Chapter I

Introduction

Statement of Problem:
The telecom sector has witnessed unprecedented developments over the last two decades,
the hallmark of which have been expansion and deepening the reach of telecom network,
introduction of new and varied services inspired by customers' expectations, substitution
of monopolistic regime with multiple operators/service providers and emergence of
regulatory framework in place of government's preoccupation with regulation of
telecommunications. In these fast paced developments , one important aspect has not
received as much attention as merited. This relates to the mechanism for resolution of
disputes in this sector.
There has been little attempt to bring this central issue on the agenda of policy makers
except to further refine the role of regulators in this respect or to proceed through the
traditional route of adjudication by courts or to seek alternative dispute resolution
methods to add grist to dispute resolution process.
A study 1 commissioned by the International Telecommunication Union (ITU)and the
World Bank on dispute resolution in the telecom sector has identified

increasing

globalization, fast changing technology, unleashing of the market forces and rapidly
growing customers needs as a major factor responsible for transformation of telecom
sector. Convergence between information, communication and entertainment has added a
new dimension to the telecommunications sector. Technology and competition have
literally overtaken

policy and regulatory initiatives required to steer the course of

development in this sector in a smooth manner. This has brought about a qualitative
change in the nature and complexity of disputes that arise in this sector. Disputes may
relate to infrastructure, competition, and technical issues such as interconnection or
investment or trade or consumer related issues. The issues in such disputes may also fall
within the ambit of various laws and agreements, such as sector specific laws, provisions
relating to telecommunications under General Agreement on Trade-in-Services (GATS),
1

Dispute Resolution in Telecommunications Sector- Current Practices and Future Directions, ITU-World
Bank-Geneva, 2004

Contract laws or Competition law or laws dealing with protection of consumers'

interests. There is also an increasing realization that the development of this sector will
be seriously impaired if delays and uncertainty become a feature in this sector. Hence,
effective and expeditious resolution of disputes in telecom sector occupies today a high
priority in the agenda of policy makers and regulators alike.
The issues of interconnection, jurisdiction, fair treatment, technological neutrality,
spectrum management,

quality of service parameters,

standards

compatibility,

interpretation of licensing terms and compliance with universal service obligations have
traditionally afflicted the telecom sector in a liberalized regime. A further addition to this
list

is

the

new

emergmg

Issues

such

as,

vanishing

boundaries

between

telecommunications and visual media; access neutrality for cable, wireless and wireline
services; sharing of infrastructure and approach towards spectrum allocation and usage.
Technological advances like voice over internet protocol (VOIP),
(3G),

WI Max

continue

to

further

vex

telecom

3rd

generation networks

scenario.

telecommunications hinges on a sound policy and regulatory

The

future

of

framework, supported by

an efficacious, speedy and transparent dispute resolution mechanism. Development of the

telecom sector will be impeded unless there is a synergy in the approach of these entities.
As in the case of other sectors, in telecommunications too, framing of right policy is
dependent on several factors , such as the decision making structure, manning of key
positions by persons with sound understanding of the sector and appropriate use of case
laws for formulating policy. Similarly, implementation of policy will much depend upon
the efficacy of the regulator to inspire confidence among the stakeholders and create a
framework with due weightage to regular monitoring for the implementation of policy in
all its aspects. However, despite the best policy and a sound regulatory framework, the
scope for disputes to arise, remains due to fast changing nature of telecommunications
sector and evolving international environment
Historically, courts have played a significant role in the resolution of disputes and
continue to do so. The government also regulated the sector in a monopolistic
environment. However, the emergence of competitive environment during the 1990s,
following the liberalization of telecommunication markets, induced by factors like
beneficial impact of telecommunications on economic growth, the need to expand and

upgrade telecommunications through infusion of private capital, brought about a

realization that the government could no longer play the role as a regulator which it did in
a monopolistic environment. It was felt that the paradigm shift in the telecom sector
required an independent regulatory intervention to lay down the ground rules, protect
consumers' interests and promote fair competition. Such an arrangement, it was felt,
would inspire confidence among the stake-holders and also spur telecom growth. A
natural corollary to the emergence of the institution of independent regulator as a watch
dog for the sector was devolution of an adjudicatory role as a court of first recourse in the
resolution of disputes. Besides, lightening the court's burden, it provided the parties to a
dispute an avenue for speedier resolution of their problems.
Telecom Regulators and Resolution of Disputes
Today, telecom regulators play a key role in the resolution of disputes along side the
courts in most of the countries where liberalization has occurred. In fact, the resolution of
disputes through the institution of regulator with the option to seek final determination
through the courts has emerged as a preferred method in the developed and developing
countries .. The concept of a specialized tribunal to address disputes in the telecom sector
is a much later development and in vogue in only a couple of countries. This is a further
refinement of dispute settlement process and indicative of growing complexity of telecom
disputes and the perceived need for attaching greater importance to this matter to ensure
orderly growth of the sector. Since the 70s, there is an increasing focus on Alternate
Dispute Resolution Methods (ADR) such as, negotiation, mediation and arbitration for
resolution of disputes. The processes

followed here are seen as confidential, time

sensitive and conducive to maintaining long term commercial relationships. The merit of
ADR methods lies in the flexibility of its use as complementary to the court-based or
regulatory-based adjudication or as a stand-alone system.

The genesis of paradigm shift in the telecommunications sector in India from a monopoly
regime to one of open competition has occurred in stages, beginning with private
participation in manufacturing of customer premises equipments in 1984, setting up fully
empowered Telecom Commission in 1989, opening up of the sub-sector of value-added
services, in July 1992, but the real transformation of the sector came as a result of in two

policy instruments, namely, the National Telecom Policy, 1994 (NTP94) and the New
Telecom Policy 1999 (NTP99). The ushering in of full competition in the telecom sector
after the New telecom policy in 1999, virtually transformed the telecom sector with the
emergence of multiple players in basic and cellular mobile services and service providers
of other value added services. To put it in nutshell, a paradigm shift occurred representing
Indian telecom transiting from a single government operator to multiple private operators,
from state monopoly to market competition, from landline services to wireless based
services, from low subscriber base and high tariff to high subscriber base and lower tariff.
Section 4 of over a century-old Indian Telegraphs Act (1885) that empowers the Central
Government to grant a license, on such conditions and in consideration of such payments,
as it thinks fit, to any person to establish, maintain or work a telegraph within any part of
India, provided the route for ushering in competition in the telecom sector. The policy of
economic liberalization enunciated during the year 1991 prepared the ground for reforms
in the infrastructure and the telecom sector was chosen to showcase reforms due to
recognition of the importance of this sector as an engine of economic growth and for
promoting social cohesion in the country. The two policy instruments led to liberalization
of the telecom sector and distancing of government from playing a regulatory role, a
primary requirement for encouraging competition in the sector, through the establishment
of a statutory regulatory authority and subsequently a statutory dispute settlement body,
specific to the sector. These tasks were accomplished through two legislative instruments,
namely, The Telecom Regulatory Authority of India Act 1997 and The Telecom
Regulatory Authority of India (Amendment) Act, 2000. Initially, prior to the amendment
of TRAI Act 1997, the function of dispute resolution devolved on the regulator but
through amendment of this Act in the year 2000, this was hived offto the new body.

The function of dispute resolution in India between licensor and licensees; between
service providers and between consumers as a class and the service providers has been
entrusted under the statute to the Telecom Dispute Settlement and Appellate Tribunal
(TDSAT). This is a quasi-judicial body, chaired by a retired Judge of the Supreme Court
of India and enjoys original as well as appellate jurisdiction. Its decisions can be appealed
against in the Supreme Court only on points of law. Although this body has been vested

with adequate authority under the Act to enforce its decisions, its efficacy as a dispute
resolution entity is under strain principally for two reasons, namely, 1) it follows regular
court procedures resulting in delays in dispensing decisions, thereby negating to an extent
the rationale for creating a specialized mechanism, and 2) the mind set of the tribunal is
to give weightage to technicalities as are usually observed in the traditional legal process
rather than to fully comprehend the impact of fast changing technology and market
liberalization on the telecom sector and reflect this understanding in the decision-making
process while dealing with disputes. The net result is erosion of confidence of disputants
who do not hesitate to take recourse to the writ jurisdiction of the High Court or go on
appeal to the Supreme Court. The efficacy of the dispute settlement body is
circumscribed by many factors. No doubt, its non-partisan character and adherence to the
principle of natural justice are points of major strength of the body and inspire confidence
among the stakeholders; its observance of court-like procedure for dealing with disputes,
involve both time and high cost. This is a major drag on its efficiency as an effective
dispute resolver. This point gets established from table of cases (Table No.XI) in
chapterV. Furthermore, a specialized mechanism in a technical discipline like
telecommunications requires representation at decision making level, of a person with
requisite technical expertise since telecom issues as discussed already are mostly
technical in dimension and a person well versed in telecom discipline at the decision
making level can enrich the dispute resolution process. However, the eligibility
requirements for appointment as a member of the body under the Act leaves the door
wide open in this respect and do not make it mandatory for a person au fait in telecom
discipline to be appointed at the decision making level..
As in the case of general disputes, both formal and informal methods are used for
resolving telecom disputes. The International Telecommunications Union (ITU) and the
World Bank commissioned study on dispute resolution in telecommunications sector
referred to earlier has identified three chief methods of dispute resolution. These are
court, and regulatory-based adjudication, that come under the category of formal methods
and alternative dispute resolution mechanism comprising arbitration, mediation and
negotiation that could be categorized as informal methods of dispute resolution. The
efficiency of dispute settlement mechanism, in general, depends on many factors:

whether it is structurally and functionally independent; whether its independence is

secured through a statute and independent funding; whether it enjoys enforcement powers
and whether its apex functionaries are qualified, possess the requisite experience and
enjoy tightly secured tenure and whether it has a trained pool of staff in requisite number
matching functions and responsibilities assigned to it. Even if all these ingredients are
present, the growth of telecommunications will be impaired if the dispute resolution
process is not efficacious, speedy and transparent. A speedy resolution of a dispute is
impeded broadly for two reasons: first, telecom disputes have become varied and very
complex in the wake of liberalization and advancements in technology. Secondly, it has
become a lawyers' paradise, since high stakes are involved and vested interests are at
play to delay or hinder timely resolution of disputes or to subvert the process of mutually
acceptable outcome. Hence, efficacy of dispute resolution mechanism has become a
necessity for the growth of the sector. Conversely, an ineffective and sluggish dispute
settlement process is a matter of growing concern to all stakeholders alike.

Complexities of Dispute Resolution Process

Dispute resolution in telecommunications suffers from other limitations also. The policy
and regulatory aspects of telecommunications are still evolving

in developing and

developed countries. In the developing countries, the concern is regarding the extent and
scope of liberalization whereas the developed countries are still grappling with the
management of new technologies. Convergence issues are setting the agenda for policymakers and regulators alike. Fair competition and protection of consumers' interests
remain the avowed but yet not fully realized objectives and have become the breeding
ground for present and future disputes. Jurisdictional issues, the battle of turf abound that
further complicate the matter. The phenomenon of mergers/acquisitions is assuming
ominous proportions that threatens new entrants in the market and undermines to an
extent growth of a competitive environment. All these developments have become the
raison d' etre of disputes and the policy makers are endeavoring to streamline the
situation by reviewing policy framework from time to time and reinventing/embellishing
the existing institutions for resolution of disputes. Similarly, the regulatory institutions
are also looking at the fine prints to reduce the existing and potential areas of conflict.

The complexity of disputes in telecommunications, arising from market liberalization,

deregulation and the rapid evolution and convergence of technologies, requires the laws
to be constantly updated to keep pace with the changes. The rapidly changing nature of
disputes in this field, ranging from telecom operations, spectrum management,
technological neutrality, deployment of new technologies, tariff fixation to licensing
terms and quality of service have their impact on the whole range of other laws. Any
breach by a signatory to the provisions relating to telecommunications under the General
Agreement on Trade-in-Services (GATS) may fall in the domain of Public International
Law. The decisions of regulators or disputes between public and private operators could
attract provisions of Administrative Law. Anti-competitive practices may similarly be
subject of Competition Law. Quality of service issues may attract the provisions of
Consumer Protection Laws Further, telecommunications services/operations in the
European Union countries are hugely impacted by the European Commission (EC)
directives. These directives are aimed at liberalizing and harmonizing telecom operations
and service provision and promoting competition in telecom markets. The impact of these
directives has been to transfer certain telecom matters from the national to the European
domain. The European Commission has laid down guidelines for resolution of disputes
by regulators and has prescribed a time-frame of up to four months for this purpose. It
has been equally serious in exercising its oversight role and has initiated prompt action
against concerned member-states that have infringed the European Union telecom rules.

The instruments for settlement of disputes and the guiding principles in this regard have
been evolving over the years but have become much more focused now. The transition
from a monopolistic order to a competitive environment in the telecom sector has not
been evenly paced; different countries and different emerging markets are at different
stages of deregulation process and the pattern of relationship between formal and
informal methods of dispute resolution has not yet deepened. This situation has led to the
emergence of various variants of dispute settlement mechanism. By and large, in most
countries that have liberalized the telecom sector, the dispute resolution function has been
assigned to the regulator with final determination of the issue by the court. In some

10

countries, India, Denmark and Malaysia, resolution of disputes is sought through

specialized bodies created for the purpose. Even among the regulatory or specialized
bodies, there are differences with regard to structure, power and functions. While these
bodies represent response to country specific situations, they also represent one common
factor, that is, overt separation of regulatory role that so long remained in the domain of
government.

As mentioned earlier, country practices differ with regard to choice of instrument for
dispute resolution in the telecom sector. Recourse to courts was the primary option for
settling issues when government exercised monopoly over the telecom business. Things
changed with the liberalization of telecom sector and ushering in of competition that saw
the establishment of regulatory institutions to regulate the telecom business. The function
of adjudication of disputes was added to the portfolio of regulators. The manner and the
procedure followed for regulatory adjudication vary among countries. For example, in the
USA, the Federal Communications Commission (FCC) besides regulation of telecom
business also adjudicates disputes on telecom issues through the office of Administrative
Law Judges with final determination of the matter vesting with commissioner or a panel
of commissioners. Internal processes to be followed for such adjudication have been
defined. FCC's decisions on disputes are not absolute and the disputants can appeal
against such decisions in a US Court of Appeal. Some of the policy- making bureaus of
the FCC also play an important role in the resolution of disputes. The Market Disputes
Resolution Division ("MDRD") of the FCC resolves issues raised by competitors against
dominant telephone carriers. Office of Communications (OFCOM), the British regulator,
in dealing with disputes places considerable emphasis on evidence and intervenes only
after it is satisfied that all efforts to settle the issue through commercial negotiations have
failed. In Australia, the dispute resolution process revolves round four institutions,
namely, a) the institution of regulator, b) the Australian Competition and Consumer
Commission, c) the Australian Communications Industry Forum,(ACIF) and d) the
Telecom Industry Ombudsman. In India, dispute resolution function is performed by a
specialized body called the Telecom Dispute Settlement and Appellate Tribunal. Besides
the tribunal, the telecom regulator in India has also been playing a positive role in

11

smoothening the turf in various aspects of telecom services that have resulted in reducing
the irritants.

The shifting dynamics of telecom industry, customer needs, widening of the existing
areas of disputes and emergence of new types of disputes pose a new challenge to the
task of resolving disputes in an efficacious, transparent and speedy manner. Hence, a
need for an effective dispute resolution mechanism for an orderly growth of the telecom
sector. There is currently no consistent framework that incorporates all the best practices
and the research is primarily intended to fill this gap. There is a great wealth of
information available from the telecom

disputes related case-laws over the last three

decades from which lessons can be drawn for improving dispute resolution mechanism.

It is an accepted fact that decisions on issues relating to market entry,

licensing terms

and their interpretation, interconnection between service providers, tariffs, applicability

of universal service obligation (USO) regulations in deregulated telecom markets and in
the face of new technologies redefining the existing services, policy changes in the area
of spectrum management, number portability and quality of service as well as consumer
issues, have the dispute potential and will continue to be issues of concern in the telecom
sector.

In addition to the above, the following factors also influence the occurrence of disputes
and impact their resolution:
Political influences;
Public policy concerns;
Technological impacts; and
Competitive and global commerce considerations.

There are any number of cases of such nature dealt with or being dealt with by telecom
regulators, courts and arbitrators around the world.

12

The telecom sector has seen institutional changes following the liberalization of the
sector. The changes have broadly followed a universal pattern of distancing policy
making , regulatory and operational functions from each other. On the operational side,
until now voice and data networks were separate. However, with the advancements in
technology and increasing use of fiber optic cables, it is now possible to transmit all
video, audio, data and voice signals across one network. Hence, there is now a growing
concern whether the existing institutional arrangements are in a position to
comprehensively address issues arising from convergence of various technologies that
has led to the emergence of competing platforms over which services are now available
to consumers. (For example, deployment of next generation networks and VOIP services
that impacts the revenue stream of traditional operators through by passing roaming
tariffs). Another important challenge is to resolve the issues arising from market
liberalization and the overlapping jurisdiction of competition authorities and
telecommunications regulatory and dispute settlement bodies since competition issues
now engulf the telecom sector more than ever. Digital divide and digital deficit are the
issues before the developing and developed countries respectively . In the case of
developing countries particularly, the question of universal access and obligation of
service providers in this respect still loom large and apart from the government, the
regulatory and dispute settlement bodies have to grapple with contentious issues arising
from them.

In India's context, the challenge arises from poor telecom penetration in the rural areas,
growing complexity in the network due to market segmentation catering for varying
consumer needs and the need to provide balance between universal service, consumer
interests and encouragement of competition and technological innovations. These require
a second look at the role of the regulator and the dispute settlement entity. The thesis
addresses the current telecom environment in India and in a few other countries as well as
the current and evolving issues in telecommunications and explores through an empirical
analysis the need and rationale for an appropriate practices and processes for resolution
of disputes that promotes customer satisfaction and cost-effective transition to reforms
for ensuring a healthy growth of the sector. An attempt has been made in the thesis to

13

examine in-depth the policy and regulatory issues in telecommunications, cross-countries

experience, theoretical framework of dispute resolution and various methods being
employed in this regard. The thesis examines the theoretical underpinnings of dispute
resolution and analyzes the linkages with the processes followed in the telecom sector.
This covers the genesis of dispute per se, multiple processes followed for dispute
settlement and their relative strengths and weaknesses. Another important variable in the
thesis is its focus on dispute systems design which takes into account factors like the
nature of various types of disputes that occur, their impact on the system and cost and
benefit laced with each type of dispute resolution process as also the relevance of
juxtaposing disputes with appropriate dispute resolution procedures. A comparative
analysis of these practices as well as identification of customer friendly practices capable
of replication and their likely impact on telecom services is an important aspect of the
thesis. An attempt has also been made to discuss at length the impact of Indian practice
on telecom sector, its efficacy vis-a-vis a few other countries, the features of a sound
practice, factors involved in determining the maturity of dispute resolution process and
steps required for upgrading and improving the existing practice for dispute settlement. In
India's context, the thesis also goes into specifics of policy and regulatory decisions that
may have contributed to the emergence of disputes and those decisions but for which
disputes could have occurred. These decisions cover areas like tariff rationalization,
quality of service parameters, licensing of services, spectrum management, protection of
consumer interests etc. The thesis also examines the pros and cons of divesting the
regulatory body of an adjudicatory role and the extant provisions of the Act where further
embellishment is required to meet the existing and emerging challenges.

Summing Up

The foregoing focuses on factors responsible for a paradigm shift in telecommunications

sector and discusses in brief how ushering in of a competitive environment abetted by
rising customers' expectations and technological advancements have changed the face of
telecom industry. One of the negative consequences of these developments has been the
emergence of new and complex disputes that threaten to derail the process of telecom
growth unless resolved in a speedy and transparent manner. By focusing attention on

14

having in place an appropriate dispute resolution mechanism, an attempt has been made
to bring this issue on the table of policy makers. There is a discussion on the types of
issues that arise or may arise in the sector due to convergence among the technologies
and services and the problem of digital divide and digital deficit being faced by
developing and developed countries. A broad introduction to the chapters of the thesis,
such as, theoretical framework of dispute resolution, methods of dispute resolution, crosscountry experience and challenges before the Indian telecom sector including impact of
regulatory and policy initiatives on the Indian telecom sector, also find place in this
chapter.

15