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  1. Telecom: Way cleared for flat spectrum usage charges

Telecom: Way cleared for flat spectrum usage charges

Given the multiplicity of spectrum usage charges (SUC) that different telecom players pay according to how much spectrum they hold, it was always critical to move to one flat rate...

By: | Published: July 26, 2016 12:18 PM
A flat SUC also ensures there is no discrimination between different types of technology, different purchase dates and even different amounts of spectrum held. A flat spectrum usage charges also ensures there is no discrimination between different types of technology, different purchase dates and even different amounts of spectrum held.

Given the multiplicity of spectrum usage charges (SUC) that different telecom players pay according to how much spectrum they hold, it was always critical to move to one flat rate – right now, it you have 4.4 MHz of spectrum you pay a 3% rate but this goes up to 6% if you have 10.2 MHz; but if the spectrum was bought in the March 2015 auction, the rate goes up to 5% and it will be 3% for spectrum bought in the 2016 auction! What made the differences particularly egregious was the 2010 auction where those that bought BWA spectrum – only Reliance Jio Infocomm and Bharti Airtel have this spectrum right now – were asked to pay just a 1% SUC. It was also unfair since telcos who bid for the 3G spectrum in the same round were expected to pay the higher 2G rate as the government felt it would be difficult to segregate 2G and 3G calls – while this also holds true for BWA calls, the SUC was never made the same as for 2G calls. Whenever an attempt was made in the recent past to fix this anomaly, it was pointed out that the tender documents for 2010 ruled out any change and the Attorney General had also opined the same way.

This was always a bogus argument since clause 5.5 of the tender document in 2010 allowed SUC to be paid ‘as per rules notified by the Government from time to time’. This power was also retained in the Unified License under which telcos operate. Indeed, it is this power that the government has used to come up with a weighted average formula for SUC – this uses the SUC for different quantities of spectrum or for that bought under different auction rules and weights them according to the proportion of spectrum held in each category. Had the 2010 agreement been so inviolable as the Attorney General had opined, how could a weighted average formula be used? This logic has been further strengthened by Monday’s decision by the Telecom Commission (TC) that reiterates its weighted average formula subject to a minimum or floor SUC of 3%. Take the case of RJio which has BWA spectrum and assume it did not have any other spectrum. Under the 2010 rule, it would have to pay just a 1% SUC. Under Monday’s decision, however, it has to pay a minimum of 3%, which makes it clear the 2010 rule is not inviolable. Also, keep in mind that, despite the exalted status, the AG is just the government’s top lawyer and, as in the case of any other lawyer, the courts are free to disregard the opinion – indeed, in the STel case where the AG opined that the telco’s 3G bid did not have to be refunded when the license was cancelled, this was struck down by the TDSAT. A flat SUC also ensures there is no discrimination between different types of technology, different purchase dates and even different amounts of spectrum held – there is no reason why an RJio should pay a 3% rate while a Bharti Airtel should pay 3.5%, an Idea 4.1% and a Vodafone 4.5% while each delivers the same set of services to the end consumer.

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