Did Mukul Rohatgi Give a Regulatory Carte Blanche to Reliance Jio?

Was TRAI, after consulting with the AG, right in allowing Reliance Jio to extend its tariff promotional offer after it expired?

AG Mukul Rohatgi. Credit: PTI

New Delhi: It is rare for a regulator empowered by parliament to seek the opinion of the attorney general (AG) on rules and regulations. In an unprecedented action, the Telecom Regulatory Authority of India (TRAI) approached the AG when the incumbent operators opposed the regulator’s proposal to allow Reliance Jio to offer promotional tariff beyond 90 days, bypassing its own rule that was being followed for 15 years.

Former TRAI chairman Rahul Khullar, known for his integrity and fairness as a regulator, told the The Wire that “tariff setting was entirely in the regulator’s domain and TRAI was the final authority in the matter. It is, thus, unprecedented that the regulator should seek the AG’s opinion on a tariff setting matter.”

Reliance’s initial promotional offer was allowed by TRAI till December 31, 2016. But this continued without any formal word from the regulator, which finally wrote to the AG, Mukul Rohatgi, on January 17, 2017, seeking his opinion on the matter. With the clock ticking, Rohatgi responded within 10 days. His legal opinion not only overturned the practice of limited free promotional service but also other established principles adopted thus far.

The AG’s letter dated January 27, 2017, which is in The Wire‘s possessiongoes beyond the issue of the 90-day period of promotional offers and says that even the basic regulatory principles of tariff do not apply on the promotional offers. It means that an operator can offer any tariff scheme as a promotional offer, and it can be discriminatory, predatory and non-inter-connect charges (IUC) compliant.

“I am of the opinion that the promotional offers, even in respect of a dominant player cannot be subject to principles of non discrimination, non predation and IUC compliance,” the AG says in his letter. Such carte blanche in regard to regulatory principles is unprecedented, to say the least.

The AG, the government’s highest legal officer, also says that an operator can offer promotional tariff for an indefinite period and there is no restriction on the number of promotional offers.

The AG’s opinion, if followed in toto, will open a Pandora’s box of regulatory problems. “When a tariff – promotional or regular – is filed, it has to comply with the regulatory principles of non-discrimination, non-predation and IUC,” says B.K. Syngal, former chief managing director of VSNL. “The AG says that an operator can go on offering promotional tariffs whether they meet regulatory principles or not, and the TRAI can just be an onlooker. It means that TRAI has no role to play. I am surprised (at) what has happened to the regulator.”

Former TRAI member D.P.S. Seth feels that the regulator should not have complicated the issue. “If the highest legal officer of the government of India says so, then I will not go against it. However, the letter issued in 2002 was followed for the last 15 years, and there was never a problem with it,” said Seth, adding, “You must understand that the industry is deeply in debt. One should not take a decision that would make matters worse.”

The telecom industry is reeling under a debt of Rs 4.5 lakh crore, while its revenue is only about Rs 2.11 lakh crore. The EBIDTA of the industry is Rs 50,000 crore.

The AG’s opinion

On the duration and number of promotional offers: Rohatgi says, “No restriction or limitations have been imposed on promotional offers except that the validity of the promotional offer at one point of time cannot be announced for a period exceeding 90 days. Under the present statutory rules, regulations and directions of the authority on promotional offers/packages, it is permissible for a telecom service provider (TSP) to launch same, similar or otherwise another promotional offer during the continuance or on completion of the validity of one promotional offer with or without gap. There is no limit applicable on the number of such promotional offers which may be offered by a TSP.”

TRAI’s 2002 letter that was followed by the industry for the last 15 years was only advisory in nature: “Had TRAI chosen to lay down various restrictions on the promotional offers, it would have done so with specific statutory rules, regulations or directions and with specific language offering the restrictions. TRAI has not restricted the number of promotional offers at one time or one after another…the term promotional offer has not been defined.”

On the issue of applicability of regulatory principles of non-discrimination, non-predation and IUC compliance: He says, “Promotional offers are not subject to regulatory principles of non-discrimination, non-predation and IUC compliance in terms of the extant statutory rules, regulations and directions of TRAI.”

The genesis of the problem

In September 2016, Reliance Jio launched its services and offered zero tariff as a promotional offer. When the period of promotional tariff expired, Reliance Jio offered another promotional tariff allowing free services to customers. Incumbent operators opposed it saying TRAI should not have allowed it. They cited the 2002 letter that was being followed for last 15 years.

The letter said: “… Service providers are therefore advised to restrict the validity of promotional packages and/or benefits offered to customers under such packages on offer to a maximum of 90 days from the date of launch.”

When operators accused the regulator of favouring Reliance Jio, TRAI took the AG’s opinion into account. The AG had said that the 2002 letter was only advisory in nature.

Telecom experts say that the regulator may have been wrong in circumventing the 2002 letter. “Reliance Jio should not have been allowed a promotional offer of more than 90 days,” said Seth.

He added, “It is the regulator’s duty to ensure that the tariff should be such that it gives a reasonable return to the service provider without compromising the interest of the consumer. We must understand that the industry has to run. That is the basic reason that a time limit of 90 days was fixed for promotional offers. That is the basic idea behind the 2002 letter.”

Syngal says that the 2002 letter was issued when the industry was at nascent stage, and it was realised that promotional tariff for longer periods were not good for the industry. “The regulator should be unbiased in [his] approach. He must realise that he is the regulator for all operators,” said Syngal.

Implications of the AG’s letter

What is likely to be seen as the most controversial aspect of the AG’s opinion is that he said the promotional offers need not comply with the regulatory principles of ‘non-predation’, ‘non-discrimination’ and ‘IUC compliance’. This is against the existing telecom tariff order that makes it mandatory for operators to offer only those tariffs that meet these three conditions.

This means that an operator can offer any tariff for any time period as a ‘promotional offer’ and it can be discriminatory, predatory and non-IUC compliant. However, if the same scheme is offered as a ‘regular tariff’, it will have to pass through the three mandatory compliances of regulatory principles – non-predation, non-discrimination, and IUC compliance. Just by change of nomenclature, a tariff becomes valid or invalid.

An operator can offer any plan to any subscriber. It has to simply inform the regulator about the plans that it has offered. There can be different plans for different sets of customers. Promotional offers are not governed by the regulation that an operator can offer only 25 tariff plans. An operator can file any number of plans.

“There will be total chaos in the industry. I am surprised how TRAI managed to get such an opinion from the AG. If what the AG says is implemented, what was the need for regulatory principles,” says Syngal.

As per the TRAI Act 1997, TRAI was established to “…. protect the interests of the service providers and consumer of the telecom sector, to promote and ensure orderly growth of the telecom sector.”

“It is true that promotional offers and an extremely low tariff help in increasing the customer base, but it is equally important to ensure the health of the industry,” says Seth. “If you kill the goose that lays golden eggs, what will be left?”

Manoj Gairola is the editor of Telecom Tiger.

Note: The story has been edited to add the dates of TRAI’s request to the AG and the AG’s response.