Telecom Commission cuts into Trai call on spectrum base price

Written by fe Bureau | New Delhi | Updated: Oct 4 2013, 09:47am hrs
In a move which creates uncertainty in the telecom sector and possibly delays the next round of spectrum auctions, the Telecom Commission on Thursday decided to ask the Telecom Regulatory Authority of India (Trai) to provide the rationale and methodology for suggesting a reserve price reduction up to 60% in the next round of auctions.

On Trais proposal to cut reserve price of spectrum by up to 60%, we have sought clarifications on the rationale and methodology adopted to arrive at the reduced prices, said MF Farooqui, secretary, Department of Telecommunications (DoT) and chairman, Telecom Commission.

In doing so, the Commission went along with the report of the technical panel constituted by the DoT, which had opined against the lower reserve price and suggested that the regulator be asked to provide clarifications as to how it arrived at the figures.

The Trai has 15 days to respond with clarifications. It has the option of sticking to its earlier recommendations while the government has the right to go ahead with its views if it finally disagrees.

Farooqui said the next meeting of the inter-ministerial panel will be on October 29 upon receiving the Trais reply, when a final decision will be taken. Once the Commission takes the decision, it will be vetted by an EGoM headed by finance minister P Chidambaram before approval by the Union Cabinet. The government must decide fast, since auctions need to be held by December-January.

The process of seeking clarifications from the regulator, which has already sent a detailed report, will delay decision-making and create uncertainty amongst the operators. In response to a question, Farooqui said: Spectrum not sold is revenue delayed.

In the 1,800 MHz band, where the Trai has reduced the reserve price by 37%, the Commission wants to know the methodology adopted to arrive at these prices.

In the 900 MHz band, where the Trai has given a reserve price (60% lower) for three circles where the licences of the operators expire in November 2014, the Commission has asked for a pan-India price also. Additionally, it has asked the regulator to reconsider its decision on not reserving any spectrum for operators currently holding it. This is because the earlier decision of the government was that operators like Bharti Airtel and Vodafone be allowed to retain 2.5 MHz.

The Telecom Commission also wants Trai to provide a reserve price for the 800 MHz (CDMA) band. Trai had suggested no auction for CDMA as of now, since there was no demand for these airwaves in the last auction and only one company had participated in March 2013 auction that too, on a price which was reduced by 50%.

On the regulators suggestion to have a uniform spectrum usage charge of 3% for all auctioned spectrum and a maximum charge of 5% of the adjusted gross revenue of operators for non-auctioned spectrum, the Commission wants Trai to consider the legal tenability of the proposition.

Considering revenue neutrality being important to the government, we have asked Trai to look at various options whereby companies can be brought on a uniform spectrum usage charge regime gradually, Farooqui said. He added that one of the options could be to have a 3% usage charge for all spectrum being auctioned in future, whereas earlier, radiowaves could continue to be charged at the current rates which is then rationalised over a period of time.

Currently spectrum usage charges are 3-8%. Charges go up as spectrum holding increases. The Commission also wants Trai to examine the impact on government revenues due to the proposed reduction.

The Telecom Commission, which includes the telecom secretary, finance secretary, DIPP secretary and the member secretary Planning Commission, has also asked Trai to give detailed options on instruments and methodology of trading spectrum between various mobile service.