The Supreme Court imposing penalty for call drops on telecom operators.

Telecom service providers heaved a sigh of relief on Wednesday after the Supreme Court struck down a compensation policy for call drops levied by the Telecom Regulatory Authority of India (Trai).

In October, Trai ordered operators to pay Re 1 for every call drop to the user, with a maximum of three per day. The regulation was to come into effect from January 1. A Bench of judges Kurian Joseph and R F Nariman said: “We have held the impugned regulation to be ultra vires, arbitrary, unreasonable and non-transparent.” The SC passed the judgment on appeals filed by the Cellular Operators Association of India, Unified Telecom Service Providers of India and 21 telecom operators. Telcos told SC last week that the sector was under huge debt and they would have to pay a big price for spectrum. Therefore, zero tolerance on call drops should not be imposed.

Another contentious issue was that the regulation did not allow leeway of two per cent, which meant telcos were to pay for every call drop. Trai in its submissions to the court said it has to safeguard one billion subscribers and if companies agree to compensate call drops with free calls without pre-conditions it is open to re- consider its direction. It had also told the court that a “cartel” of four-five firms were making Rs 250 crore a day but not investing on their network to improve services. Telcos had termed the Trai regulation arbitrary and whimsical, contending that compensating consumers amounted to interfering with their tariff structure, which could only be done by an order, and not by any regulation. The government has been asking operators to invest in infrastructure, while operators say spectrum crunch affects call drops the most.

Commenting on the order, Minister for Communications and Information Technology Ravi Shankar Prasad said, “Tariff, standards of services come in the domain of Trai. While I acknowledge the mobile operators for bringing connectivity to the nook and corner of the country, it is equally their responsibility to give good, satisfactory service. They must identify the gap and reinforce it through investment. Since July, they have added about 90,000 sites in the country, and about 5,000 in Delhi. They need to do more, and the government will continue to insist upon the operators that they must fulfill this obligation.”

Analysts hailed the order but stocks of major players such as Bharti Airtel, Idea Cellular, Reliance Communications were down on the BSE. Bharti Airtel was down 2.55 per cent at Rs 359.45, Idea Cellular by 1.46 per cent at Rs 111.25 and Reliance Communications by 2.16 per cent at Rs 54.40.

Kapil Sibal, who was representing telecom operators, said, “(The) SC has rendered historic judgment by striking down the Trai regulation”.

Rajan S Mathews, director general of the Cellular Operators’ Association of India, said, “We are very pleased with the Supreme Court Verdict. It affirms what we have been saying all along.”

“Now, let us move forward and fix the real issues, like having more cell towers, affordable spectrum and working with the local authorities to get the infrastructure in place,” Mathews added.

Welcoming the order, Faisal Kawoosa, lead analyst, Telecoms at CMR, said, operators can’t shrug off their responsibility as they are the ones who run the show and own the services and are accountable to consumers and other stakeholders, including the government, for the loopholes in the network.

The Ruling was given by the SC bench comprising Justices Kurian Joseph and R F Nariman on the appeals filed by Cellular Operators Association of India (COAI).

SC Ruling

• SC struck down the TRAI regulation calling it as arbitrary, unreasonable and non-transparent.


• TRAI cannot punish telecom companies in the name of protecting consumer interests.


• Dismissed that telecom companies alone were to blame for call drops and were thus deficient in service.

Background

• In October 2015, TRAI had framed the rules that had imposed mandatory compensations to the subscribers for call drops.


• As per the rule, telcos (call originating service provider) were to pay consumers 1 rupee for every call drop with the penalty capped at 3 rupees per day.


• TRAI Rule was to come into force from January 1, 2016. But service providers had refused to pay compensations to the consumers, and had taken the case to SC.

A CONTENTIOUS ISSUE

1. Oct 2015: Trai orders telcos to pay subscribers Re 1 for every call drop, subject to a cap of three call drops a day per user


2. Dec 2015: Operators challenge the ruling in Delhi HC


3. Feb 29, 2016: Delhi HC upholds Trai order 


4. Mar 3, 2016: Telcos approach SC seeking stay, but get no interim relief, hearing fixed for March 10


5. May 11, 2016: SC strikes down Trai regulation

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