New Telecom Bill is flawed; it overlooks monopolies, allows surveillance

Early media opinions on the Indian Telecommunications Bill, 2022, released on September 21 , 2022 by the Ministry of Communications, are divided. Will it speed up next-generation reforms and usher in a new round of telecom revolution or bring back the licence-permit raj and reinforce state surveillance of citizens? 

In any case, the Bill has seen the light of the day amid a flurry of activities happening in the telecom sector in India in the last few years.

For instance, on October 2, Prime Minister Modi launched 5G services in the country. The bigger surprise was the announcement by Telecom Minister Ashwini Vaishnav that the state-owned Bharat Sanchar Nigam Limited (BSNL) would roll out 5G by August 2023. Considering that the BSNL was almost on the brink of collapse as recently as in 2019, this is a sea-change.

Opinion: India moves to telecom duopoly with onset of 5G and higher costs

Centre’s BSNL dilemma

Before 2019, the government was in a dilemma on whether to shut down the hugely loss-making BSNL or revive it with a fund infusion. Only when the issue of secure communications between various defence establishments, and secure internal communications in all government departments (which depend fully on BSNL), was sharply posed before the government, especially by the Ministry of Defence itself, that the Prime Minister reportedly decided to revive BSNL. 

With this security concern weighing foremost in its mind, the government declared through a press note of the Ministry of Communication on February 14, 2019 that it had decided to revive BSNL.

In 2019, the first relief package of ₹69,000 crore was sanctioned to the telecom utility. A part of this money was used for the purchase of 4G spectrum and the rest for a VRS (voluntary retirement scheme). After BSNL defaulted on paying even the monthly salaries, a fear psychosis had set in among employees and hence the VRS met with unprecedented response. Of 1,53,000 employees, 78,569 opted for it. The government followed this up with a second revival package of ₹1.64 lakh-crore in July 2022.

The telecom sector has witnessed a major turbulence in recent years due to a different reason as well. The entry of Reliance Jio into 4G services in September 2016 and its strategy of predatory low pricing marginalised or eliminated rivals and smaller players. Finally, only Airtel, Vodafone-Idea, and the public sector BSNL survived in the mobile telephony business besides Reliance Jio.

Also read: New Telecom Bill: Spectrum as atma, with sharper rules on service provision

New policy amid churn

It is in the wake of such topsy-turvy changes that the new Draft National Telecommunications Bill hit the public arena.

Depending on one’s vantage point, the new Telecom Bill was either welcomed or criticised on one focal point: for diluting the powers of the regulatory body TRAI (Telecom Regulatory Authority of India) and seeking to reduce it to the status of an advisory body without enforcement powers.

That apart, the draft Bill faced widespread criticism that it retained the provisions of the Indian Telegraph Act, 1885, that provided for communication surveillance by the state. It even seeks to strengthen the ability of the state to control messaging apps.

In this brief review of the Bill, we will address only two related issues posed by the Bill.

Firstly, the 5G era also ushers in an era of enhanced monopoly in the telecom sector. Would the Bill curb or favour the monopolistic practices?

Secondly, in the backdrop of the Cabinet approving a ₹1.64 lakh-crore revival plan for BSNL, would the Bill bolster the position of BSNL vis-à-vis the private monopolies or weaken it?

Monopoly in telecom

Already, in December 2021, in providing mobile telephony services from 2G to 4G, just three private companies accounted for 89.91 per cent of the total subscriber base (Reliance Jio 36%, Airtel 30.81%, Vodafone-Idea 23%) and the public sector BSNL accounted for only 9.90% and MTNL 0.28%. 

But the monopoly is not about market share alone. More important is the issue of curbing high monopoly prices in the interest of consumers. This is precisely what the regulatory agencies in the US and Canada, and in European countries from the UK to Sweden, are doing.

Also read: 5G service launched: Find out if your smartphone supports it

In India, TRAI had been mandated to curb monopoly practices in the telecom sector. The highpoint of the Bill is that it is trying to weaken the regulatory powers of TRAI and seeks to transform it into a mere advisory body without enforcement powers. It goes without saying that it would only strengthen the private monopolies and their oligopolistic practices, if any.

But in Indian conditions, monopoly is an unavoidable reality, thanks to a very high threshold of investment into 4G and 5G services and long gestation period before the companies see returns. So, only 3-4 major players are left in the telecom mobile telephony services. How to safeguard consumers’ interests even in such a scenario, where only four corporate houses dominate the market, is thus the central challenge before the regulator.

RJio’s telecom muscle

Even in the period of 4G services, RJio had emerged as the top player. In the 5G era, it would signify gain market girth. This is because RJio has diversified into diverse other fields which are organically related to telecommunication through 5G. 

These include live-streaming of news and entertainment like films and music, and sports events etc., cloud data services which RJio would be offering in collaboration with Google, online e-commerce through Reliance Retail, online money transfer through Jio Money and so on, besides the conventional voice telephony, internet and other digital communication services through Reliance Broadband.

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The Reliance Group is also planning to enter into tele-education and  telemedicine. Further, Reliance Industries is acquiring stakes in around 40–50 firms which are engaged either in related supply chain or downstream activity. This interface takes RJio’ quasi-monopoly qualitatively to a higher stage. Airtel, Vodafone-Idea and BSNL are no match for RJio in this regard.

Effectiveness of TRAI

The past record shows that the role of TRAI was not very effective in controlling tariff increases by monopoly telecom players, especially after luring a large number of subscribers from other telcos with low promotional prices initially. TRAI has come up with some papers with recommendations against monopoly in certain areas relating to telecommunications.

For instance, it came up with a consultation paper on over-the-top (OTT) communication services (i.e., messaging apps like WhatsApp and live streaming apps like Netflix) in 2018. In September 2022, It came up with Draft Telecommunication (Broadcasting and Cable) Services Interconnection with recommendations on competition in cable TV services.

But, strangely, TRAI never came up with any norms against monopoly and monopoly pricing in mobile telephony services. Some consumer rights activists have called for making TRAI a constitutionally empowered body autonomous from the government and for taking away the power of appointment of the TRAI chairperson from the telecom ministry.

Opposite of what’s needed

In a scenario that calls for strengthening the regulatory powers of TRAI, the Bill seeks to do the opposite. What would happen to monopoly practices in future if TRAI’s regulatory powers are diluted is anybody’s guess. Moreover, a decentralised grievance redress mechanism is badly needed and the Draft Telecom Bill is totally silent on this.

Already, out of the three private players, Vodafone-Idea is on the brink of collapse with an accumulated debt of ₹1.98 lakh-crore and its operating loss in the first quarter in FY23 widened to ₹7,296 crore from ₹6,544.9 crore in the last quarter of FY22. At this rate, the number of top private players in the telecom market would soon come down from three to two. 

The consolidated net loss for Airtel in FY21 was ₹15,084 crore. Though it reported a profit of ₹4,200 crore in FY22, it made a loss of ₹587.90 crore in the first quarter of FY23. It has a debt of more than ₹1 lakh-crore. If Jio grabs a large number of its subscribers, Airtel too would go the way of Vodafone-Idea sooner or later. RJio would be the sole private monopoly left in the Indian telecom scene.

There is no explicit recognition of this danger in the Bill and it contains no provisions to adopt any additional method to curb monopoly.

BSNL — from existential crisis to revival

By March 2019, BSNL had an accumulated loss of ₹90,000 crore. However, its losses, which were at ₹15,500 crore in 2019-20, came down to ₹7,441 crore in 2020-21 and it stood at about the same level in 2021-22. Vaishnav told Parliament in the budget session that BSNL has started making an operating profit.

Far from eroding away absolutely, the BSNL subscriber base is increasing marginally. A section of the top bureaucrats in the government seems to be pitching for its revival. The government also sent instructions to all ministries that they should use only BSNL for official purposes.

BSNL has its inherent strengths as well. Ilango Subramanian, a retired senior technical official in BSNL, told The Federal: “One important component of the July 2022 revival package is the merger of BharatNet and  Bharat Broadband Network Ltd (BBNL) with BSNL. BharatNet is the world’s largest rural broadband project providing broadband connectivity to 2.5 lakh gram panchayats, developed at an outlay of ₹61,109 crore. With this, BSNL is not just yet another service provider but has been made a custodian of national resources as well.”

Power of BharatNet

Subramanian added: “Thanks to BharatNet, when it is completed, anywhere in rural India anyone can get a broadband connection for ₹500. The merger of BharatNet is a major revenue booster for the BSNL. If even Reliance Retail has to sell its products online though Reliance Jio in remote villages it can do so only though BharatNet and hence it has to pay service charges to the BSNL. Additionally, it is only BSNL which has 68,000 mobile towers and it is expanding the number to 112,000 and all other private telcos depend on BSNL towers only for their mobile services.”

He further said: “Along with 5.8 lakh km of BharatNet optic fibre cable network, the BSNL now has 12.6 lakh km of optic fibre cables. At the time of the launch of Reliance Jio, the Reliance Group owned only 2.7 lakh km of optic fibre cables, confined mainly to tier-I and tier-II cities and not covering rural hinterlands. Idea Cellular (now Vodafone-Idea) owned only 1 lakh km of optic fibre cables. The private telcos are no match for the optic fibre cable infrastructure of the BSNL.”

Also read: PM Modi launches 5G services at Indian Mobile Congress

But the catch is that around ₹80,000 crore of this ₹1.64 crore second revival package is in the form of the value of spectrum allotment. The immediate cash component from the budget is only ₹43,964 crore. BSNL has still not completed its 4G rollout. To launch 5G, it would require more than ₹1 lakh-crore and the Minister has given no hint as to how this much money will be raised.

BSNL, of course, is on a revival path. But to what extent it would revive and by what time is still not clear. Meanwhile, its debt burden would drag it down again. So some uncertainty still clouds the BSNL revival process and the Draft Telecom Bill gives no indication to clear this uncertainty. As it is, BSNL is not legally entitled for government guarantees to raise funds of this order for expansion.

Surveillance enhanced

Besides the above issues, the draft Telecom Bill reinforces the surveillance powers of the state. The activist NGO Internet Freedom Foundation has pointed out in a press note that the Clause 24(2) of the Draft Telecom Bill repeats Section 5(2) of the Indian Telegraphs Act, 1885 which provided for the interception of telegraph messages of citizens by the police. The only difference is that it has expanded the ambit of the state surveillance to all “telecommunication services and telecommunication networks.”

Hence, naturally, tapping the phones of citizens by police officials — which is presently authorised by Rule 419A of the Indian Telegraph (Amendment) Rules, 2007 as per the orders of the Home Secretary — is also covered under this draconian Clause 24(2) of the draft Telecom Bill.

Besides phone-tapping, the authorities can also intercept OTT communication like WhatsApp, Signal, and Telegram invoking this provision. These service providers are to obtain a licence to operate in India and one of the licensing conditions is that the service providers should handover such messages and even identity the ultimate source of the messages to the designated government authorities.

In other words, the draft Telecom Bill not only replicates the draconian surveillance provisions of the colonial era Indian Telegraph Act, 1885 but renders them far worse from the right to privacy point of view.

Surveillance conditionality

While at least 13 companies were allowed to participate in the 5G trials in India, especially the global majors including the Chinese Huawei, only three ultimately participated in the 5G spectrum auction. Why? This is reportedly because of the Union government’s condition that these companies should handover the source code of their software to the government so that the government agencies can intercept any message as and when required; and these companies were not agreeable to this surveillance conditionality that meddles with the privacy of their users.

The government talks big on Make in India on the one hand and on the other hand indulges in contradictory restrictive practices which would curb investment prospects from global companies. Already, criticism of the Bill from the industry and potential investors is mounting.

Minister Vaishnav said that the Bill would be finalised in 8-10 months. After that, once it gets approved by the Cabinet and gets tabled in Parliament, a Bill of this nature, in all probability, would be referred to a parliamentary committee and, after a time-lag, it might be passed by Parliament, hopefully, with lots of changes. 

Yet, in the present form, the Bill clearly reveals the direction of the government’s thought-process — and the gaps in it — on this vital issue.