1. Distorting SUC, Trai-style

# Distorting SUC, Trai-style

## Trai just muddying the waters, junk its suggestions

By: | Updated: July 14, 2016 8:11 AM

In an ideal world, all telcos should be paying a similar spectrum usage charge (SUC), but due to bad drafting of the rules in 2010, the government feels SUC for Broadband Wireless Access (BWA) spectrum cannot be changed from 1%. Since this would have given RJio and Bharti Airtel—the two telcos who own BWA spectrum—an unfair advantage, the attorney-general came up with a compromise using a weighted average. Under this formula, while Vodafone and Idea would pay an SUC of 4.7%, Bharti Airtel would pay 3.7% and RJio 2.9%. That’s not fair, but as both RJio and Bharti Airtel bought more spectrum in fresh auctions, the difference would have reduced. This formula was given to Trai to make its recommendations, but what has emerged is a veritable noodle soup which is not only confusing, but also raises SUC and is bereft of logic.

Let’s weight the SUC, Trai says, by the revenue earned from each band—but since it is not possible to segregate revenues from each band, it is not clear how Trai comes out with its ‘factor’ by which it weights the revenues. A ‘factor’ of 4.56 is used for 900 Mhz spectrum in relation to 2100 MHz spectrum—how was this got and why should a pan-India ‘factor’ be used instead of a per circle one? There is no ‘factor’ given for 700/800 MHz, so how is this to be dealt with; is the ‘factor’ the same for ‘liberalised’ and ‘unliberalised’ spectrum—if not, why not? Also, since spectrum revenues will change from time to time—if you use spectrum costs for calculating the ‘factor’, the same problem arises in each successive auction—Trai will have to periodically come out with a new factor, making the entire process of calculating SUC more uncertain. It is true the government did not try hard enough to convince RJio/Bharti Airtel about the flat SUC, but the weighted average formula it suggested had a logic and the differences would reduce over a few years. Since Trai will only worsen the gap, it’s best to just junk the recommendations.