The Telecom Regulatory Authority of India (TRAI) on Wednesday said the weighted average formula, as suggested by the telecom department, for calculating the annual charge that operators pay to use airwaves “is at best a temporary solution”.
The regulator also proposed its own weighted average formula to calculate the spectrum usage charge (SUC) to replace the formula based on operators’ total spectrum holding approved by the Telecom Commission, stating that “the current approach creates a distortion…”
Bid value
The new formula takes into account the ‘bid values’ by telecom service providers (TSPs) for each band. “As bid values are a reflection of how the TSP 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,” TRAI said.
The regulator added, “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 Ld. AG and proposed by DoT.”
Paving the way for mega spectrum auction likely to be held in September, the Union Cabinet had last month approved the sale of all available airwaves. However, it was decided to refer back the issue of SUC to TRAI for its recommendations.
Currently, telecom operators pay in the range of 3% to 8% of their adjusted gross revenue as SUC for spectrum bands expect 2300 MHz, for which the charge is 1 per cent of AGR. This arbitrage may be exploited by operators as it is not possible for the government to segregate revenue accrued from different bands of spectrum.
The telecom department was unable to make any changes towards a flat SUC after the AG’s view that the fee for airwaves bought in the 2010 sale cannot be altered due to the rules of that spectrum auction.
The authority reiterated “its consistent position that the SUC regime 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 authority pointed out that as has been recognised by the Government of India, as a matter of policy, it is desirable to move to a flat rate SUC and adoption of weighted average could provide a path to such transition. “While taking a view on this matter, all possible steps should be considered by the DOT to move to a simple, transparent and flat ad valorem SUC regime in accordance with law,” the regulator added.
