Govt may have to levy uniform rates across spectrum bands
In a move that may force the government to take another look at charging a lower spectrum usage charge on broadband wireless access spectrum in the 2300 MHz band acquired in the 2010 auctions and instead move towards charging a uniform rate across bands acquired in the past and in future, mobile operators have jointly written to the department of telecommunications secretary JS Deepak that they are in no position to segregate revenues across different bands of spectrum to provide same services.
“The use of multiple bands such as 2300, 1800, 800 and 700 MHz (post-auction) for provisioning of same technology, ie, LTE, and with carrier aggregation becoming a reality, segregation of revenues basis spectrum bands becomes almost impossible,” the letter has stated.
This may complicate matters for the government as while deciding to charge a lower SUC for 2300 MHz spectrum, it had stated that the onus for segregating the revenue would lie with the operators. “With operators expressing their inability, how can the government penalise them if they are not able to find a foolproof mechanism to segregate revenues?” an executive from a leading operator told FE.
The letter written by the Cellular Operators Association of India (COAI), the apex body of GSM operators, which includes Mukesh Ambani’s Reliance Jio Infocomm (though it is not party to the letter), is significant because it comes at a time when a DoT committee is studying ways in which segregation of revenues can be done by operators without any arbitrage. As reported by FE earlier, the committee has so far not found any of the ways suggested by operators for segregating the revenues as foolproof.
Sources told FE that with the Supreme Court leaving the matter of deciding a uniform SUC to the government via its order on April 8, the committee is reconsidering the entire issue afresh. The dilemma before the DoT in making the levy uniform across all bands retrospectively and prospectively is that it will be tantamount to changing conditions in the Notice Inviting Applications for auctions, which may be objected to by some operators. However, the government has the power to make the changes and even the Telecom Regulatory Authority of India had recommended doing the same in 2013, which it reiterated in its latest recommendations made in January.
The issue of reappraising a uniform SUC was rekindled when last month the Telecom Commission decided to charge a flat 3% rate of the operators’ adjusted gross revenue (AGR) for all bands of spectrum acquired in forthcoming auctions sometime during June/July. This, instead of making things easier, only complicated matters as more layers of SUC were added with more room for arbitrage.
An operator like Bharti Airtel has spectrum in the 1800 and 2300 MHz bands through which it provides 4G services. Its competitor Reliance Jio has spectrum in the 1800, 800 and 2300 MHz bands to offer 4G services.
For providing the same service, while Bharti will pay an SUC at 5% for spectrum acquired in the 1800 MHz band, it will have to pay it at 1% for the 2300 MHz band. RJio will also pay 1% for 2300 MHz and 5% for 800 and 1800 MHz spectrum. If they acquire spectrum in the same bands in the forthcoming auctions, they will have to pay SUC at 3%.
Even the SUC for the same band providing same service is different. For example, SUC on 1800 MHz acquired in the 2014 and 2015 auctions are charged at 5% of AGR whereas 1800 MHz acquired in 2012 auction is charged with the slab rate (3-8% depending on the spectrum an operator has with rate going up as quantum of spectrum increases). Similarly, SUC on 2100 MHz acquired in 2015 auction is charged at 5% of AGR whereas 2100 MHz acquired in 2010 is charged at 3% for standalone 3G and at slab rate for operators holding administrative spectrum, COAI has said.
What the majority of operators have said via the COAI letter is that they do not have any mechanism to segregate revenues accruing to them for providing the same service through different spectrum bands.
As a solution, the COAI letter has urged to make SUC uniform across bands at 3% of AGR, which is further reduced to 1% in a phased manner. “A uniform rate of SUC will simplify the calculations and remove all arbitrages and ambiguities,” it has said.