Any recommendation back to TRAI could take months as TRAI chairman demits office soon

Telecom regulator TRAI on Monday released its recommendations on auction of spectrum brought back to the government pool through the cancellation of 122 licences by the Supreme Court in its February 2, 2012 judgment.

Within hours of its release, the Recommendations were unanimously labelled “arbitrary, regressive and inconsistent” by the entire telecom industry for calling for a reserve price of Rs. 14,422 crore/per MHz for the 700 MHz band, Rs. 7,244 crore/MHz for the 800/900 MHz band and Rs. 3,622 crore for the 1800 MHz band. This translates into a reserve price of over Rs. 18,100 crore for a block of 5 Mhz in 1800 Mhz band.

The TRAI has also unsettled the public sector firms by recommending immediate withdrawal of excess spectrum of 2x2.4 MHz from MTNL. It has further quoted its earlier recommendations of May 2010 which says excess spectrum from both BSNL and MTNL should be withdrawn.

With the industry jointly up in arms, the government will be forced to re-examine the issue which requires a mandatory reference back to the TRAI. This could push the entire schedule ahead by months as the TRAI chairman is set to demit office, which means the entire issue will have to be addressed afresh by the new TRAI chairman.

Those firms holding CMTS licence/UAS licence/Unified licence or eligible for grant of Unified Licence are eligible to bid in these auctions, which shall be conducted using Simultaneous Multiple Round Auction (SMRA) format. The spectrum validity is for 20 years.

The recommended sequence of spectrum auction is auction of 5 MHz in the 1800 MHz band as early as possible in 2012-13 itself; allocating additional 1.25 MHz spectrum to the holders of 4.4 MHz in 1800 MHz bands, subject to legal opinion; auction of spectrum in the 800 MHz band in the current financial year; auction of the 900 MHz band in the first half of 2013-14; auction of the balance spectrum in 1800 MHz band in the first half of 2013-14; auction of the 2100 MHz band in the second half of 2013-14; auction of the available spectrum in the 700 MHz band in the first half of financial year 2014-15; and auction of the additional spectrum in the 2300 MHz band in the second half of financial year 2014-15.

Licensees who have acquired spectrum through auction shall be levied spectrum usage charge at the rate of 1% of the Adjusted Gross Revenue (AGR). However, licensees with a mix of spectrum assigned administratively and spectrum acquired through auction and licensees who have been assigned spectrum only through administrative process shall be levied spectrum usage charges at the rate applicable on the administratively assigned spectrum and on the entire AGR. The calculation of licence fee as well as spectrum usage charge will be based on a minimum AGR (which shall not be less than 5% of the bid amount) or the actual AGR, whichever is higher.

Spectrum becomes technology neutral and service agnostic, which simply means that spectrum in any band can be used for deploying any services in any technology. Mortgage of spectrum may be allowed by spectrum holders to a registered Indian financial institution against borrowings.

The TRAI has further recommended that the Department of Telecommunications together with the Finance Ministry and the Reserve Bank of India remove all the road blocks in the framework for borrowings by the telecom sector against the spectrum assigned.

The TRAI says spectrum trading should be allowed between spectrum holders which have obtained spectrum through auction or have paid the auction determined price for the spectrum held by them, only for the limited purpose of frequency configuration (arranging spectrum in a contiguous band).

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