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TRAI seeks penal action against incumbent telcos

India’s top three telecom companies are staring at huge fine over the point of interconnection (POI) controversy.

The telecom regulator TRAI has asked the government to penalise Airtel , Idea and Vodafone after Reliance Jio complained that the incumbent telecom companies are not providing sufficient POIs, which has led to call failures for Jio customers.

TRAI has suggested Rs 50 crore per licence service area to be levied for failure to provide incremental POI to Jio. The authority has written to telecom minister proposing a hefty penalty to be levied to these operators.

TRAI has also expressed its displeasure at high call failure to the tune of 80-85 percent. The telecom operators not providing POI is an anti-consumer move and shows their intention to stifle completion and hinder the entry of new entrant into the market.   
 
If this penalty is levied it is sure to be big setback for the incumbents. Earlier, TRAI had also sent show cause notices to the three telecom operators.

Speaking on the issue, Mahesh Uppal, Telecom Analyst told CNBC-TV18 that in all telecom regulations, interconnection is one of the most serious misdemeanour that you can be involved in as an operator because without interconnection no competitor can survive in the market.

Below is the verbatim transcript of Mahesh Uppal’s interview to Surabhi Upadhyay on CNBC-TV18.

Q: What we are given to understand is that Telecom Regulatory Authority of India (TRAI) has recommended to the Department of Telecom (DoT) that there should be a penalty of about Rs 50 crore per licence service area levied on these incumbents as they have failed to provide enough points of interconnection to service Jio’s new customers. Your first thoughts on this and the legal validity of this kind of letter that is going on to the DoT?

A: Well, as you are aware there has been a dispute about the points of interconnect and RJio has been alleging that the operators have not been cooperative and have not been willing to provide adequate points of interconnect to the company. The companies have said that look this is also because Jio has its own technical problems, but I think that the regulator, the TRAI seems to according to you be persuaded that the problem is the telcos. The telcos are not providing sufficient points of interconnect and as far as this penalty is concerned this is a penalty that is part of the licence when there is a provision in the telecom licence that each company has 13 circles that it serves, there is a penalty that is mentioned there in the licence for failure to comply with licence conditions.

One of the licence conditions relates to interconnection and the penalty if I recall correctly is a maximum of Rs 50 crore, so this is what I think the TRAI seems to be telling the DoT or the government to do. I haven’t seen all the details.

Q: Going by what you are saying it is a fairly serious sort of observation from the regulator, because here is a regulator recommending the imposition of the maximum permissible penalty under the current guidelines of Rs 50 crore per licence service area. This would be taken as a pretty serious comment coming in from TRAI?

A: Yes, it would be if this is true that they have recommended this then this would imply that they are persuaded that the operators are not providing sufficient points of interconnection and the TRAI being persuaded it seems to have recommended this and as far as interconnection itself is concerned in all telecom regulation interconnection is one of the more serious misdemeanour that you can be involved in as an operator, because without interconnection no competitor can survive in the market and so regulatory internationally and in India are also right to think of interconnect as a serious issue. It would seem that is what the regulator have seems to have concluded, but as I said we don’t know the detail.

Q: Since it is Rs 50 crore per licence area can you give us some sort of a rough number, what will the total levy come up to if indeed this is a sort of penalty that actually comes out?

A: Well, there are 22 circles so 50×22 is about Rs 1,000 crore, because since each circle is a separate licence what the regulator or the TRAI would have to conclude that in each circle the companies are not providing adequate interconnection, we don’t know that whether Jio has alleged that interconnect is being denied or that there is a barrier to interconnection in all circles or some circles we don’t know that, but yes there are 22 circles and the maximum penalty is Rs 50 crore.

(Disclosure: Reliance Jio is part of Reliance Industries which owns Network18 Media and moneycontrol.com)