The Telegraph
Monday , January 20 , 2014
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Consent grows on flat spectrum fee

New Delhi, Jan. 19: The telecom department has decided on a flat 2G spectrum use charge (SUC) at 3 per cent of revenues. It has also come up with three alternatives for broadband spectrum fee.

Ahead of the auctions next month, the telecom department has forwarded a note dated January 9, 2014, for legal advice on its tentative decision to fix the flat spectrum charge instead of the current graded system, where the fee ranges from 3-8 per cent depending on the amount of spectrum used.

Telecom operators said they might have to pull out of the auction unless the current formula for spectrum use fee is changed. Under the current rules, when an operator buys spectrum, it moves to a higher spectrum use slab.

“Everyone is waiting for clarity on SUC. We can take a call only when clarity is there,” Bharti Group deputy managing director Akhil Gupta had said earlier this week even as his company had announced it was joining the auctions.

The telecom department now wants to know from the government’s legal department whether it can tweak the rates.

“The rate of SUC is prescribed by way of government orders. In the notice inviting applications (NIA) 2010, it was mentioned that spectrum use charge as a percentage of the adjusted gross revenue shall be payable by successful bidders. Under the circumstances, can the DoT (department of telecom) revise the rates of SUC in the light of recommendations made by Trai, the relevant conditions of the NIA and licence requirements,” the note said.

Earlier last month, the Telecom Regulatory Authority of India (Trai) had termed differential SUC “a disincentive for any merger or acquisition, spectrum sharing and trading as well as in acquiring any additional spectrum”. It proposed that the government replace this structure and impose a flat rate of 3 per cent of a company’s annual revenue as spectrum fee for all airwaves obtained in auctions and 5 per cent for airwaves given under subscriber-linked allocation.

Broadband options

The note also suggested three alternatives for broadband wireless access (BWA) auctioned in 2010 and used for high-speed mobile telephony and Net connectivity.

The first option suggests raising the SUC charge for BWA spectrum, currently at 1 per cent, to 3 per cent, similar to that of 2G spectrum.

The second option says BWA spectrum sold through the auction in 2010 can continue to attract an SUC of 1 per cent and will be “reported separately”.

This spectrum will not be doubled up with any fresh spectrum bought by a telecom company for calculating the use charges.

The last option suggests the spectrum fee should remain at 1 per cent but its calculation should be done along with the fresh airwaves bought.

This calculation will, however, require a complicated weighted average formula.

Officials said they expected the law department to approve the shift to fixed rates, with certain safeguards, by next week as the last date for the withdrawal of bids is January 27.

The government wants to raise around Rs 40,000 crore from the spectrum auction and other related fees. The finance ministry is depending on the mop-up to balance its books.

Before proceeding with the auction, the government has given a serious thought to the threat by top telecom companies that it may fail to raise the targeted amount if the spectrum fee issue is not addressed, officials admitted.

Eight telecom operators, including Vodafone, Bharti Airtel and Reliance Jio Infocomm, have applied to bid for the spectrum auction.