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Kerala HC dismisses petition challenging default provision of MSO LCO revenue sharing

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6 Oct 2013
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The Kerala High Court, on 14th January 2019 dismissed writ petition filed by cable operators welfare association challenging the provisions by which a default revenue sharing ratio of 55:45 between Multi System Operator (MSO) and Local Cable Operator (LCO) would be applicable in case parties fail to execute a Model Interconnection Agreement in Schedule V of the Telecommunication (Broadcasting and Cable) Services Inter Connection (Addressable Systems) Regulations, 2017.

The contention was that the pressure exerted by the Regulations on the local cable operators to function at reduced revenue sharing would result in complete disruption of services, since the local cable operators would be unable to provide the services at the rates fixed in the default clause.

It was also contended that the bargaining power of the LCOs is severely restricted
by the Model Revenue Sharing provided in the default clause.It was contended that the
prescription of a default clause for revenue sharing between MSOs and LCOs does not come within the ambit of the purpose of the TRAI Act and the impugned clauses in the Regulations are therefore ultra vires the enabling statute.

TRAI stated that the revenue sharing of 55:45 was arrived at after taking all relevant factors into consideration.It was further contended that the power of the TRAI to frame Regulations has been upheld by Madras HC and the Apex Court.Den Networks Limited submitted that the decision of the Apex Court,which has considered the entire legal and factual aspects of the matter covers the issue and the challenge now raised is therefore

The High Court remarked that it was beyond dispute that the TRAI has the power to frame the regulations.It further stated that the "The contentions raised on the basis of legislative competence therefore cannot be considered by this Court in view of the authoritative pronouncement by the Apex Court in Star India Private Limited v. Department of Industrial Policy and Promotion".

The Court noted that the parties were free
to arrive at a negotiated settlement in respect of the revenue sharing as well. However, in case such a negotiated settlement with regard to revenue sharing is not arrived at between the parties, the impugned provision states that the revenue sharing will be in the ratio of 55:45 between the MSO and LCO.

The Court opined that the "The existence of default clause by itself, cannot be said to fetter the contracting freedom of the parties to an agreement. It is only in case a negotiated agreement cannot be arrived at, that the default ratio would be applicable.".

The writ petition was dismissed with the court "Leaving open the rights of the local cable operators to approach the Telecom Dispute Settlement and Appellate Tribunal in case there is any dispute as to the refusal on the part of any MSO to enter into negotiated agreements with regard to revenue sharing".

Source - Kerala High Court Judgement

Alternate Link display_pdf.pdf

All paragraphs sourced from the judgement.
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