Routes of controversy

Reliance Infocomm faces charges of routing its international calls to India illegally and passing them off as national long distance or local calls.

RELIANCE INFOCOMM, the telecom venture of the Reliance Group, the biggest private Indian conglomerate, is once again caught in a fierce controversy for operating in the grey area that lies between what technology enables it to do and what the law permits. Barely a year after it paid a penalty for abuse of its licence to provide limited mobility service, the company has been accused of routing its international calls to India illegally and passing them off as national long distance (NLD) or local calls. The publicly owned Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL), which made these accusations, claimed dues of Rs.600 crores for such calls made through India's biggest private integrated telecom operator. A top-level source in BSNL told Frontline that Reliance's dues to the two publicly owned companies could mount to "at least Rs.1,000 crores" because BSNL's field units are still gathering details from across the country.

It is well known that a thriving grey market in international calls exists in India. According to figures released by VSNL, the biggest carrier of International Long Distance (ILD) traffic to India, the size of the "grey market" is about one-third of the legitimate voice traffic to India, implying that traffic with a revenue implication of at least Rs.1,800 crores is beyond the regulatory framework. During the last few years the Vigilance Department of the Department of Telecommunications (DoT) has slapped more than 190 cases against those indulging in the illegal routing of international calls to India since 1998. Reliance's operations are far bigger than anything unearthed so far.

The prime motive for private operators bringing voice traffic through illegal channels is to avoid paying the Access Deficit Charge (ADC) to BSNL and MTNL whenever a call from a private operator lands on a BSNL or MTNL number. For BSNL and MTNL, the ADC is akin to a subsidy that is meant to make it viable for them to provide below-cost services to subscribers in semi-rural and rural areas. While the private operators have been lobbying for dismantling the ADC, the justification for continuing it is rooted in the objective of the government to increase the teledensity in the country, particularly in the under-served parts.

Differential rates of ADC are applicable on different classes of calls. While international calls attract an ADC of Rs.4.25 a minute, for domestic calls it ranges from Rs.0.30-0.80 a minute. Several experts have pointed to the scope for abuse in this system because it provides an incentive for operators, particularly integrated operators who provide NLD, ILD and other services, to cheat primarily by passing off international calls as local or national-level long distance calls.

Both the DoT, which is the licensor, and the Telecom Regulatory Authority of India (TRAI), which is entrusted with the task of regulating the telecom sector, have drawn flak for the manner in which they have handled the issue. The DoT, which initially viewed the matter as a dispute between two telecom operators, had to change tack after it was presented with evidence about the violations, and slapped a fine of Rs.150 crores on Reliance Infocomm, after issuing a showcause notice in October.

Meanwhile, pressure has been mounting on TRAI to act against the company. On December 6 Communist Party of India (Marxist) MP Nilotpal Basu accused TRAI Chairman Pradip Baijal of acting "in connivance with private operators" and demanded his resignation. It is evident that the issue cannot be reduced to a commercial dispute between the two public sector telecom majors and Reliance. The accusation that Reliance has tampered with the Calling Line Identification (CLI) of the calling party from overseas has security implications as well. Basu pointed out that the case of the terrorist attack on Parliament House in December 2001 was solved because the telephone numbers could be identified (see interview).

On December 1, in his reply to a starred question raised in Parliament, Dayanidhi Maran, Minister for Communication and Information Technology, said that BSNL's notices to Reliance Infocomm amounted to Rs.257 crores, while MTNL had raised bills to the tune of Rs.341.27 crores against the company.

RELIANCE Infocomm offers not only basic, cellular and limited mobility services but also has licences issued by the DoT for its ILD and NLD operations. Last year, after a controversy raged, Reliance paid a penalty of Rs.458 crores to the DoT for offering full-blown mobility using its Wireless in Local Loop (WiLL) limited mobility service.

Any ILD operator has to pay an ADC of Rs.4.25 a minute, incur a cost of about Rs.1.25 a minute for bringing the call to India and pay Rs.0.30 a minute to the operator on whose line it terminates the call. Since it costs at least Rs.5.80 a minute to land a call in India, Reliance can provide this service without any margin for itself only if it either absorbs the cost or indulges in something that it is not permitted to do. The option of routing the call as a local or national-level call originating in India, after clipping the CLI, is attractive if it can be managed.

BSNL's alert field staff and engineers in Ahmedabad who noticed abnormal traffic patterns, first unearthed the Reliance route in August. They noticed that the CLI showed the international calls to be originating in Mumbai, Chennai or Kolkata. Typically, the eight-digit telephone number began with the numbers 3039 after the station code, making it appear as if the call originated in India. Their enquiries confirmed that the calls were made using the Reliance IndiaCall service.

Rakesh Mehta, Joint Secretary (West Zone), Sanchar Nigam Executives' Association (SNEA), told Frontline that SNEA engineers including himself then arranged for their acquaintances and relatives in the U.S. to buy units of the Reliance IndiaCall service (procured on the Internet) and make calls to specified numbers in Ahmedabad, which were monitored. This enabled them to gather the changed CLI numbers and match them with the details such as calling time, CLI and other relevant details provided by the callers in the U.S.

Rakesh Mehta said a third method, a more robust one involving the use of tools available in the switches in the local exchanges, provided "tangible proof for the first time" that the calls were coming from a Reliance number in Mumbai.

On August 25, two weeks after the call routing was unearthed by BSNL's Gujarat Circle, the DoT asked for details of various telephone numbers used by Reliance for its services. At a meeting on September 8 representatives of Reliance explained their position to the DoT. Reliance claimed that what it was offering was a service called Home Country Direct (HCD). Such services were in line with the recommendations issued by the International Telecommunications Union (ITU).

On September 13, BSNL's Ahmedabad unit issued a disconnection notice to Reliance Infocomm for routing international calls improperly, and on September 15, raised a bill for Rs.1.03 crores. This included dues as well as penalties for violation of the interconnect agreement Reliance had signed with BSNL on November 1, 2002. A senior BSNL official wrote to Reliance on September 22, accusing the company of "tampering the CLI of incoming international calls and terminating them into BSNL's network as domestic calls".

The mounting evidence presented by BSNL's units across the country persuaded DoT to issue a showcause notice to Reliance Infocomm on October 4. It said Reliance had violated the provisions of the Unified Access Service Licence (UASL), which provide for "a financial penalty not exceeding Rs.50 crores" for violation of the terms of the licence. It also alleged that Reliance was tampering with the CLI and passing international traffic along inappropriate paths instead of routing traffic along the designated "trunk groups".

On October 14 Reliance paid BSNL Rs.53.71 crores. On October 29 BSNL wrote to Reliance claiming that the amount payable had increased to Rs.182.70 crores, and served notice giving the company seven days to pay up or face disconnection.

Reliance moved the Delhi High Court seeking an injunction on BSNL. Justice Vikramjit Sen, who heard the petition, ruled that "in order to be entitled to discretionary relief, Reliance should not be seen to have approached this court with unclean hands. It must establish that it has a prima facie case." He also observed that this would have been the case if it had "conducted its business in consonance with the interconnect agreement" (with BSNL). Referring to Reliance tampering with the CLI, he noted that Infocomm's liability to BSNL had been "drastically reduced" by disguising the CLI.

Reliance preferred an appeal before a Division Bench of the Delhi High Court, which directed the company to pay Rs.40 crores to BSNL as an interim measure. BSNL moved a Special Leave Petition before the Supreme Court challenging this interim order. The Supreme Court directed Reliance to clear the claims amounting to Rs.182.70 crores. It asked the High Court to dispose of the matter by January 31, 2005.

G.L. Jogi, general secretary of SNEA, has criticised the role of DoT. He told Frontline that legal opinion the SNEA had gathered was that the DoT had the power to initiate criminal proceedings against the company.

He alleged that although Reliance Infocomm gave an assurance to the Delhi High Court, it was continuing the illegal routing in several Circles.

TRAI's silence in the matter, even as it is preparing a review of the ADC, has exposed itself to more criticism. Prabir Purkayastha, secretary of the Delhi Science Forum, which has actively intervened on behalf of consumer interests in the past, said the regulator ought to have intervened by taking note of what Reliance had done and determine whether what Reliance claimed to be an HCD service was permissible under the TRAI regulations. "The regulator and the DoT," he observed, "have a major responsibility of correcting the situation, which they have both abdicated."

Dayanadhi Maran took the position that the cancellation of Infocomm's licence would "cause huge suffering" to the about eight lakh Reliance subscribers. But it has been pointed out that cancelling Reliance's ILD licence, which is where the alleged violations have occurred, would hardly affect its operations or its subscribers. After all, many operators, among them BPL and Hutch, for instance, are able to offer services without an ILD licence.

Purkayastha estimated the total loss on account of the illegal call routing to be about Rs.1,300 crores.