TRAI vs Telcos: The Legal and Economic Positions on Compensating Call Drops

Should you be compensated for call drops? TRAI wants to, but the Supreme Court and telecom operators don’t agree. Who is right?


Lines Cut: TRAI needs to go back to the drawing board and figure out how best to curb call drops. Credit: vgrigas, Flickr CC BY 2.0

New Delhi: The Supreme Court, on May 11, put an end to a nearly two-year-long back-and-forth between the Telecom Regulatory Authority of India (TRAI) and India’s telecom operators over whether consumers deserved to be compensated for ‘call drops’ or phone conversations that end because of technical issues on the operator’s end.

The court, while overturning an earlier Delhi high court judgement, has killed a TRAI order that demanded that telecom operators such as Airtel and Vodafone should compensate their customers one rupee per dropped call, up to a maximum of three rupees per day.

“We have held the impugned regulation to be ultra vires, arbitrary, unreasonable and non-transparent,” a bench comprising Justices Kurian Joseph and R.F. Nariman said.

Immediate reactions from parties on both sides of the tussle have proved to be quite reactionary. Consumer advocacy group Consumer Voice, which was a stakeholder in the TRAI consultation process on quality of service, has expressed its disappointment in remarks to The Economic Times. “We’re extremely disappointed. Telcos are not investing in networks and now they will get a free hand. Situation on call drops is worsening on a daily basis,” said Consumer Voice’s telecom adviser Hemant Upadhyay.

The telecom industry lobby, which has argued that TRAI’s compensation proposal is both not feasible and doesn’t take into account the infrastructure investment costs that companies have to incur, is ecstatic. “It’s a big win for the telecom industry,” said Cellular Operators Association of India Director General Rajan Mathews.

Is the Supreme Court decision against the interests of the consumer? Or are telecom operators grappling with harsh conditions and poor policy? As it turns out, it’s a little bit of both.

TRAI’s position

Consumer group arguments against call drops usually tend to centre around telecom operator malice; specifically that telecom operators, rather than working to improve quality of service, actually profit off of call drops by charging consumers for calls that they actually don’t end up making. For instance, if a customer is charged by per-minute billing and the call gets cut after six seconds she ends up being charged for the whole minute even though the call ended because of technical reasons.

While TRAI has acknowledged these concerns in its consultation paper late last year, the regulator’s argument revolves around two major points. First, the prescribed benchmark for call drop rates is around 2%. Put simply, 2% of calls made through any telecom operators can be dropped because of technical issues; that’s the permissible limit.

In a number of “on-spot” call drop tests – conducted by TRAI in the Delhi and Mumbai telecom circles – the service quality of only one telecom service provider in each of these local service areas was within the 2% benchmark. In some cases, as shown below, one telecom service provider in the Delhi local service area had a call drop rate nearly 17%. This therefore takes apart the telecom industry’s argument that most call drops are within the permissible level.

Second, TRAI has argued that call drops and poor quality of service can be traced back (in part) to the lack of investment in network infrastructure by the telcos. According to the consultation paper, network investment (other than radio spectrum) rose by 4.6% in the 2013-14 financial year. However, minutes of usage grew by 6.8%, indicating that “investment has not kept pace with the usage”.

The opposing side

The telecom industry’s position, argued by lawyer and Congress leader Kapil Sibal in court, relies on two separate arguments. The first is that TRAI ignores that telecom companies such as Airtel and Vodafone have to incur high costs on acquiring spectrum and re-bidding for their spectrum after their licenses expire. Also because of this shortage of spectrum, as a number of people have pointed out, telcos in India are overloaded. They carry more voice and data per unit capacity than their counterparts in countries such as Singapore and China.

Second, and more interestingly, is the argument the Supreme Court judgement echoes: namely that TRAI’s calculation on how customers should be compensated for call drops (one rupee per call drop) is “arbitrary, unreasonable and non-transparent”. Both the method by which the fine has been decided and its application (how will telecom operators distinguish between a bonafide call drop and the dropping of a call because the phone’s battery switches off?) are overly complex and more than a little unmanageable.

To be fair to TRAI though, the idea of compensating consumers for call drops with credit was first mooted by the Department of Telecommunications and is a common practice in various international markets. Unfortunately for TRAI and the government, there is very little in the way of precedent when it comes to compensating specifically for poor quality of service. While there is an established legal foundation in areas such as the retail and FMCG industries, in other areas this is still being handled on a touch-and-go basis.

This doesn’t mean that the telecom industry can’t take responsibility on its own, without the nudging and prodding of TRAI and the government. India’s e-commerce industry has led the way in terms of the high quality of service and customer refunds. At the other end of the spectrum, airlines such as SpiceJet have stepped up to compensate flyers for delays and cancellations that happen because of the company’s fault.

It is clear, therefore, that the question of whether regulation-led customer compensation norms are more efficient than competition or incentive-led compensation standards still needs to be more carefully examined.

The way forward

Even though the Supreme Court’s judgment is final, the issue of call drops still hasn’t been resolved. TRAI and the Department of Telecommunications need to head back and work out a proposal that is less opaque and much easier to implement. The government and telecom operators need to work on harmonisation of spectrum and better sharing and trading policies.

Until they do, the customer will continue to lose out.