Trai reiterates to have a flat rate for SUC

Suggests including alternate factors like market-determined price and technical efficiency of bands to calculate weighted average

The Telecom Regulatory Authority of India (Trai) on Tuesday reiterated its position on having a flat rate regime for spectrum usage charges (SUC). Trai, however, suggested a formula to calculate the weighted average in case the government still wants to go ahead with the weighted average method to levy SUC from telcos. It said the government could include factors such as last market-determined price and technical efficiency of spectrum bands to calculate the weighted average.

The telecom regulator said taking the spectrum quantity in a band as the sole weightage in the weighted average formula might lead to certain shortcomings. “While the optimal solution in the view of the Authority is to move to a flat rate regime, we are constrained to limit ourselves to examine the weighted average solution,” Trai said in its reply to the Department of Telecommunications (DoT).

Trai said if DoT chooses to adopt weighted average rate of SUC, it should explore alternative methods for computing weighted average. “The ease of implementation, level-playing field, and encouragement to bidders to participate in the auction are key rationales for such a position being taken,” it added.

SUC, one of the many levies that operators pay the government, has been a bone of contention. Telcos have been asking for a uniform charge across bands, given the difficulty in calculating separate charges across bands with multiple operators offering data services on various bands. The SUC varies from five per cent to one per cent across bands. The government gets Rs 8,000-8,900 crore annually from SUC.

In a presentation to telecom secretary J S Deepak on June 10, the Cellular Operators Association of India sought a uniform SUC at three per cent of adjusted gross revenue for all bands, and for existing and new spectrum. The industry body argued it would remove arbitrage.

Currently, the SUC levy on the 2,300-MHz band spectrum is one per cent, while it is higher for other bands.

Trai had earlier recommended an SUC at a flat three per cent across the industry and gradually bringing it to one per cent. However, the Attorney General (AG) was of the opinion that a flat rate for all past, present and future spectrum was not appropriate in legal terms.

The Telecom Commission, the highest decision-making body of DoT, had decided that an SUC of three per cent of adjusted gross revenue would be charged from mobile operators for spectrum acquired in upcoming auctions, whereas a weighted average formula would be applied for calculating the SUC on the total spectrum holding for all bands.

The DoT had written to Trai on June 24, enclosing a report of its internal committee on revenue segregation for broadband wireless access (BWA) spectrum and the opinion of the AG.  “While introduction of normalisation factor will still result in reduction of SUC in case of some operators holding BWA spectrum, this gap will be less than that produced by DoT suggested formula. DoT may take a call on the issue of imposing floor amount to cover the revenue shortfall,” the regulator said.
 

In addition, the Authority is of the view that any solution based on weighted average rate, irrespective of the proxy that is used, is at best a temporary solution.

"While taking a view on this matter, all possible steps should be considered by the DoT to move to a simple, transparent and flat ad valorem SUC regime in accordance with law," Trai added.