The draft of the India Telecommunications Bill of 2022, which has been released for public consultation with a deadline of October 20, 2022, has been long awaited. There is no doubt that three of the major legislations governing the sector are outmoded and incapable of dealing with twenty-first-century technology and the challenges it poses.
The dates of these acts are enough to make it clear that the Indian Telegraph Act of 1885, the Wireless Telegraphy Act of 1933, and the Telegraph Wires (Unlawful Possession) Act of 1950 need to be replaced. Such archaic laws cause hindrances for all stakeholders, and new legislation is required to underpin growth in a sector with cutting-edge technology and huge externalities for an increasingly digital economic landscape.
The proposed bill will have wide, long-term implications for the future of the entire economy, especially with 5G being deployed and 6G in the offing. Detailed consultations with all stakeholders are of paramount importance to ensure that it furthers national and consumer interests by providing a fair, stable and balanced policy environment.
But the draft bill has been controversial. It deals well with certain issues. But it also contains some retrograde and investor-unfriendly proposals. While there is welcome clarity in the proposals for spectrum allocation and right of way (RoW), and for corporate actions such as mergers or bankruptcies, there are also sections pertaining to licensing that are out of step with reality and could impact the privacy of users and businesses. Moreover, there are broad provisions that could be used to shut down the internet without judicial supervision. If the bill is legislated unchanged, existing concerns across these areas will be elevated.
There is also huge concern about policymaking and regulatory authority. The bill would dilute the powers and responsibilities of the statutory regulator, the Telecom Regulatory Authority of India (TRAI), with a reversion of more discretionary powers to the central government. This is retrograde and unlikely to work well.
Empirically, we may note that most nations with efficient telecom sectors tend to have independent regulators. If we look back at India’s own history, growth in telecom and related domains has clearly been fostered by the creation of TRAI. TRAI and the Department of Telecommunications (DoT) have often had differences of opinion, which has also meant open debates about the pros and cons of certain issues, leading to better consensus about the way forward.
A reversion of powers to the central government with all its pulls and pushes would sharply reduce the checks and balances inherent in the presentation of different but highly informed opinions about future policy direction. In addition, there are draft provisions that give subjective powers to the government to waive fees, charges and penalties in the name of consumer interest and fair competition. Given the history of the 2G scandal and its aftermath, where several bureaucrats and politicians were arrested, a concentration of discretionary powers justified by broad rationales could lead to a fresh cycle of litigation. Or, it could lead to an administration frozen by fear and hesitant to take decisions.
New legislation is required to underpin growth in a sector with cutting-edge technology and huge externalities for an increasingly digital economic landscape.
On the positive side, the bill clearly aims to address issues that have arisen in practice through the past two decades in the area of spectrum allocation. It proposes that the default mechanism for spectrum allocation will be auctions. Auctions help reduce the possibility of corruption and the attendant delays and litigation, if it is strictly followed in future spectrum allocations.
The draft bill provides for administrative assignment of spectrum for specified functions relating to government and public interest such as defence, transportation and research. The administrative exceptions to auctions may include “backhaul” spectrum necessary for efficient 5G services. The bill also advocates technology-agnostic use for deploying spectrum. It allows for refarming and repurposing and harmonisation of frequency. It enables sharing, trading, leasing and surrender of spectrum, and a process for return of unutilised spectrum.
The bill also deals with spectrum reuse in cases of insolvency while referring to the Insolvency and Bankruptcy Code 2016 (IBC 2016). The draft suggests that a licensee undergoing insolvency proceedings can continue to operate if it continues to provide telecommunication services and does not default on dues under the licence agreement. If the licensee is unable to meet these requirements, the spectrum may revert to the centre.
Another area where the bill has made noteworthy and useful clarifications is in the framework for RoW. The proposed regulatory framework facilitates RoW for any “facility provider” building telecom infrastructure. A facility provider includes any licensee or registered entity, including any contractor, subcontractor or agent working for the centre or for a licensee.
The draft bill deals well with certain issues. But it also contains some retrograde and investor-unfriendly proposals. While there is welcome clarity in the proposals for spectrum allocation and RoW, and for corporate actions such as mergers or bankruptcies, there are also sections pertaining to licensing that are out of step with reality and could impact the privacy of users and businesses.
The draft simplifies the processes for mergers, demergers and acquisitions, or other restructuring by only requiring intimation to the licensing authority. Hence, any scheme for restructuring that adheres to the framework of the Companies Act, 2013 may be carried out without further permissions, by simply notifying DoT.
There is also an enabling framework for a “regulatory sandbox” to facilitate innovation and research and development (R&D). This will enable any entity to conduct tests and collect evidence relating to new innovations while availing of exemptions from the terms and conditions of licence, assignment, registration, etc.
The Universal Service Obligation Fund is to be expanded into the Telecommunication Development Fund (TDF), and will be used to cover expenditures for the sake of underserved urban areas, in R&D, skill development, etc. A portion of payments made for a licence, registration or spectrum assignment will be allocated to the TDF as proposed.
But the concept of extending licensing to over-the-top (OTT) apps has been badly conceived and ill-defined. OTT services allow for instant communication including messaging and data-based calling. This could mean cumbersome KYC processes for users registering for any email plus instant messaging service, which would qualify for a licence. To ensure that a user provides the correct details, the draft provides for a fine of Rs 50,000 for wrong identification details, suspension of the operation of the specific mobile number or barring of the person from using telecom services. Licensing would also make OTTs subject to phone-tapping security requirements as provided in the bill.
The bill does not clarify if, say, messengers embedded within other software would also be included in this definition. Also, would this licensing apply equally to WhatsApp, Slack, Microsoft Teams, Gmail and Zoom, for instance, since these are all very different services, which allow for instant messaging?
According to the bill, licensed entities will have to “unequivocally identify” all users, and make such identity available to all recipients of messages. The latter provision would impact users responding to a poll or declining a service for instance, who may wish to conceal their identities in such instances. It would also mean surveillance across both private personal communications (such as among family members) and confidential business-related communications.
TRAI conducted a detailed consultation on licensing over four years and came to the conclusion that OTT should not be regulated or licensed. The importance of OTT in socio-economic growth cannot be undermined. According to the Broadband India Forum (BIF), “OTT services are the backbone of the digital economy and by subjecting them to licensing, it could stifle the entire socio-economic ecosystem, kill innovation and stymie GDP growth. The OTT communication services ecosystem is being developed by a number of start-ups, small and medium enterprises (SMEs), members from academia and professionals. Subjecting such services to licensing could harm the start-up ecosystem, constricting the flagship mission of Startup India.”
The impact of such licensing on the business environment and on the privacy of hundreds of millions would definitely appear to be negative. Indeed, it could be argued that this is unconstitutional since it violates the fundamental right to privacy. It would make it difficult for professionals such as doctors, lawyers and chartered accountants to fulfil their fiduciary responsibilities and maintain client confidentiality.
It would also be technologically impossible to comply with these provisions without a complete redesign of many OTT services to breach end-to-end encryption. The draft provides a framework for the protection of users to stop harassment by unwanted calls or messages. But while this must be a foundational policy objective, the provisions mentioned above may conflict with the aim of protecting users.
The bill also has broad provisions to suspend the internet, which is concerning. India suffers the highest number of internet shutdowns in the world, with over 100 blackouts annually, including some for reasons as nebulous as prevention of cheating during exams. These shutdowns cause massive economic losses and can contribute to loss of life in a medical emergency, for instance. The bill’s provisions for shutdowns are broad. In the event of an “occurrence of any public emergency or in the interest of public safety, the central government or a state government can order the suspension of communication services on any telecom network”. These provisions could lead to shutdowns without safeguards such as judicial oversight.
There are also some ambiguities that need to be clarified and resolved during the consultation process. The bill allows the government to take back spectrum after five years, or to withdraw existing exemptions through notifications, without consultation or due process. This would adversely impact investor sentiment. It does not clarify the situation for some services provided under registration such as public Wi-Fi.
It defines infrastructure as only physical assets such as towers and fibre. This is in conflict with the International Telecommunication Union’s definition of digital infrastructure and it needs to be expanded to include elements such as data centres, undersea cables and content delivery networks.
Industry bodies such as the BIF have pointed out these and similar lacunae. T.V. Ramachandran, president, BIF, says, “Some of the provisions unfortunately appear to be prohibitive rather than facilitating/enabling for the larger digital ecosystem. The provisions seem to take us back to the pre-1997 era by diluting the powers of the regulator. This could damage investor confidence and undermine the independence of the regulatory authority owing to the deletion of provisions that enable proper checks and balances.”
Lt General Dr S.P. Kochhar, director general, Cellular Operators Association of India (COAI), says, “We are studying the newly drafted bill and will share our comments with the government in due course of time.”
Tony Verghese, partner, J. Sagar Associates, says, “The new bill has taken into account the current gamut of services being offered using different technologies, such as OTT, internet services via satellite, in-flight and maritime services, broadcasting, internet and broadband services, which will now fall within licensed services. The bill particularly covers aspects of restructuring, defaults and insolvency considering the status of this sector, which has seen a lot of consolidation and mergers. Flexibility has been given with the power to waive fees, interest, penalties, etc.; however, certain other offences such as wilful contravention, equipment/ service-related breaches and cybercrime using telecom infrastructure are non-compoundable. Another interesting introduction is the concept of protection to users, which includes unsolicited messages/calls, etc. I do hope that the new bill will progress and hopefully address a number of issues, which have been in a grey area.”
It is clear that public consultation is very much required since the draft covers a lot of ground and contains a mix of proposals, which could have positive and negative outcomes. It could be said that it identifies areas of concern but it does not necessarily offer optimal prescriptions.
A more balanced approach would better address the needs of the rapidly evolving digital ecosystem without violating constitutional provisions. A clear, stable and neutral policy environment would be created if the gaps, oversights and conflicting provisions in the bill are worked out in the consultation process.