Revenue separation for 4G spectrum is complex, needs audit: DoT panel

A technical committee of the Department of Telecom has said that an audit mechanism must be set up to ensure that 4G operators such as Reliance Jio correctly segregate revenues earned from broadband spectrum (2300 MHz) and other frequency bands.

The committee said the process to separate revenue between spectrum bands could be a complex task requiring constant audit and monitoring by the Government.

The committee has also listed at least eight instances where revenues earned by operators cannot be segregated at all.

They include revenue from value added services, unused vouchers and bundled/combo tariff plans.

Even where income earned on different spectrum bands can be separated, DoT will have to put in place a tamper-proof mechanism to ensure that the operators are not taking advantage of the arbitrage, the report said.

The report has huge ramifications for operators such as Reliance Jio, which has a mix of spectrum in the 2300 MHz and 1800 MHz bands. Reliance Jio and Bharti Airtel had argued that it was possible to separate all revenue earned from the 2300 MHz band and other frequency bands.

This is important because broadband operators such as RJio have been allowed to pay a lower spectrum usage charge of 1 per cent of the annual revenue earned from services offered on the 2300 MHz band compared to an average of 5 per cent for other spectrum bands.

The DoT panel is worried that a player may load up higher revenues on the 2300 MHz band to take advantage of the lower spectrum usage charge.

For example, if RJio offers 4G services using both 2300 MHz and the 1800 MHz bands, the DoT would want to know the exact income the company earned for each band.

While RJio has said its network is capable of making the distinction, DoT had not allowed a similar plea from 3G operators in 2010.

Though the panel has not disallowed RJio’s case, it said that to make this separation reliable and tamper proof, DoT should come out with a clear set of guidelines specifying what needs to be done at the network level. But the worry for RJio could be on those services where the panel has ruled out revenue separation.

Value-added services, for example, are touted to be one of the biggest revenue earners for 4G companies. It has suggested that DoT could charge a higher revenue share on such services.

The panel’s report will be now be considered by DoT, which will make its own set of proposals to the Telecom Commission for a final view on the matter.

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