leased
Circuits or Local Lead of Domestic Leased Circuit (s), as the case may be,
shall, within thirty days of receipt of such request, send to the specified
service provider who made such request (hereafter referred to as requesting
specified service provider),.....
(a) a confirmation of its ability to
provide the Domestic Leased Circuits or Local Lead of Domestic Leased Circuit,
as the case may be;
(b) a demand note giving therein the
relevant details....”
47. From these Regulations, it is clear that
any specified service provider can make a request to any other specified service
provider for providing the leased circuit. In clause 3 (n) of the Regulations
providing the definitions, the term ‘specified service provider’ is defined as
"a service provider who has been allowed under the terms and conditions of
its licence to access the subscribers directly for provision of Domestic Leased
Circuits." Clause 3 (m) defines the term ‘service provider’ to mean
"the Government as a service provider and includes a licensee".
Reading these two together with clause 2 relating to applicability of the
Regulations, quoted above, means that any licensee who has been allowed under
the terms and conditions of its licence to access the subscribers directly for
provision of leased circuits under the terms and conditions of its licence and
who has an obligation under contract
with its subscriber or has any other arrangement with its subscriber to
provide domestic leased circuits and who does not have adequate DLC or
resources for to provide the same under such contract or arrangement may make a request in writing
to any other specified service provider for providing DLC or local lead of DLC
as case may be. Now, as has been mentioned in
48. But, the impugned Regulations do not seem
to respect the intention or even the language of the circular even as the
Respondent claims that it is acting in pursuance of this circular. As per the
Regulations, any specified service
provider can make a request to any other
specified service provider if it does not have adequate DLC or resources for to
provide the same. The Regulations are patently flying in the face of the
circular. While clause 5 of the licence empowers the licensor to modify the
licence conditions at any point of time, the circular dated 15.7.2003 is not a
modification of the licence conditions. There is nothing in the TRAI Act which
empowers the Authority to modify, suo
motu, the licence conditions. Section 11 (1) (a) (ii) enables the Authority
to make recommendations, either suo motu or on a request from the
licensor on terms and conditions of licence to a service provider. Therefore,
what the Authority had to do, in the event it felt necessary, was to make
necessary recommendations to the Central Government which is the licensor and
since the Act provides that the recommendations of the Authority shall not be
binding upon the Central Government, it would have been upto the Central
Government to consider and take a decision thereon. Instead, the Authority
issued the impugned Regulations.
49. The argument of the learned counsel for
Appellants is that it has already been settled by this Tribunal that the
Authority has no power to override the licence conditions. There is also a
difference of opinion between the Appellants and the Respondents in so far as
section 11 (1) (b) (ii) is concerned. The subsection reads as follows: (ii) notwithstanding anything contained in
the terms and conditions of the license granted before the commencement of the
Telecom Regulatory Authority of
51. The
fourth contention of the Appellants in matters relating to jurisdiction is that
the TRAI Act 1997 makes no provision for the Authority to issue the DLC
Regulations and that the Authority can only make recommendations to the
licensor i.e., the Central Government which alone is competent to modify the
licence conditions in case it is in agreement with the recommendations of the
Authority. We have examined this issue. Along with the reply to their Appeal
affidavit, the Respondent had filed a copy of the Telecommunication Tariff
(Thirty Sixth Amendment) Order, 2005 (3 of 2005) dated 21.4.2005, wherein it is
stated that the then existing Schedule IV of the Telecommunication Tariff Order
1999 along with its Annexures shall be substituted by another Schedule and
Annexures. The explanatory memorandum to this Tariff Order states that
significant developments have taken place since the Tariff Order 1999 was
notified and that although the number of players has increased, competition is
restricted to the areas where the new entrants have built their networks. It
quotes a study conducted in September 2004 by the Office of Telecommunications
Authority,
52. In
section 5 of the explanatory memorandum to the Telecom Tariff Order 2005,
relating to further examination of outstanding issues measures to promote
competition and promoting growth of rural networks are examined. The following
extracts are relevant.
"5.6 Measures to Promote
Competition
5.6.1 The long-term goals of the Authority to
establish effective competition in the sector such that regulation of tariffs
is not required. Until such a market scenario prevails, cost-based tariff
pricing is required. As stated in the consultation paper, the DLC market has
witnessed an increase in the number of players but competition is still not effective
in the majority of cases. This is mainly on account of the fact that new
entrants have not matched the incumbent in rolling out networks both in terms
of quantum and in terms of reach. Further, new entrants perceive a significant
risk in building out new high-capacity networks since the capacity is bought
over time and capital recovery is dependent on how quickly utilisation levels
can be increased. Thus the choice of service providers to the consumers is
limited. This coupled with the absence of interconnect regulations for leased
lines results in end-users to rely solely on what is offered by the operators
nearest to his premises. The Authority intends to release consultation papers
on measures that could be taken so that competition in this space is further
promoted. These measures include:
·
interconnect
of operators for provisioning of multi-operator leased circuits
·
introduction
of reselling of bandwidth
·
introduction
of wholesale and retail pricing.
5.7 Promoting Growth of Rural
Networks
5.7.1 The Authority recognises that without focus on
rural areas, sizeable growth in the telecom sector would not be possible. ...
5.7.2 Universal Service Objectives (USO) have been
sought to be achieved through a combination of initiatives that include
Government funding, Access Deficit charges, roll-out obligation, tariff policy,
direct USO subsidy, etc. The Authority has also come across initiatives of the
State Governments seeking to provide broadband connectivity for rural
development as part of their e-Governance plans...... A number of other private
initiatives by corporations and other voluntary agencies all aiming to take ICT
(Information Communication Technology) services to rural areas have also been
noticed. All these point to the need for making available the services of
leased circuit in areas beyond the commercially attractive zones of
availability.
5.7.3 In this context, it is relevant to quote the
statement of the Authority in the consultation paper on "Growth in the
Telecom Services in Rural India" dated 27.10.2004:
"We are in
a fortunate situation where the optic fibre structure has already been extended
to the extent that on an average optic fibre termination is available in 4-5
locations each block. This implies that we can reach within 15 to 20 km of most
villages with large bandwidth through lighting up of dark fibres which would,
in turn, imply that the total investment needed for achieving this objective
could be one-fourth to one-fifth of that needed in case we had to lay the entire optic fibre backhaul
infrastructure......”
5.7.4 The Authority examined whether an incentive
mechanism could be built in the pricing policy for the DLC, so that DLC with
rural links could get the benefit of an inbuilt subsidy. Analysis of the extent
of competition in non-rural areas indicates that a cross-subsidy mechanism in
the pricing policy would not be appropriate. Therefore, an alternative
mechanism needs to be involved in the matter of providing affordable bandwidth
services to areas that are considered uneconomical by service providers and
that mechanism has to be outside the tariff policy regime. USO is said to arise
from requirements imposed as a result of inter alia regulation for providing
telecommunication services as may be specified in geographical areas/locations
that can only be met under cost conditions that follow outside normal
commercial standards. Taking all these factors into account, the Authority
would consider making recommendations to government on the issues of providing
direct support from USO fun to bandwidth providers in rural/remote areas.
Needless to say, the extent of such support would depend upon the price at
which bandwidth services are to be made available to consumers in such areas as
against the ceiling tariff specified in this Order. These and other related
issues for operationalising the scheme would form part of recommendations of
the Authority to the Government. (emphasis
supplied)
53. What
transpires from a reading of the above is that the development of the DLC
market has been generally slower to pick up compared to other segments; that it
has been so because of lack of investment by the new entrants to build their
networks beyond the ‘trunk segment’ (Metros and major cities); that while
prices have decreased in the trunk segment, including to an extent where heavy
discounts are offered, prices are still high compared with other competitive
markets; that in view of this, the Authority considers it appropriate to
continue with Tariff Regulation until such time as competition becomes adequate
and effective; that competition cannot become effective unless new entrants
roll-out their networks into rural areas; that the Authority intends to release
consultation papers in this regard; and, most importantly, that the Authority
would consider making appropriate recommendations to the Government. In other
words, it is clear that the Authority recognises that its role, beyond fixation
of tariffs which exercise it is authorised to perform by virtue of section 11
(2) of the TRAI act, is to make its recommendations to the Government. In fact,
even the consultation paper issued on 17.11.2006 states in para 3.4 that
"the Authority considers it appropriate to continue with tariff
Regulations in the DLC market until such time the competition becomes adequate
and effective." While the consultation paper no doubt speaks of the
possibility of mandating the service providers to provide leased circuits,
nowhere is it stated that the proposal is to issue Regulations in this regard.
Section 11 (4) of the TRAI Act stipulates that the Authority shall ensure
transparency while exercising its powers in discharging its functions. In
keeping with the stipulation, it is expected of the Authority to specify in
every consultation paper how it proposes to deal with a matter i.e., whether it
proposes to issue a Regulation or whether it proposes to send necessary
recommendations to the Government. This would enable the stakeholders to
respond appropriately. Unfortunately in this case, the Authority had not done
so.
54. Be that
as it may, there is a clear recognition by the Authority of its responsibility
to send necessary recommendations to the Government if it wants to propose
measures beyond tariff fixation, when it issued the TTO 2005. It is clear that
it is for the licensor to stipulate the licence conditions. As per the TRAI
Act, only in case of interconnection is there a provision in Section 11 (1) (b)
(ii) empowering the Authority to fix
the terms and conditions of interconnectivity between service providers. It is
a moot point here whether this provision relates to licences issued prior to
the year 2000 or after the year 2000. Section 11 (1) (a) (ii) states that the
functions of the Authority shall be to make recommendations, suo motu or on a
request from the licensor, on the terms and conditions of license to a service
provider. The provisions of the TRAI Act are absolutely explicit and there is
no scope for confusion in this regard. It is thus clear that instead of making
recommendations to the Government, the Authority had wilfully proceeded to that
issue the Regulations even though the provisions of the Act are clear and even though it itself
recognised, at the time of issuing the TTO 2005, that it needs to send necessary
recommendations to the Government. This can only be, therefore, construed as a
case of usurpation of powers by the Authority.
We accordingly uphold the contention of the Appellants that the
Authority had acted incorrectly in issuing the impugned Regulations instead of
sending recommendations to the Government. Consequently, the impugned
Regulations are void, ab initio.
55. The
Counsel for Respondent argued that Section 11(1) (b) (vi) states that the
Authority shall "lay down and ensure the time period for providing local
and long-distance circuits of telecommunication between different service
providers;". According to him, this
sub-section clearly enables the Authority to issue the Regulation because local
and long-distance circuits include Domestic Leased Circuits and Local Lead, and
that the power to deal with DLC can specifically be traced to the sub-section.
He also pointed out that the in a
rejoinder filed before this Tribunal in appeal no. 9 of 2005 has categorically
stated that powers under the subsection can be exercised by the Authority only
with reference to lease lines. He referred in this connection to para 19 (d) of
the said rejoinder where the 1st appellant had stated as follows:
Para 19(d)
"The TRAI was clearly conscious and aware of the fact that lease lines for
local and long distance circuits for telecommunication are only transmission
links and are not parts of switches to work as Ports for interconnection. They
are totally different. In this view of the matter the provisions of section 11
(1) (b) (vi) of the Act, which only apply to lease lines for local and long
distance circuits for telecommunication are not the ports as points of
interconnection, were never pressed into service during the proceedings of
appeal no. 11 of 2002. The provisions of section 11 (1) (b) (vi) of the Act has
no applicability whatsoever in relation to the ports for interconnection."
56. Replying
to the contention of the learned counsel for the Respondent about the rejoinder
in Appeal no. 9 of 2005, the learned counsel for Appellants relied on the
judgement of the Hon’ble Supreme Court in P.
Nallammal and Another v. State [(1999) 6 SCC 559] wherein the court
observed as follows:
"7.... The volte-face of the Union of India
cannot be frowned at, for, it is open to the State or Union of India or even a
private party to retrace or even resile from a concession once made in the
court on a legal proposition. Firstly, because the party concerned on a
reconsideration of the proposition could comprehend a different construction as
more appropriate. Secondly, the construction of statutory provision cannot rest
entirely on the stand adopted by any party in the lis. Thirdly, the parties
must be left free to aid the court in reaching the correct construction to be
placed on a statutory provision. They cannot be nailed to a position on the
legal interpretation which they adopted at a particular point of time because
saner thoughts can throw more light on the same subject at a later stage."
57. Irrespective
of what the first appellant has stated in his rejoinder filed in a different
case, it needs to be examined whether the provisions of Section 11 (1) (b) (vi)
empower TRAI to issue the impugned Regulations. As indicated above, the Counsel
for Respondent argued that the local and long-distance circuits include leased
circuits. But what is being overlooked is that this sub-section speaks of local
and long-distance circuits of telecommunication between different service
providers. As indicated in Para 47 above, we had held that a leased line
cannot be sought by a service provider from another service provider for the
purpose of even giving the CUG network to a subscriber. So the question of
leased circuits being covered under this sub-section does not arise. To try and
impart a meaning to the sub-section when it is not intended would be incorrect.
58. During
the course of arguments, the Counsel for Respondent sought to establish that
powers to issue the impugned Regulations exist under the TRAI Act. His argument
is that the TRAI Act has been amended in the year 2000 precisely to strengthen,
among other things, the Authority and it is in this context that a clear
distinction is made between the recommendatory and regulatory functions of
TRAI. According to him, the recommendations regarding the terms and conditions
of the licence would be made largely in a pre-licence stage and once the
recommendations are accepted, it is open to TRAI to regulate a particular
activity if the said activity falls within clause (b) of sub-section (1) of
section 11 of the TRAI Act. We have carefully considered this argument. Firstly
there is nothing in the TRAI Act which states that the recommendations
regarding terms and conditions of the licence would only be in the pre-licence
stage. If this argument is accepted, it means that TRAI can bring in any
additional conditions after the licence is issued. Such a position would be
untenable. It is entirely the prerogative of the licensor i.e., the Central
Government to stipulate and modify the terms and conditions of the licence.
Except in so far as explicitly provided in Section 11 (1) (b) (i) of the TRAI
Act, it is the duty of the Authority to ensure compliance of the terms and
conditions of the licence. None of the functions as stipulated in Section 11
(1) (b) of the Act which the Authority is duty-bound to discharge speak of
modification of or addition to the terms and conditions of the licence. Even in
a case where the Central Government accepts the recommendations of the
Authority, it is essential that the terms and conditions of the licence are suitably
modified or added to only by the Licensor.
As indicated above, only in respect of section 11 (1) (b) (ii) is there
some scope for fixing the terms of interconnectivity. But the instant case is
not one of interconnection. Secondly it is also not a case where the conditions
of the licence had been modified. The letter dated 15.7.2003 from the
Department of Telecommunications is only by way of a clarification; that too to
state that the customers of CUG network can approach the Telecom operators directly.
That by itself does not empower the Authority to issue the impugned
Regulations. Even assuming for a minute that it did, the Regulations fly
squarely in the face of the circular dated 15.7.2003 when actually the
Authority is tasked to ensure compliance of the terms and conditions of the
licence. To impart a meaning from the letter dated 15.7.2003 for assuming the
power to issue the impugned Regulations is not, therefore, tenable.
59. The
Counsel for Respondent also argued that it would be totally misconceived to
state, as contended by the Counsel for Appellants, that all measures to
facilitate competition and promote efficiency and operationalise
telecommunication services so as to facilitate growth in such services should
be only by way of recommendation and that there cannot be any Regulation. There
is a certain force in this argument even though it does not apply to the
instant case. And, this cannot be generalised. We are clear in our mind that it
is the responsibility of the Authority to make recommendations regarding those
measures that are not expressly contained in the terms and conditions of a
licence and also so long as they are not specifically covered under the
provisions of section 11 (1) (b) of the Act. If, on the other hand, they are covered
by these provisions, either of the licence or of the sub-section, then it is
open to the Authority to take such measures as are necessary. In our opinion
there is no conflict between subsection 11 (1) (a) and subsection 11 (1) (b) of
the Act as contended by the Counsel for Respondent. The learned counsel states
that if the licensor acts on some recommendations and rejects the others and if
TRAI frames a Regulation and brings into effect those recommendations that are
rejected, there may be some conflict and may have to be tested. This, with due
respect, is an illogical suggestion. We are sure that the Authority does not
contemplate a situation where it would bring through a Regulation some of the
suggestions which are rejected by the licensor. For, if it did, it would be a
vile abuse of the power to regulate and may put at risk even the power that is
otherwise required to promote the orderly growth of the telecom sector. Every
creature of statute must recognise that it functions within the framework of that
statute and cannot allocate to itself the ultimate wisdom.
60. In the
light of the above, we hold that the impugned Regulations have been issued by
the Authority without jurisdiction.
61. Before
leaving this issue, we must address ourselves to an argument of the learned
Counsel for Appellants that while the Regulations mandating the provision of a
leased circuit is incorrect, it is open to a service provider to seek from
another service provider the provision of a leased circuit to cater to the
needs of the former’s subscriber. What is being advocated is that compulsion by
way of Regulation is bad and that it should be left to respective parties to
enter into commercial arrangements. This argument overlooks the fact that
resale of bandwidth is prohibited by the licence and as such, there cannot be
any arrangements inter se between two service providers. What is permitted is
what is envisaged by the letter dated 15.7.2003 which enables a customer to
request different service providers in which case the arrangement of Telecom
resources from various service providers may be resolved by their entering into
mutually agreed commercial agreements. Only to this extent is a mutually agreed
commercial agreement permissible.
62. Having
disposed of the issue relating to jurisdiction, we now come to the merits of
the case. The learned counsel for Appellants argued that the impugned
Regulations are arbitrary. The consultation paper issued on 17.11.2006
recognises that DLC services market in
63. Lastly, the counsel for Appellants has,
during the course of arguments, contended that Regulation 12 of the impugned
Regulations implies that the Authority would adjudicate the disputes between
service providers, a task which is not within the purview of the Authority but which
is solely within the jurisdiction of TDSAT by virtue of the TRAI Act, 1997. The
learned counsel for Respondent stated that this Regulation provides for
inspection, auditing of records maintained by the DLC provider and that the
Authority may undertake this exercise if it considers it expedient to do so and
to ensure compliance of the provisions of the Regulations. He contended that
such an intervention by the Authority does not amount to adjudication of any
disputes between service providers by the Authority. Clause 12 of the
Regulations provides for Inspection and Auditing. Clause 12 (4) states that
"the Authority may, by order or direction, from time to time, intervene,
for the purpose of protecting the interests of the subscribers or specified service
providers or for monitoring and ensuring provision of Domestic Leased Circuits
or Local Lead of Domestic Leased Circuit, as the case may be, under these
Regulations so as to promote and ensure orderly growth of the Telecom
sector." Without specifically so stating, this sub-clause does give the
impression that in the event of any dispute between requesting service provider
and the requested service provider, the former can approach the Authority who
may then issue an Order. While under the Act, every Order or Direction of TRAI
is appealable to TDSAT, there is no provision in the Act for the Authority to
intervene in disputes between two parties. Disputes settlement is solely within
the jurisdiction of TDSAT. Even the other sub-clauses of clause 12 do give the
impression that the requested service provider has to not only provide the
resource, as indicated above, but also has to maintain several records and be
also constantly answerable for the Authority or the persons who may be
appointed for inspection by the Authority. It will also have to bear the cost
of inspection. As pointed out above by us, it appears to be a disproportionate
burden, not under the purview of the licence, on the service provider to whom a
request has been made and such a service provider does appear to bear the cross
for no fault, all because some service provider who does not have the circuit
or resources for to provide the circuit enters into an obligation with a
customer and then makes a request. It can lead to a situation where a service
provider establishes an infrastructure at some expense for its own future
requirements and this is demanded by another service provider who has only to
make a request under these Regulations. It is a patently unacceptable situation
to put it most mildly. And we have no hesitation in holding that these
Regulations are absolutely arbitrary and irrational.
64. In conclusion, we hold that the impugned
Regulations are without jurisdiction and also arbitrary and irrational and
void, ab initio. We accordingly set
aside the Domestic Leased Circuits Regulations 2007 (10 of 2007). We have
however taken note of the macro situation and the concern that the different
sectors of the economy need to be provided with leased circuits. It is open to
the Department of Telecommunications, as licensor, to consider the entire
matter, if necessary seeking the opinion of TRAI and take a considered decision
on the measures required, including, if needed, the modification of the license
conditions to appropriately provide for making available Domestic Leased
Circuits or Local Lead of Domestic Leased Circuit. It is equally open to the
Authority to, if so desired, send suo
motu, recommendations to the licensor on this issue. Needless to say,
either suo motu or on request from
the licensor, the Authority will follow the due procedure and in keeping with
the provisions of section 11 (4) of the TRAI Act, 1997.
65. We would however like to clarify and
direct that our setting aside of the DLC Regulations, 2007 shall not adversely
affect, in any way, the arrangements already entered into between different
service providers in pursuance of the said Regulations. We are so directing
keeping in view the interest of the large number of consumers who may, directly
or indirectly, be affected if these arrangements are suddenly disturbed.
66. We would like to place on record our
appreciation of the efforts made by the learned counsels Mr. Maninder Singh as
well as Mr. Saket Singh who have painstakingly taken us through the various
dimensions of the issues involved.
67. The Appeals are accordingly disposed of.
No costs.
........................J
(ARUN KUMAR)
Chairperson
.........................
(J.S. SARMA)
Member
.......................
(G.D. GAIHA)
Member