Today's judgment will also make it easier for DoT to encash the bank guarantees of private telecom players who have not implemented their licence conditions - that is, those who have either not paid their licence fees, or have not begun setting up their networks. In most cases of encashment, private operators have petitioned the TRAI which has struck down DoT's move.

The 51-page ruling, delivered by Justice Usha Mehra, essentially restores the powers of DoT vis-a-vis TRAI which had been arguing that DoT could not grant/alter any telecom licences without the TRAI's approval. By this, Justice Usha Mehra cleared the decks for MTNL to provide cellular services in Delhi and Mumbai. It has upheld theUnion government's decision to amend the grant of licence to private operators in the cellular phone sector. However, the court has left open the question on whether MTNL was an "existing" service provider or not.

TRAI had stalled MTNL's entry plan into mobile phone services due to opposition from private cellular operators. TRAI had held that its recommendation was a precedent condition for the grant or revocation of licence or for laying down terms and conditions of a licence to be issued to any service provider. In another move, the court has struck down the TRAI order restraining DoT from granting licences to private parties for operating Internet services in the country.

Saying that the question of grant or amendment of licence by licensor DoT did not fall within Trai jurisdiction, Justice Mehra observed, "I have no hesitation to hold that the TRAI order suffers from legal infirmities".

Justice Usha Mehra said, "The authority fell in error in concluding that the power of the government to grant oramend the licence is subject to the recommendations of the TRAI or that these recommendations are mandatory in nature".

DoT had challenged the TRAI ruling on Internet services, as the order had restrained them from selling and processing forms for granting licences to private Internet service providers (ISPs). Justice Mehra, in an interim order in April, had given DoT the permission to process and sell application forms.

On the issue of licenses, the court clarified, "The dispute regarding the grant or to amend the licence by the licensor is not a dispute covered under the provisions of section 14(2) of Trai act. These are not disputes which can be adjudicated by TRAI." Citing reasons for her conclusion on TRAI's powers and jurisdiction, Justice Mehra said, "It was not the commitment of the government of India that the licensing power of the government will be subject to the discretion of the regulatory authority".

The powers of the TRAI cannot be "construed as a condition precedent to the exercise ofany other power by the central government under the Telegraph Act," Justice Mehra said. The court said functions of TRAI could not be read as a procedural prerequisite and the condition precedent, if read into section 4 of the Telegraph Act (which confers powers on government in the matter of licensing) would destroy the power itself. If the recommendations of TRAI were made mandatory, "The licensing authority will be obliged to remain inactive, if no recommendation is forthcoming from the TRAI and blindly to issue the licence if recommended (by TRAI) to do so," said the judgement. "In that eventuality, the exercise of power under section 4 is inhibited. This would lead to a vacuum and produce undesirable consequences," Justice Mehra remarked. The judgement further said, "No doubt, as and when TRAI recommends the need and time to introduce new service provider, the licensing authority will give due regard to recommendations. But such recommendations by itself may not usurp the quasi-judicial function of thegovernment to grant licence".

It is not the object of TRAI to grant licence to a new service provider, the court said, adding that there is no provision under he TRAI Act empowering the regulatory authority to grant licence nor can TRAI cancel or revoke it. While TRAI members were very dejected with the ruling, minister of state for communication Kabindra Purukayastha said that the judgment had upheld the government's role as a licensor. He said that the government fully appreciated the concerns of the private telecom industry and would not misuse its position as a licensor against private players. The minister also stated that the matter should never have actually reached the courts as the TRAI was a creation of the government and as such part of the family.

TRAI must get teeth

The TRAI has been rendered a paper tiger. The trouble is that the 112-year old Indian Telegraph Act grants DoT the absolute right of licensing. The court is "not in a position to declare (the Act) redundant". TRAI was setup in a hurry, without the required amendments to the Act. The result is babudom holds sway.

An all-powerful DoT can now set terms and conditions (whether in Internet services or cellular operations) that may be detrimental to private operators. At stake is fair competition. Thus, implicit in the decision to licence two private operators per circle is the premise that there will be no third operator. But now MTNL can muscle its way into Mumbai and Delhi circles.

TRAI must have the powers it assumed it had when it took on DoT. The multi-operator environment created by telecom liberalisation requires TRAI to resolve problems relating to (for example) inter-connectivity, timing and need for new competitors as also to protect consumer interests. The Telegraph Act needs to be amended to give TRAI teeth.