India approves spectrum trading norms for telecom firms

India on Wednesday approved the much-awaited spectrum trading norms for telecom companies so that this scarce resource can be put to optimal use.

"We have approved the spectrum trading norms today (on Wednesday). Now the telecom companies can trade spectrum among themselves. For this, they need not take any government permission," Communications and IT Minister Ravi Shankar Prasad said in a briefing after a union cabinet meet where the proposal was approved.

"The telecom companies only need to inform the government 45 days in advance before trading and they have to give an undertaking," he said, adding that trading would also resolve the problem of fragmented spectrum holding in India.

He mentioned that if it is found during sample checking that the companies are not complying to all the rules in the undertaking, then the government will take strong action and the "licensee shall not be allowed to trade."

Spectrum trading allows parties to transfer their spectrum rights and obligations to another party - a move that will allows better spectrum usage as the idle spectrum from the hands of one service provider gets transferred to another facing a spectrum crunch.

This also helps to improve customer satisfaction and services of the service provider acquiring spectrum.

Terming the decision a "revolutionary step", Prasad said: "Spectrum trading has been permitted in all the bands."

According to the norms, spectrum trading will not alter the original validity period of spectrum assignment as applicable to the traded block of spectrum.

"The seller shall clear all his dues prior to entering into any agreement for spectrum trading. Thereafter, any dues recoverable up to the effective date of transfer shall be the liability of the buyer," they said.

"A non-refundable transfer fee of one percent of the transactional amount or one percent of the prescribed market price, whichever is higher shall be imposed on all spectrum trade transactions, to cover the administrative charges incurred by government in servicing the trade," it said.

The norms said if any service provider sells only a part of its spectrum holding in a band, both the buyer as well as the seller will be required to pay the remaining instalments of payment, prorated for the quantum of spectrum held by each of them subsequent to the spectrum trade.

The guideline mentioned that the buyer should be in compliance of the prescribed spectrum caps from time to time.

"The spectrum acquired through trading shall be counted towards the spectrum cap by adding to the spectrum holding of the buyer."

Regarding spectrum usage charges (SUC), it said: "The seller should clear its SUC and its instalment of payment till the effective date of trade."

A telecom service provider will be allowed to sell the spectrum through trading only after two years from the date of its acquisition through auction or spectrum trading or administratively assigned spectrum converted to tradable spectrum.

In case of administratively assigned spectrum converted to tradable spectrum after paying the prescribed market value, the period of two years will be counted from the effective date of assignment of spectrum.

Almost a month ago, the government approved spectrum sharing guidelines, which are expected to address the issue of mobile phone call drops and the quality of services as also optimise the use of radio frequency spectrum for telecom services. Telecom regulator, TRAI in mid-June had sent its recommendations on sharing of airwaves to the Telecom Commission.