The fixed annual license fee (that escalates annually at the rate of 15 per cent) determined by the auction procedure in Phase-I of FM Licenses for Private Broadcasters has proved to be unviable. In such a scenario, migration to a one-time entry fees plus revenue sharing model, as in the case of cellular licenses (Telecom) in India, is the most suitable option.

Entry fees: The Committee recommends that the entry fees should be determined by a competitive bid process that will reflect the true market value of the frequency.

Revenue Share: In light of the fact that:

* The Tenth Plan has also envisaged a revenue share mechanism in radio.
* The revenue sharing arrangement has been tried in a number of instances in India (like Telephones/Major ports etc.) and in the media sector as well (in case of DTH). 

* Revenue understatement may be a cause of concern in the case of large public utilities. But radio is comparatively a small local industry with much smaller capital investment and revenue flows. The only form of revenue in the radio industry is in the nature of advertising and opportunities of revenue understatement are therefore much less in comparison to an infrastructure industry like electricity or oil. 

* Detailed guidelines have been formulated in relation to related party transactions in Accounting Standard 18 of the Institute of Chartered Accountants of India.
* Internationally the revenue share model is used in spectrum allocation (As in Australia) and broadcast licenses.

The Committee recommends a revenue share of four per cent of gross revenue. This revenue share shall be subject to review by a committee every five years and may be increased/decreased, depending on the then prevailing market conditions. Such revision, covered under the agreement, will not be considered as a change in law.