DoT estimates 86% reduction in spectrum usage charges after 5G auctions

Ayushi Kar | | Updated on: Jun 13, 2022

| Photo Credit: MUSTAFAH KK

In September, the Cabinet had decided that operators will not have to pay SUC on additional spectrum purchased by operators 

Estimates made by the Department of Telecommunications reveal that spectrum usage changes (SUC) will reduce by 86 per cent after the upcoming 5G auctions.

According to the DoT’s calculations, if each operator wins 40MHz of spectrum in the mid-band (3300MHz) and 400MHz in the mm-wave band (26GHz), there will be an 86 per cent decrease in SUC. 

September bailout package

In September, as part of the telecom bailout package, the Cabinet decided that operators will not have to pay spectrum usage charges on the additional spectrum purchased by operators. 

Spectrum usage charges given by each operator are computed as a specific percentage of the adjusted gross revenue earned by operators. At present, operators give 3 per cent of their revenues every year as spectrum usage charges. This approximately equates to around ₹5,000 crore in revenue from SUC to the government. 

With zero per cent SUC on the future spectrum, using weighted average calculations, experts believe that purchasing mm-wave could be a cost-effective way to drive down future SUC to an annual charge below 0.5 per cent of the overall revenue for operators. This could result in annual savings of thousands of crores for cash-strapped operators. 

86 per cent drop

An 86 per cent drop in revenue from SUC will, therefore, be a major blow to the Centre’s pocketbooks and, thus, it remains to be seen if the DoT might ask the Cabinet to roll back its September decision.

As per BusinessLine’s previous reporting, the DoT has already asked the Cabinet to roll back on its previous September decision to give operators spectrum for 30 years. DoT now wants the cabinet to allow operators to purchase spectrum for 20 years in order to reduce the cost of acquiring spectrum for 5G. 

The Cabinet is set to consider the DoT’s proposals for the upcoming 5G auctions on Wednesday. Issues the Cabinet will have to weigh in on include deciding whether spectrum should be directly allocated to enterprises for private networks, or whether telcos should be given the sole charge on the market. The Cabinet will also be approving the spectrum reserve price for 5G, set by the DoT, as well as approve 5G spectrum for the BSNL. 

Published on June 13, 2022
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