Volume 21, Number 4; Article by Subhasish M Chowdhury and Debabrata Datta, December 2009
Subhasish M Chowdhury is Lecturer, School of Economics, University of East Anglia, Norwich, UK
Debabrata Datta is Professor of Economics, Institute of Management Technology, Ghaziabad
Since its inception in the 1990s, the privatised telecom industry in India has been faced with legal disputes on several issues, which have led to delays in the introduction of new technology and have affected the progress of the industry. Using the contest theory of economics and incorporating legal battle as a form of contest, this paper develops a model which shows that there can be equilibrium without legal battle. But this needs the policy makers and the regulatory body to plug the possible routes of disputes, and streamline the dispute settlement mechanism to prevent protracted legal contest.
The paper then analyses the causes of the major legal disputes that have occurred in the Indian telecom industry. The main reasons identified are: the existence of several regulatory institutions without an adequate dispute management mechanism; the government's participation as both player and referee; the neglect of the possibility of post contract opportunism; the merger of political and business interests; the lack of a technology neutral licensing policy; and more recently, the bypassing of the auction mechanism in spectrum allocation.
In view of these shortcomings, the need of the hour is the streamlining of the dispute settlement mechanism. While the bifurcation of the regulatory and dispute management functions with the constitution of the Telecom Dispute Settlement and Appellate Tribunal (TDSAT) has made some amends, it is also necessary to ensure that arbitrariness in spectrum allocation ends. Private bodies specialised in arbitration like the International Chamber of Commerce, and neutral technical experts need to be involved in dispute resolution.
Reprint No 09401