The Telecom Regulatory Authority of India has recommended to the department of telecommunications (DoT) that a flat rate of spectrum usage charge is the best way forward. However, as a second option, considering that there are legal obstacles to levying a flat SUC on spectrum acquired in the past, especially in the 2300 Mhz band in 2010 auctions, it has suggested its own formula to calculate the weighted average. Its formula is not only more complex, but also raises the payable SUC for every operator than what has so far been used by the DoT.
“While the optimal solution in the view of the authority is to move to a flat rate regime, we are constrained to limit ourselves to examine the weighted average solution as suggested by the attorney general and proposed by DoT,” TRAI said in its recommendations.
The new formula takes into account the bid values of each band of spectrum to the existing weights.
Analysts termed the new formula suggested by TRAI as not only very complex, but complicating matters when the general direction of the government is to simplify things. Further, if the bid value of spectrum bands starts getting added to calculating SUC, the rates would become extremely volatile with each auction.
Justifying its formula, TRAI has said that only the quantity of spectrum is not a sufficient weight, and revenue arising out of each band should also be taken into account. However, since revenue segregation cannot be done, the bid amount paid by the operators was indicative of the revenue expected from that band.
“As bid values are a reflection of how telecom service provider values the band, taking into account market determined price based on bid values might lead to a result that more closely approximates the result, were it possible to segregate revenues as envisaged by the NIA (notice inviting applications),” TRAI has said.
The TRAI’s recommendations come after the DoT, on the directions of the Union Cabinet, had sought its views on SUC before deciding on the notice inviting applications for the upcoming spectrum auctions.
While the government had earlier decided to impose a 3 percent uniform SUC for the spectrum being sold in the upcoming and future auctions, for spectrum sold in the previous auctions the Telecom Commission went with Attorney General Mukul Rohatgi’s opinion on clubbing spectrum sold for broadband wireless access services in 2010, to avoid arbitrage in imposing spectrum usage charges on weighted average formula in future.
The AG had opined that the DoT cannot increase the SUC of 1 percent of AGR on 2300 Mhz bandwidth, sold in the 2010 auctions, but can club it with other spectrum bands to arrive at a weighted average formula.
Telecom operators represented by the Cellular Operators Association of India (COAI) had sought a uniform rate of SUC to avoid any arbitrage. Reliance Jio, a member of COAI, was not party to the suggestions. - Financial Express