Accepting the views of a committee of the department of telecommunications (DoT), the Telecom Commission on Thursday put the ball back on the court of the Telecom Regulatory Authority of India (Trai), asking it to reconsider the key issues it had recommended on spectrum pricing.
The commission, the highest decision making body in the DoT, would again meet on October 29, after it receives Trai’s clarifications.
“We have sought further clarifications on some issues. It would be sent back to Trai for clarifications. But it does not mean we did not agree with anything,” said M F Farooqui, secretary of DoT and chairman of the Telecom Commission. He added the commission hoped to take a final decision on the issue on October 29.
The government aims to conduct the auction of 1,800 MHz, 900 MHz and 800 MHz bands by January. It has set a target of collecting Rs 11,343 crore through the auction.
On Thursday, the Telecom Commission asked Trai to reconsider fixing the reserve price for the 1,800 MHz and 900 MHz bands. It also asked the regulator to provide a base price for the 800 MHz spectrum. In a report, the DoT committee, set up to look into Trai’s recommendations, had said the calculation of the reserve price “does not appear to reflect the value of liberalised spectrum, as its potential for use is much more than 2G over the next 20 years”. It questioned whether the regulator had taken into account “the future growth potential in the telecom sector”.
Trai had recommended the reserve price of 1,800-MHz spectrum be reduced 37 per cent to Rs 1,496 crore per MHz pan-India and up to 60 per cent for 900 MHz in the circles of Delhi (at Rs 288 crore), Mumbai (at Rs 262 crore) and Kolkata (at Rs 100 crore).
The Telecom Commission has also sought clarification on Trai’s suggestion to have uniform spectrum usage charge (SUC) at three per cent of the adjusted gross revenue. “We need to examine this from the point of view of revenue neutrality. We have asked Trai to also refer to the notice inviting applications issued by the government earlier. We need to examine the basis of slab-based SUC with these references. We also need to see whether it is legally tenable,” said Farooqui.
The DoT committee had noted the uniform SUC couldn’t be implemented since revenues from auctioned and non-auctioned spectrum couldn’t be segregated. It said the issue could be examined only when all operators held liberalised spectrum.
Currently, SUC varies from three to eight per cent, depending on spectrum holding.
Incumbent operators such as Airtel, Vodafone, Idea, BSNL and MTNL, which have substantial spectrum, pay spectrum usage charges of up to eight per cent. Reliance Jio had opposed the move, saying it would have to pay more, as its spectrum usage charge for broadband wireless access spectrum was pegged at one per cent of revenue.
“Going back to Trai in spite of the very detailed analysis by the regulator would only create more uncertainty in the telecom industry and marketplace. What Indian telecom needs is certainty and that would make it a golden goose from an ugly duck,” said Prashant Singhal, partner in a member firm of Ernst & Young Global Ltd.
The DoT committee also rejected Trai’s suggestion to introduce the extended GSM band, taking spectrum out from the existing CDMA band (800MHz). This would be bring relief to CDMA operators such Sistema Shyam Teleservices and Tata Teleservices, as these have said if the government adheres to Trai’s recommendation on extended GSM band, it would scuttle their growth.
Farooqui said the Telecom Commission had sought more details from Trai on its proposal on full refarming of 900 MHz spectrum. The DoT committee had accepted Trai’s view on full refarming.
On Trai’s suggestion to allow spectrum trading, the committee raised doubt on whether this was an appropriate time for this. It expressed concern and suggested a more holistic view. Based on the committee report, the Telecom Commission has sought clarifications on the matter from Trai.
According to the DoT committee report, the government auctions only right-to-usage of spectrum; the legal framework under which it can be treated as transferable and tradable, in whole or part, has to be prepared. It stated there was a need to assess the market sale of spectrum.