The Telecom Regulatory Authority of India (TRAI) has stood firm on its recommendation to lower the base price of the 2G spectrum by up to 60 per cent in the upcoming auctions. The regulatory body has overturned the Telecom Commission?s proposal to reconsider its key recommendations on spectrum pricing.
With TRAI deciding to keep its recommendations unchanged, the Telecom Commission will take a final decision on the regulatory body?s proposals at its meeting likely to be held on October 29. It will then forward its decision to the empowered group of ministers to take a final call on the matter.
In September 2013, in its recommendations on spectrum pricing, TRAI had proposed lowering the reserve price of the 2G spectrum from the earlier recommended Rs 181.1 billion to Rs 74.8 billion for 5 MHz pan-India spectrum in the 1800 MHz band. A panel appointed by the Department of Telecommunications (DoT) had earlier stated that the reserve price proposed by TRAI did not reflect the market value of the spectrum. Subsequently, the Telecom Commission sent the report prepared by DoT panel to TRAI seeking clarifications on key recommendations made by the regulatory body.
In its response to Telecom Commission, TRAI has stated that the methodologies used by it to arrive at the spectrum pricing are grounded in economic theory and have widespread international acceptance. TRAI has asserted that there is no scope for it to reconsider the reserve price.
Amongst other recommendations, DoT had also rejected TRAI?s suggestion to introduce a flat spectrum usage charge (SUC) for using spectrum. Currently, a slab-based system is followed wherein operators have to pay a SUC ranging between 3 and 8 per cent of their annual revenues, depending upon the quantum of spectrum held by them. The DoT panel stated that the move would amount to the violation of licence norms since at the time of auction of broadband spectrum, operators were asked to pay SUC of one per cent of their annual revenues. The DoT panel also added that a uniform SUC could not be implemented, as revenue from auctioned and non-auctioned spectrum could not be separated.
Explaining the rationale for proposing a flat SUC, TRAI has stated that since broadband players can now also offer voice services, therefore, levying a lower SUC on such players would be unfair to other players. According to TRAI, the transition to a uniform SUC would not only simplify the levy structure but also enable the policy initiatives on merger and acquisitions and sharing and trading of spectrum to be implemented without inherent disincentives. However, TRAI added that if DoT was concerned about changing the regulations regarding the broadband auction then the SUC for all players could be brought down to 1 per cent.
Other recommendation made by the regulator suggested that the government should not go ahead with spectrum auction in the 800 MHz band and instead look into what is called extended GSM (e-GSM) band. The move would result into optimisation of the 800 MHz spectrum which is traditionally used by CDMA operators as it could be used by GSM operators as well. According to TRAI, adoption of e-GSM band will add over 25 per cent spectrum to the 900-MHz band, even if the government takes a decision to set aside 5 MHz of spectrum in the 800-MHz band.
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