Trai sees flaw in DoT spectrum charge code; bats for flat rate

Telecom regulator TRAI has drilled holes in the formula government uses to calculate annual spectrum charges payable by mobile phone operators and suggested using value generated by use of the airwaves to be included in the basis for computing levies.
It has said that formula in practice may have a significant impact on the revenue payable to the government.
The Telecom Regulatory Authority of India identified complications in adopting flat spectrum rate recommended by it earlier but still batted for it to make process simple and transparent in future.
"The over-all SUC rate arrived at by the weighted average formula is also impacted by SUC rate fixed for each band...This may have a significant impact on the overall spectrum usage charge that is payable to the Government," Trai said in its reply to reference sought by the Department of Telecom.

The Cabinet last month approved spectrum auction rules except spectrum usage charges (SUC) recommended by the inter-ministerial panel Telecom Commission. The Cabinet asked telecom ministry to seek Trai's view on SUC before it approves the rule.
As per Trai, government considers only quantum of spectrum held by a telecom operator to calculate spectrum usage charge but this may not give correct value as intended under the concept of collecting this charge.

"While quantum of spectrum will certainly be a factor in any weighted average formula, this may not be the sole factor to estimate the revenue from a given band. It is widely accepted that currently some spectrum bands generate greater revenue than others even if the holding is smaller than in other bands," Trai said.

It has suggested to DoT to take into account benefit that a spectrum band delivers and bid price of the airwaves can be used as one of the factor to determine a close value for calculating SUC.
A DoT committee has said that it is not possible to segregate revenue that a telecom operators earns from a particular band as various bands can be clubbed to deliver 3G or 4G mobile services.
The DoT fixes percentage of amount that it will charge from revenue telecom operators earn by providing services. The percentage was earlier fixed based on slab rate ranging between 3-8 per cent of telecom services revenue while exact percentage was levied based on spectrum holding of the firm.

The government, in January 2014, decided to cap SUC at a flat 5 per cent for spectrum that was to be procured in the future auctions. The government imposed weighted average formula on companies holding spectrum allocated in past and buying spectrum in future.
Moving towards lower or flat spectrum regime, the telecom ministry proposed 3 per cent SUC rates from upcoming auction and weighted average for companies holding old spectrum.
Trai said that the DoT has neither sought the opinion or recommendation of TRAI on this matter in the past nor has there been any consultation on it.