No consensus yet on new system to calculate spectrum usage charge

Written by fe Bureau | New Delhi | Updated: Jan 8 2014, 19:02pm hrs
The Telecom Commission (TC) in its meeting on Monday could not reach a consensus on a new system of calculating the spectrum usage charge (SUC), an annual fee levied on mobile operators for using radiowaves, that would ensure revenue neutrality for the government as well as be legally tenable. The TC, however, was of the opinion that the SUC slab system needs to be changed.

The inter-ministerial panel is expected to meet in a few days to reach a final decision. It is imperative that the government modify the current SUC policy before spectrum auctions begin on February 3.

Mobile operators, including Airtel, Vodafone, and Idea, had last month told the Department of Telecom (DoT) that in the absence of a flat SUC, the industry did not have any incentive to buy additional radiowaves either through auction or sharing process. However, Reliance Jio Infocomm is opposed to any change in the current regime. We are deliberating all permutations and combinations to come up with a fresh spectrum charge policy that is revenue neutral and legally tenable, said an official present at the TC meeting. The TC's decision will have to be ratified by the empowered group of ministers on telecom and the Cabinet before the Notice Inviting Application can be modified to state the new spectrum usage fees.

Currently, mobile operators pay between 3% and 8% of their annual gross revenue to the government as SUC based on the total airwaves they hold. However, for broadband and 4G spectrum holders, this fee is 1% of their annual revenue.

Telecom regulator Trai had proposed the government replace this structure and impose a flat 3% of a telco's annual revenue as SUC for all airwaves obtained in auctions and 5% for radiowaves granted under earlier rules of subscriber-linked allocation. Trai also said that differential SUC acts as a disincentive for any merger or acquisition, spectrum sharing and trading as well as in acquiring additional spectrum. It also creates unwanted opportunities for arbitrage between bands and technologies likely to operate under a common unified licence, etc.

The TC in its meeting discussed options, put forth by DoT, including accepting Trais suggestion of a flat SUC for all airwaves (bought through auctions) to 3% of annual revenues. Another option was to charge 3% spectrum usage fee for all airwaves bought through auctions, while retaining the higher slab of up to 6% revenue share for radiowaves acquired under earlier rules.