On September 21, 2022, the Department of Telecommunications (“DoT”) at the Ministry of Communications, Government of India (“Government”), proposed to replace the existing legislation governing telecommunications in India, namely, Indian Telegraph Act, 1885, the Wireless Telegraphy Act, 1933, and the Telegraph Wires (Unlawful Possession) Act, 1950 (collectively, “Telegraph Laws”), with the draft Indian Telecommunication Bill, 2022 (“Draft Bill”).[1]
The objectives behind this move, as stated in the accompanying explanatory note (“Explanatory Note”),[2] include improving digital inclusion, growing the telecommunications sector, and creating a future ready, international telecommunications regime.[3] In this note, we examine some of the features of the Draft Bill against these objectives.
In doing so, we must remain mindful that the Draft Bill, based on a public consultation commenced in July 2022,[4] is a major first step in what is likely to be a fairly extensive consultative process, preceding its enactment.
Exclusive Privilege and an Opportunity Lost?
At its core, the Draft Bill is intended to modernise the basis on which telecommunications services are regulated under the Telegraph Laws, which dates back to 1885. Under the Telegraph Laws, the establishment and operation of wired and wireless telegraphs,[5] i.e. the apparatus used, or capable of use, for transmission of signals, images or sounds was an exclusive privilege of the Government.[6]
In proposing the Draft Bill, the DoT considered legislations in jurisdictions with fairly unified telecom legislation like the UK (and the EU), Australia and Singapore, as well jurisdictions that regulate the sector in a more fragmented manner, such as Japan and the US.[7]
The key choice to be made was whether to assert a broad ability to license and regulate various telecommunications services (as is the case in Singapore), or to inherently recognise that certain types of activity would simply not be regulated (as is the case in many of the other jurisdictions mentioned above).
The DoT has emphatically chosen the former and expanded on the approach under the Telegraph Laws by reserving an “exclusive privilege” to provide telecommunications services, establish and operate telecommunications networks and infrastructure, and use and assign spectrum.[8]
Indeed, the term “telecommunications service”[9] (“Service”) is defined in the broadest possible terms to cover “services of any description”, made available by “telecommunication”[10] (which in turn is defined as the transmission or reception of any messages, including all information through wired or wireless “electro-magnetic” means), and expressly includes content services (such as broadcasting) and services that use networks to deliver messages.
Most concerningly, while the Draft Bill provides for a light-touch “registration” regime for Telecommunications Infrastructure (defined below and hereinafter referred to as “Infrastructure”), it requires a more onerous “license” for all Services and Telecommunications Networks (defined below and hereinafter referred to as “Network”).[11]
This means that a licensing regime will apply not only to activities that are best regulated through licensing like mobile and internet services, but also to software platforms that operate using internet bandwidth, ranging from calling and messaging applications, to even services that transmit content (such as software updates) to machines.
This position will be a clear global outlier. While some degree of regulation for over-the-top services (“OTT Services”) (such as requiring non-discriminatory treatment, privacy norms, regulation of OTT (such as VOIP) to protect revenues, or offer emergency services) is not uncommon, licensing for software is almost unheard of, and the proposal has already met with much protest. The point to remember here is, telecom licensing in India has seen a long history of disputes around revenue sharing obligations, audit norms, and permitted activities.
While modernising the Telegraph Laws, defining Services in a technology neutral, converged manner is important, licenses are not great instruments for regulating software and platforms, which tend to be heterogenous and dynamic. A much better option may be to carve out software services from the definition of Services and regulate them through a series of broad principles, that may be prescribed either by the DoT or, more coherently, by the Ministry of Electronics and Information Technology. While it is intended to be a light touch regime, it will be important to make use of the consultation process to ensure proper categorisation and regulation of OTT Services. Several Small and Medium Enterprises (“SMEs”) provide OTT Services, machine to machine communication services and other technology-based services that operate using Networks provided by licensed entities. There is little benefit in creating an overlapping licensing regime here, and the cost of compliance may well make these businesses unviable.
This exclusive privilege over broadly defined Services has also resulted in leaving out several key exclusions from the regulation, along with several relaxations that have been sought by the industry for many years. For instance, “private telegraphs”, or connectivity within business premises, to enable internal communications, have long been excluded from the regulation.[12] Given the expansive definition of Services, a carve out for private use is critical.
A logical extension is the interconnection or peering of private networks (or traffic) within private premises. Examples of this include in-building infrastructure or peering of traffic between customers who are co-located at the same data centres. This activity does not touch any public telecom network, and is enabled between identified parties through privately owned and operated infrastructure. There is very little real benefit in licensing this sort of activity and carving it out from licensing would provide much needed clarity and help de-congest networks for public traffic.
Such exceptions need to be made in the final form of the Draft Bill to reduce (a) the administrative burden on the Government, which will likely get overwhelmed by the applications for license; and (b) the compliance burden on companies that do not provide ‘telecommunications services’ in the absolute sense and merely use Network.
Telecommunication Networks and Telecommunication Infrastructure
While telecommunications infrastructure (“Infrastructure”) is defined clearly and exclusively to refer to scheduled passive infrastructure such as telecommunication “lines” (copper, optical, etc., and equipment connected therewith for fixing or insulating the same), towers, ducts, etc.,[13] Networks are defined less clearly.
Telecommunications networks (“Networks”) under the Draft Bill include all
“systems of telecommunication equipment, or telecommunication infrastructure, or both…. or a combination of such networks, used or intended to be used, for providing telecommunication services…. ”.[14]
As under the current IP-1 registration regime, the Draft Bill only requires registration for establishing and operating Infrastructure.[15] However, by including Infrastructure within the definition of Networks, a licensing requirement would apply to it. A key distinction that may be relevant here is between active and passive network element, where the former requires licensing and the latter does not. One hopes that this distinction will be brought back into the Draft Bill through the consultation process.
Another key missing element here seems to be the purpose. Some equipment (such as general purpose storage or computing infrastructure) used for providing Services (which can currently include purely software services) may be owned and operated purely by a service provider (such as a provider of infrastructure as a service). A licensing requirement for owning such “Network” equipment would clearly be an overreach. An important principle that should find its way into the Draft Bill is the avoidance of multiplicity of licensing obligations for the same services or equipment.
These ambiguities will hopefully be addressed during the consultation process. While the Explanatory Note records that the Draft Bill has been drafted in simple terms and without provisos to avoid ambiguity, there is a strong case for building in exceptions to the above definitions. An ambiguous and expansive definition risks a re-run on systemic disputes such as those relating to AGR, which have had a crippling impact on the industry.
User Identification and Sharing of Information
The Draft Bill, expanding on a theme under a recent legislation,[16] requires licensed entities to validate their identity[17]. Licensed operators are required to “unequivocally” identify persons to whom they provide services[18], through a verifiable mode that remains to be prescribed.[19] Indeed, the identity of persons sending messages, using telecommunication services, is to be made available to their recipient[20].
While Know Your Customers obligations have been iterated by the DoT and telecom operators for many years, such obligations may not parse well with the expanded definition of Services. Even if the privacy challenges are ignored here, users may not always want to share their identities with the recipient of each message they send. For instance, a user responding to a poll or declining a service, may not want their identity revealed/ verified while doing so.
Under Chapter 6 of the Draft Bill, fairly wide powers have been reserved to prescribe standards that Service or Network providers[21] may have to adhere to, intercept or block certain communication[22], and specify the manner in which Services are provided or telecommunication equipment is procured[23].
Requirements to trace the first originator of messages and decryption has been debated at length under the recently notified Intermediary Guidelines[24] and the obligations under the Draft Bill may raise similar concerns.
Spectrum Management and License Fees
In keeping with the stated intent of liberalising the sector and simplifying the overall process, spectrum management by the Government may be through auction, administrative process or in any other manner prescribed by the Government[25]. The inclusion of special provisions such as deferral and exemptions for entities under distress or insolvency[26] or otherwise unable to pay license fees for extraordinary reasons[27], are a very welcome step as they take into account the representations of the industry to provide relief. This will prompt telecom companies to invest in infrastructure and network expansion, thereby improving customer experience. Further, ability to trade, sell or lease spectrum will also foster healthy market dynamics and potentially lead to new players entering the sector.[28]
Similarly, the move to allow acquisition of a licensed entity by a non-licensed entity through a notification rather than an approval[29] is a welcome move to cut down on deal uncertainty and delays, and the associated terms and conditions[30] will need to align with this concept to avoid diluting the intent.
Regulatory Sandbox
In yet another welcome move, a regulatory sandbox has been proposed to encourage innovation and technological development in the telecom space[31]. While the move itself is very welcome, a standalone licensing regime for sandboxed entities, may make this route difficult to access for SMEs. A better alternative may be to prescribe registration and exemption regimes for classes of sandboxed entities.
Right of Way
The Draft Bill, being mindful of wide-ranging delays, penalties and litigation with local public works departments and municipalities, proposes a new regime on right of way for Networks and Infrastructure. While the Draft Bill proposes a clear direction to government authorities to grant approvals expeditiously,[32] act in a fair and non-discriminatory manner[33], and only reject requests on substantive grounds[34], the proposed solution may prove to be somewhat trite.
Public properties, particularly in urban areas, may be “owned” and “managed” by an overlapping and unclear set of public and private entities. A classic example may include a privately managed road stretching between a municipal and an industrial area. Similarly, the extension of this requirement to non-governmental entities is likely to be the source of much litigation.[35] A better alternative may be to create deemed “designated authorities” for specific locations, to be nominated by the relevant state government, and vest the authority with the power to grant right of way within such specific location.
In any event, a clear requirement to grant right of way with specified charges for providing such right of way,[36] is a significant step towards clearing infrastructure led roadblocks for development of the telecom sector and improving the quality of infrastructure.
Offences
In a welcome move, the Draft Bill has proposed a streamlined categorisation for offences and penalties, and listed out whether they are cognizable or compoundable.[37] This, along with the grading of offences[38] and the monetary cap for financial penalties, would give certainty to regulatory matters in this space and help dissuade extreme actions or crippling penalties that have plagued this industry.
While some protection may result from a determination of intentional or negligent breach under Section 7 of the Draft Bill, it may be better to prescribe a clear requirement for Mens Rea for certain types of offenses (e.g.: providing Services, accessing Networks, possessing equipment that blocks telecommunications), which are subject to criminal sanctions such as imprisonment. Some amount of work in including these qualifications, and appropriately excluding good faith actions, would help enhance this regime and protect from challenges.
Survival and Grandfathering
The Draft Bill proposes a sunset period for the earlier rules and notifications, till such time they are not contrary to the proposed Indian Telecommunications Bill, 2022.[39] While the intent of avoiding a regulatory vacuum and continuing the existing jurisprudence in the space is laudable, the existing rules, regulations, case laws, and regulatory positions draw their power from the Telegraph Laws and rely on their terminology extensively.
Many of these provisions (for instance rules dealing with interception under the Telegraph Laws) may not have meaning in view of the new definitions of Services and Networks. A better approach here may be to specify a transitional period within which fresh delegated legislation will be passed, and the entire new regime will be brought into force, rather than adopting the current dual approach, which may well lead to confusion and conflict.
While there are some inherent ambiguities in the licensing structure and most of the operative aspects of the law will be under the rules to be enacted, the Indian Telecommunications Bill, 2022, is a bold and positive step towards Atmanirbhar Bharat in the telecom industry. The devil, however, is in the details, and several aspects of the Draft Bill may need to be improved during consultation to ensure the intended effect.
[1] Indian Telecommunication Bill, 2022 (Draft), https://dot.gov.in/sites/default/files/Draft%20Indian%20Telecommunication%20Bill%2C%202022.pdf.
[2] Explanatory note to the draft Indian Telecommunication Bill, 2022, https://dot.gov.in/sites/default/files/Explanatory%20Note%20to%20the%20draft%20Indian%20Telecommunication%20Bill%2C%202022.pdf.
[4] Consultation Paper on ‘Need for a new legal framework governing Telecommunication in India’, DoT (July 23, 2022), https://dot.gov.in/sites/default/files/Consultation%20Paper%20final%2023072022-1.pdf?download=1.
[5] Section 3(1AA), Indian Telegraph Act, 1885.
[6] Section 4, Indian Telegraph Act, 1885.
[8] Section 3, the Draft Bill.
[9] Section 2(21), the Draft Bill.
[10] Section (17), the Draft Bill.
[11] Section 3(2), the Draft Bill.
[12] Rule 472, Indian Telegraph Rules, 1951.
[13] Section 2(19) and Schedule 5, the Draft Bill.
[14] Section 2(20), the Draft Bill (emphasis supplied).
[15] Revised Guidelines for Registration of Infrastructure Providers Category -I (IP-1), https://dot.gov.in/sites/default/files/RevisedIP-1Guidlines22122021.pdf?download=1 (December 22, 2021).
[16] Rule 4(2), Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“Intermediary Guidelines”); para (v) and (vi), CERT-In Cyber Security Directions dated April 28, 2022.
[17]Section 4(7), the Draft Bill.
[18] Ibid.
[19] Ibid.
[20] Section 4(8), the Draft Bill.
[21] Section 23, the Draft Bill.
[22] Section 24(2), the Draft Bill.
[23] Section 25, the Draft Bill.
[24] Rule 4(2), Intermediary Guidelines.
[25] Section 5, the Draft Bill.
[26] Section 20, the Draft Bill.
[27] Section 21, the Draft Bill.
[28] Section 6, the Draft Bill.
[29] Section 19(1), the Draft Bill.
[30] Section 19(2), the Draft Bill.
[31] Section 30, the Draft Bill.
[32] Section 13(2), the Draft Bill.
[33] Section 15, the Draft Bill.
[34] Section 13(4), the Draft Bill.
[35] Sections 14 and 15, the Draft Bill.
[36] Sections 13(1) and 13(6), the Draft Bill.
[37] Sections 47 -49, read with Schedule 3, the Draft Bill.
[38] Schedule 4, the Draft Bill.
[39] Section 53, the Draft Bill.
