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Telecom regulator picks holes in DoT’s spectrum levy formula

The Telecom Regulatory Authority of India (TRAI) on Tuesday picked holes in the stand taken by the Department of Telecom on the formula proposed for collecting spectrum usage charge.

Sticking to its stand of moving towards a flat levy for all operators, the regulator said the formula suggested by the DoT may not be “close to reality” and it can at best be a temporary solution.

The key difference is in the manner in which the DoT has proposed to calculate the new spectrum charges.

Under the existing rules, operators pay different rates based on the type of spectrum they own.

For example, operators with spectrum in the 2300 MHz band pay 1 per cent of their annual revenues as spectrum fee, while those with airwaves in 900 MHz and 1800 MHz pay about 3-4 per cent.

DoT has now proposed a formula based on weighted average principles that take into account the total quantum of spectrum an operator holds.

The TRAI, on the other hand, wants a flat fee for all operators irrespective of the quantum of spectrum the operators hold. As a short-term measure, the TRAI has instead proposed another formula based on the revenue earned by the operator from each frequency band. This could mean higher payouts for telcos compared to the DoT scheme.

For example, an operator with 20 MHz spectrum in 2300 MHz band and another 5 MHz spectrum in any other band would be currently paying 4 per cent as revenue share. Under the DoT’s weighted average formula the operator would pay 2 per cent of revenues.

But under the TRAI formula the operator would end up paying 2.8 per cent, assuming that the operator earns 80 per cent of its revenues from spectrum other than 2300 MHz.

“The Authority is of the view that taking the spectrum quantity in a band as the sole weightage in the weighted average formula may lead to certain shortcomings,” the TRAI said. “Each spectrum band has its characteristics in terms of range, penetration, capacity, eco-system etc.

Accordingly, if DoT chooses to adopt weighted average rate of SUC, then it would be appropriate for it to carefully explore alternate proxies which may be used for computing the weighted average like technical efficiency factor and the market-determined price for such spectrum band,” it added.

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