TRAI sticks to earlier position of flat regime rather than a slab-based one for spectrum

NEW DELHI: The Telecom Regulatory Authority of India has reiterated its earlier “consistent position” that the Spectrum usage charge (SUC) must transition from a slab-based regime to a flat ad valorem regime.

The ease of implementation, level playing field, encouragement to bidders to participate in the auction are key rationales for such a position being taken, the regulator has said in its response to a letter received from the Department of Telecom following TRAI’s earlier recommendations of 27 January this year.

TRAI points out that the trading of spectrum is now happening and would gain momentum in due course. It said merger and acquisition would also take place in the sector in the near future going by recent media reports. All this would make the SUC regime more complex and would need an intricate and large system for smooth implementation, it reiterates.

The Cellular Operators Association of India has also supported a flat rate instead of a slab-based one.

At the same time, TRAI has suggested a separate formula for computation of the charges according to the weighted average method, as against the one considered by the Telecom Commission.

“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 letter to the Department of Telecommunications (DoT).

The Attorney-General had said “the contract which emerged after the 2010 auction and which is legally binding on both parties, does not permit the Government to change the SUC for BWA unilaterally.” As the Revenue cannot be segregated for each band, there is difficulty in finding a multiplicand for the SUC rate for that band. As an alternate solution, the Attorney General recommended that the Weighted Average of SUC rates across all spectrum bands, including BWA Spectrum obtained in the 2010 auction, should be employed on an operator-wise basis to calculate the SUC in a legally valid manner.

Trai has recommended that the DoT should also include several alternate factors such as last market-determined price and technical efficiency of spectrum bands to arrive at the weighted average for computing the SUC. The telecom watchdog said that if the spectrum quantity in a band was the only weightage for calculating weighted average formula, it may lead to certain shortcomings.

“Part of this shortcoming is based on the fundamental difficulty of using a proxy - any proxy, on which a weighted average computation is based, will not exactly map the revenue earned by each TSP (telecom service provider) from each band,” Trai said in its letter.

The Telecom Commission had cleared a proposal to use weighted average formula for calculating spectrum SUC based on the total spectrum holding, for all bands allocated to telecom operators.

DoT had requested the Authority to provide recommendation on SUC in the context of valuation and reserve price of spectrum in 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz spectrum bands.

In January, TRAI had recommended rates for auction of spectrum in the 700 Mhz, 800 Mhz, 900 Mhz, 1800 Mhz, 2100 Mhz, 2300 Mhz and 2500 Mhz bands.

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