The Delhi High Court has struck down a notification of the Telecom Regulatory Authority of India on the 'calling party pays' issue. In the process it has also virtually redefined the regulator’s role to ensuring interconnectivity rather than fixing inter-connection rates.

A division bench of the high court comprising chief justice S.N. Variava and justice S.K. Mahajan said Trai should stick to regulating inter-connect agreements between operators and not impose inter-connection rates on service providers. Its regulations cannot also supersede licence agreement conditions.

"Trai cannot lay down the terms and conditions to service providers on introduction of telecom service, installation of equipment, technology and regulate in respect of the telecom industry,'' the bench said in an open court ruling. The regulator's powers in this regard are only "recommendatory'' and the government is not bound to abide by the proposals, it further added. This means that Trai cannot fix revenue shares between operators on its own. It can only settle disputes between operators.

The court also struck down the Interconnection (Charges and Revenue Sharing) Regulation 1999, issued by Trai on 28 May 1999, which allowed Trai to issue inter-connection orders over-riding licence agreements between the government and private operators. The regulations notified the actual revenue sharing pattern for basic and cellular operators.

The court clarified that Trai cannot change the inter-connection rates specified in the licence agreements. "Trai must function within the framework of policy laid down by the government. This not only means policy decisions of the government but also the terms and conditions of licence issued by the government."

Trai had, in fact, relied on a section of the TRAI Act that allows it to regulate revenue sharing arrangements among service providers. However, the court said that an arrangement must exist between operators for it to be regulated. The court rejected Trai's argument that it needed to have powers to regulate arrangements for inter-connection to ensure efficient inter-connection. It pointed out that inter-connection agreements between cellular operators and the department of telecommunications were specified in the licence agreement and had existed since 1995. Trai only has powers to set tariffs that are binding on the government acting as a licenser. All its other powers were recommendatory or advisory.

Trai had notified the calling party pays regime on 17 September 1999, under which incoming calls to a cellular subscriber become free while calls from a fixed to a mobile phone cost more than a local call. The revenue derived from these calls were to be shared between basic and cellular operators in a 1:2 ratio. Under the rates fixed by Trai, calls from a fixed to a mobile phone would have cost Rs 3.60 a minute. The high court had stayed this order on 28 October 1999.

The calling party pays regime was challenged by a non-governmental organisation, Telecom Watchdog, which said the tariff on calls made from a fixed to a mobile phone was too high. Later, the department of telecommunication services and the Mahanagar Telephone Nigam Ltd also became parties in the case, challenging the reasonableness of the revenue sharing formula. The department and MTNL contended that since cellular licence agreements did not provide for access payments to cellular operators by the department and MTNL, there was no question of sharing revenue with them for incoming cellular calls.

The bench concurred with the argument, stating, "In effect, what the Authority has purported to do, is to vary (the) terms and conditions of the licence". Since it had already held that Trai had a recommendatory role, where it could issue regulations only within the broad framework laid down by the government, the bench said the regulator could not purport to do indirectly what has not been allowed directly.

In its ruling on Trai's jurisdiction on inter-connection, the bench interpreted clause 11 (c) of the Trai Act as a recommendatory provision. This clause states that one of the regulator’s functions is to "ensure technical compatibility and effective inter-connection amongst service providers".

The private telecom operators, who stood to benefit by the Trai regulations, felt that they cannot reach agreements on a mutual basis in an environment of unequal competition. They have also pointed out that monopoly organisations like the department of telecom services and the MTNL have no desire to negotiate.

  also see : Basic and cellular telephone operators in India