DoT may stick to Trai's satellite spectrum pricing recommendations

The Department of Telecommunications (DoT) is not considering any changes to the satellite spectrum pricing recommendations by the Telecom Regulatory Authority of India (Trai), despite opposition from telecom operators, which argue that the proposed charges are “unfair” and “unjustifiably low”, according to government officials in the know.

 

Under the Trai recommendations, satellite communications (satcom) providers would be required to pay 4 per cent of their adjusted gross revenue (AGR), in addition to an annual fee of ₹3,500 per megahertz and ₹500 per urban subscriber.

 

“The regulator has given its recommendations. There is no need for any changes to them,” said a senior official. “Telcos have presented their views, but there’s enough time for the market dynamics to play out. After five years, it can be reviewed,” the official added, requesting anonymity.

 

Another official said the recommendations are likely to be approved within the next couple of months. The approval process will involve review by the Digital Communications Commission (DCC), the apex decision-making body in the telecom department, and may also require vetting by the Ministry of Finance.

 

Following the finalisation of the pricing framework, the Department of Telecommunications is expected to take an additional 30 to 45 days to allocate spectrum to eligible applicants, according to one of the officials.

 

A full-fledged commercial rollout of satellite services is expected by early next year, the official added.

 

The telecom department’s response to queries emailed by Business Standard in this connection was awaited until the time of going to press. 

 

Elon Musk’s Starlink, Bharti group- and Eutelsat-backed OneWeb, and Reliance Jio’s joint venture with SES, Jio Satellite Communications Ltd, are awaiting the government’s decision on the administrative pricing mechanism proposed by Trai on May 9.

 

The department issued a letter of intent to Starlink on May 7, days before the pricing recommendations were announced, but trial spectrum for testing services has not yet been allocated.

 

A senior industry executive said Starlink has yet to identify the location of its landing station. Only once the necessary equipment is secured will the company be eligible to receive trial spectrum. OneWeb and Jio Satellite Communications received trial spectrum last year, with permissions extended into this year.

 

Telco-backed satellite operators have argued that allocating spectrum at 4 per cent of AGR is based on incorrect assumptions and that the charge would distort competition by creating a non-level playing field between satellite and terrestrial service providers. They contend the proposed regime would benefit satcom operators at the expense of traditional telecom providers.

 

In a letter to the telecom department late May, the Cellular Operators Association of India (COAI), which represents Bharti Airtel, Reliance Jio, and Vodafone Idea, said satellite services could act as substitutes for terrestrial services and should therefore be subject to the same AGR-based charges. It also alleged that Trai’s pricing lacked a techno-economic assessment and was instead derived from “ad hoc” spectrum charges, such as those applied to non-competitive VSAT services using geostationary satellites, as outlined in a Department of Telecommunications memorandum dated November 11, 2023. 

 

COAI also criticised Trai’s decision to forgo any entry fee or upfront payment for space spectrum, contrasting this with the auction-based approach for terrestrial spectrum. Trai Chairman Anil Kumar Lahoti had defended the regulator’s approach, stating that satellite spectrum is a pooled resource and is priced administratively across global markets.

 

“Trai’s position is inconsistent with the approach followed so far in administrative spectrum allocations, and is without any rationale, empirical analysis, international benchmarking, or economic justification,” COAI had said. “In a stark contrast, operators are required to face substantial upfront auction determined charges, often amounting to thousands of crores -- translating into an effective spectrum cost of 18-53 per cent of the present AGR.”

 

The association had further noted that while terrestrial operators are bound by long-term spectrum payment obligations spanning 20 years and dependent on revenue from over a billion subscribers, non-geostationary satellite orbit (NGSO) operators will not face comparable financial or operational responsibilities. Trai has proposed a five-year spectrum allocation term for satcom operators, extendable by an additional two years. 

Not on the same page

 

Trai recommendations

 

• Satcom operators to pay 4% of annual AGR as spectrum usage charge
• Additional 8% licence fee, ₹3,500/MHz/year, ₹500 per urban user
• Administrative spectrum allocation for 5 years, extendable by 2 years
• Space spectrum treated as pooled resource; no auctions
• Satcom viewed as complementary to terrestrial networks

 

Telco objections

 

• Creates imbalance with terrestrial operators
• 4% AGR charge ‘unfair’; lacks techno-economic evaluation
• No upfront fee makes allocation inequitable
• Telcos pay up to 21% of AGR
• Satcom seen as competitor, not complement