SUC hike for 4G players: Dot seeks legal view

Broadband (4G) spectrum holders such as Reliance Jio, who want to bid for 2G radiowaves in the February auctions, may have to pay a weighted average of 2G waves at 3% and 4G waves at 1% as spectrum usage charge (SUC). This would be higher than the 1% adjusted gross revenue (AGR) currently being levied as SUC on broadband spectrum, according to an option debated by the telecom commission recently.

The other two options include raising SUC to a flat 3% for all spectrum holdings as recommended by Trai, or keeping SUC on broadband spectrum acquired through the 2010 auctions at 1%, which would be reported separately by operators.

The government has sought legal opinion on these options from the law ministry. The telecom commission is expected to take a final decision on SUC before auctions start on February 3.

According to a DoT note on SUC, if existing broadband licence holders acquire spectrum through the current auctions, ?weighted average rate of existing BWA rates (1% as stipulated in NIA issued in 2010) and the applicable rate for the 2G spectrum acquired through auction can be applied?.

The applicable rate for the 2G spectrum would depend on its quantum and the rate of the current auction, said the DoT note. Which means the slab for calculating SUC on 2G spectrum would be a cascading rate, as applicable currently, and may range between 3 % and 8% of AGR.

For instance, if Reliance Jio, which holds pan-India 4G spectrum, acquires 5 Mhz of 2G spectrum in the current auctions at the rate of 3%, the weighted average rate would be 1.67%.

The telecom commission at its meeting on January 7 could not reach any consensus on a new system of calculating SUC, an annual fee levied on mobile operators for using radiowaves, that would ensure revenue-neutrality for the government while being legally tenable.

GSM operators recently wrote to the government proposing that it adopt Trai’s suggestions for a flat SUC regime. Trai has proposed setting SUC at a flat 3% of revenue for the spectrum the companies buy in auctions and 5% if it is acquired at government-set prices. If this isn’t immediately possible, at least a uniform fee structure should be applied for all similar technologies, GSM firms had suggested.