DoT panel rejects TRAI proposals on spectrum pricing

A panel set up by the Department of Telecom has rejected the telecom regulator’s proposal to reduce the reserve price for spectrum auction by 60 per cent.

The panel has said that the valuation did not reflect the value of the spectrum keeping in view the future growth potential and projections in the telecom sector.

“For arriving at valuation of spectrum based on production function, TRAI has used base station cost for 2G services. Therefore, the present valuation does not appear to reflect the value of the liberalised spectrum as its potential for use is much more than 2G over next 20 years,” the panel said in its report to be submitted to the Telecom Commission, which will take a final decision.

If the panel’s report is accepted then the next round of auction will get delayed because the DoT will have to send the proposals back to TRAI for a review. The Government was hoping to conduct the auction in November with a view to generating revenues.

TRAI had proposed reducing the reserve price from the earlier recommended Rs 18,110 crore to Rs 7,480 crore for 5 Mhz pan- India spectrum in the 1800 Mhz band.

The DoT panel has also rejected TRAI’s recommendation to introduce a flat charge for using spectrum. While TRAI had said that all operators should pay three per cent of their annual revenues for using the spectrum, the panel has said that this would go against the rules specified at the time of auctioning broadband spectrum in 2010.

This is in line with what Reliance Jio had said while contesting the TRAI proposal. Players that won broadband spectrum, including Reliance Jio, were told that they would have to pay only one per cent of their revenues for using the airwaves.

Punching holes in the regulator’s explanation to permit spectrum trading, the DoT panel said that this could create monopolies. It said that TRAI should take a holistic view of the matter including provisions to curb fly-by-night operators entering the scene just for trading benefits.

The panel has also asked for a relook at the way TRAI proposes to deal with the 800 Mhz band, currently used by CDMA players. The regulator has said that this band should not be put up for auction but must be earmarked for extended GSM service.

The committee said that this was not feasible as it would require a lot of re-arrangement in the existing allocation. The regulator’s idea of adding fresh roll out obligation to cover all villages with more than 5,000 people has also not found favour. The panel said that this is tantamount to changing the rules mid-way and, hence, legally untenable.

thomas.thomas@thehindu.co.in