Friday, May 10, 2013

Configuring a 'Non-Toothless' Regulator (TRAI)

A proposal to give the telecom regulator the right to impose penalties marks a sea change in the government's approach to regulation

Shyam Ponappa  May 9, 2013

On April 27, this newspaper carried a report on the department of telecom's proposed amendments to powers of the regulator in the Telecom Regulatory Authority (Amendment) Bill. These amendments are remarkable, because they are an institutional evolution of the kind that we have rarely experienced, but need much more. Such salutary changes are heartening at a time of perceived drift in governance and stalled decisions. They are also important for our institutional development as examples of change initiated from within for legacy systems.

According to the report, the Telecom Regulatory Authority of India (Trai's) role will be extended to include the power to:
  • impose penalties on operators for non-compliance with its orders and regulations;
  • determine how to address consumer grievances and implement a plan; and
  • recommend how spectrum should be audited for efficient usage, and penalise transgressors for inefficiencies.
In addition, Trai is to be on a par with other independent regulators.

The right to impose penalties reflects a sea change for the better in the government's approach to regulation. It is especially significant because of the difficulties in setting up the regulator years after privatisation began, as well as in the period thereafter. This amendment has the potential to correct many deficiencies, provided it is implemented properly. Good outcomes, however, are not a foregone conclusion because outcomes require a combination of properly designed systems, people with the required skills in place and functioning well in circumstances that are not adverse.

Together with the other changes, namely, addressing consumer grievances and recommending how spectrum should be monitored for optimal usage, with the stipulation of penalties for inefficiencies, Trai will be empowered to facilitate usage and access.

The question is whether these changes sufficiently empower our regulator for our communications needs. The recommendations are good, but do they need improvement? Ideally, what should be the structure, function and powers of the agency in practicable terms, without making the "best" the enemy of the "good"? To formulate answers to these, it is useful to consider relevant benchmarks and markers. Some of the following material is derived from the ICT Regulation Toolkit of the International Telecommunication Union.*

Some countries have a single-sector regulator for telecommunications, as in Botswana, Spain and Peru. Others have multi-sector regulators, with responsibility over utility sectors that typically include telecommunications, water, electricity and transportation, such as in Jamaica, Costa Rica, Germany, Latvia and Panama. More recently, there has been an increase in "converged regulators" with responsibility over broadcasting, telecommunications and information technology. Today, such regulators are found in most European Union countries, including Finland, Italy and the UK, as well as in Australia, Hong Kong, China, Malawi, Malaysia, South Africa and Tanzania. This is because such structures are considered to be better equipped to address convergent environments where different services are offered over the same platform. Such a move also facilitates the transition to modern, packet-switched "Next Generation Networks".

Regulators in several countries, such as the US, the UK, and Malaysia, are the designated authorities responsible for spectrum allocation and management for the government; they do not only make recommendations. Should Trai have such a role and responsibility? To understand why the answer needs to be worked out thoroughly, read on.

Spectrum monitoring and management undoubtedly need modernised capabilities to provide information and decision support. This includes the use of online tools such as user-friendly databases and graphical user interfaces, and public access in areas not related to security or defence. These technological aspects are one dimension of need.

A different dimension is that of institutional readiness and interfaces, and the state of institutional development in counterparty agencies. In other words, it is not simply a matter of elegant logic and organisational design, but also culture and work processes that fit as well as the interrelationships, such as between telecommunications, broadcasting and competition laws, that will ultimately result in effective governance in our context.

What are the desirable qualifications for the head of the regulatory agency? The requirement is for coordinating interdisciplinary issues effectively, in addition to integrity, intellectual capacity, and governance/administrative ability. The first Trai was headed by a judge; thereafter, there was a banker, then people from the Indian Administrative Service. In the US, lawyers head the agency, while in the UK, it is economists; both have very different cultures and institutions from ours. In addition to experience in administration and contracts, knowledge of economics, commercial dealings and coordination using multiple inputs is desirable. Technical expertise, while essential as an input, may not be a key criterion for effective regulation and oversight.

Here are some examples of national anomalies:

  • In Canada, spectrum matters are addressed by Industry Canada rather than by the regulator, the Canadian Radio-television and Telecommunications Commission, or CRTC.
  • In Singapore, the Infocomm Development Authority has responsibility over telecommunications and information technology matters, but the Media Development Authority licenses over-the-air television and regulates content.
  • In Australia, the communications regulator has no authority over competition issues, whereas in the UK, Ofcom has jurisdiction concurrently with the Office of Fair Trading.

For all these reasons, to properly configure Trai's role and powers, a consultative process is advisable (i.e., solutions collectively formulated that are likely to work) with the help of experienced facilitators who can help elicit convergence through stakeholder interactions. Such issues are ill-served by consultations in the form of a quasi-judicial hearing, which is predicated on the "rightness" of a position in the law.

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