Telecom Commission to meet on January 7 to discuss spectrum usage charges

Telecom Commission to meet on January 7 to discuss spectrum usage charges
The inter-ministerial body Telecom Commission (TC) is likely to meet on January 7 mainly to discuss proposal of levying uniform annual fee on spectrum usage across all players in the sector.

"Probably on January 7," a government official told PTI when asked about the date of the TC meeting.

The views of TC will be sent to the Empowered Group of Ministers (EGoM) on telecom, headed by finance minister P Chidambaram, which will take a call on it.

The EGoM could also determine whether their decision will need final approval from the Cabinet.

Sources have confirmed that the panel will discuss recommendations made by TRAI for levying a uniform spectrum usage charge (SUC) of 3 percent of revenue earned by mobile operators from telecom services from April 1, 2014 and keeping the upper limit of SUC at 5 percent.

Levied annually by the government,, SUC at present varies from 3-8 percent for mobile service providers and 1 percent for holders of broadband wireless access (BWA) spectrum that can be used for 4G services.

The uniform SUC, if implemented as per recommendations made by TRAI, will provide relief for mobile operators such as Airtel, Vodafone and Idea, but will increase rates for BWA spectrum holders including Reliance Jio Infocomm Ltd (RJIL).

The Department of Telecommunications is likely to place before inter-ministerial panel Telecom Commission six different scenarios based on probable revenue impact for the exchequer, based on changes in annual spectrum usage fee to be paid by the companies.

The DoT committee, which examined TRAI's recommendations, stated that after "deliberating on the matter (uniform spectrum usage charge) in totality, a revenue neutral SUC rate may be determined," sources said.

The first scenarios proposed to be placed before TC include acceptance of charging 3 percent SUC recommended by TRAI, starting with the purchase of airwaves in the upcoming auction. It is of the view that in this case there should be no change in existing slab rate if telecom companies buy additional spectrum.

Further, the proposed upper slab rate under this scenario is 5 percent and SUC for BWA spectrum is to be raised to 3 percent from existing 1 percent, the DoT panel is learnt to have said.

If this option is accepted by the government then revenue from six licences that are expiring in 2014 will be reduced to Rs. 226 crores from Rs. 426 crores that they paid in 2011-12 under the existing rates.

In other scenario, the DoT committee has suggested levying 3 percent SUC on spectrum being put for auction and fixing the upper limit at 6 percent without increasing SUC applicable on BWA airwaves.

Under this option, the SUC on BWA will be increased to 3 percent from one percent at present on any further acquisition of such airwaves, sources said.

If this goes through, the financial implication would remain same on the 6 licences expiring in 2014. However, revenue accruing to the government by increasing charges on BWA spectrum have not been estimated yet.

Under the third option being worked out is a minor modification of the second scenario, that is fixing the upper limit at 5 percent.

In the fourth option, the committee has suggested keeping SUC at 3 percent, BWA spectrum SUC at 1 percent and with other type of spectrum at 3 percent.

In the fifth scenario, the committee has suggested levying 3 percent SUC for standalone auctioned spectrum and a fee of 1 percent for BWA unless combined with other airwaves.

In the sixth scenario, the committee has suggested charging SUC at 5 percent on all spectrum including that acquired through auction.

Sources said at the present 6 percent SUC slab rate, the revenue is estimated to be at Rs. 1,370 crores while the CAGR is at 8.29 percent.

"Next year SUC at 5 percent will therefore be at Rs. 1,403 crores but applying minimum SUC under third option would lead to companies paying SUC of Rs. 1,370 crores. Depending on the licence duration and rate of growth, the period required to bring SUC at prescribed rate will vary," sources said.

However, sources said that all the options drawn up by the DoT can have legal implications which are being examined.

While GSM players like Airtel, Vodafone, Idea Cellular and Uninor have been demanding implementation of uniform SUC, RJIL has opposed any such move.

RJIL has opposed changes in existing SUC rates and said "any post facto deviation in auction rules which extends undue benefit to incumbent operators will not stand judicial scrutiny".
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Further reading: 4G, Auction, EGoM, Network, Operators, Spectrum, TRAI, Telecom
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