01:01 am - Wednesday 22 November 2017

COAI requests DoT for flat spectrum usage fee

By insightVAS - Tue Dec 17, 12:10 pm

The industry body of the GSM operators COAI has again written to Department of Telecommunications (DoT) with emphasis on flat spectrum usage that would encourage larger participation in upcoming auctions and increase government revenue.

In a letter to Telecom Secretary MF Farooqui, the Cellular Operators Association of India (COAI) highlighted that the Cabinet, while recently ratified the floor price of spectrum, had indicated that the direction should be towards a flat spectrum usage charge (SUC), instead of the current cascading charge.

Telecom Regulatory Authority of India (TRAI), in its recommendations on valuation and reserve price of spectrum, had proposed a flat SUC in place of the current charge which varies from 3-8 percent, depending on the quantum of airwaves held.

TRAI, while suggesting flat 3 percent and 5 percent SUCs depending upon whether the spectrum was acquired through auctions or a mix of entry fee and auctions, respectively, had left the final decision of the percentage of levy on the DoT.

The final decision of SUC will be taken together by the department of revenue and the DoT.

The COAI has said that SUC is factored into calculations when telecom operators bid for airwaves in the auctions.

So, if the government continued with the current cascading SUC practice – which means any additional bandwidth acquired through auctions would lead to a higher outgo – then it will attract lesser bids as operators will spread out the payment, thus limiting revenue for the government.

“Wherever spectrum is sold globally, against an upfront price determined through auctions, the spectrum usage charge is always kept at nominal level,” COAI wrote.

The latest trigger for the industry body’s letter is an internal DoT calculation which reveals that if the government were to accept TRAI’s recommendation of a flat SUC, then it could cause a loss of Rs 2,657 crore to the exchequer over a period of 10 years.

Citing the explanation given by the regulator, the industry body has said that the current system is filled with anomalies and it imposes discriminatory and differential spectrum costs on different operators for the same spectrum acquired through the same auctions.

TRAI had pointed out that a cascading SUC dampens consolidation, spectrum trading and sharing. Under a flat SUC, however, the opportunities for arbitrage that exists in the current regime would cease to exist.

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