New DoT plan to cut spectrum usage fee for existing operators

| | Updated on: Jan 01, 2014

Compromise formula to resolve stalemate between GSM players and Reliance Jio

The Department of Telecom is considering a middle path to resolve the stalemate over introducing a uniform spectrum usage charge regime. Under this new plan, the usage fee for incumbent mobile operators will be brought down to 3 per cent of the annual revenues compared with a maximum charge of 8 per cent at present.

But broadband players will be allowed to continue paying the existing rate of 1 per cent in order to address the concerns raised by Reliance Jio. However, if broadband operators acquire any additional spectrum then they too will have to pay fee at 3 per cent. If this option is accepted by the Government, then it will help incumbent players such as Airtel and Vodafone save nearly Rs 400 crore a year. Reliance Jio may not gain much unless it decides against buying any more spectrum. However, this is one of the six options proposed by the DoT for the consideration of the Telecom Commission in a bid to end the stalemate. The industry is sharply divided over the usage charge with the incumbent GSM players and Reliance Jio taking opposite views.

Under the existing policy, incumbent operators, including Airtel and Vodafone, pay between 3 per cent and 8 per cent of their annual revenues as spectrum usage charge (SUC). Broadband operators such as Reliance Jio pay only 1 per cent. TRAI had proposed bringing all players under a flat 3 per cent fee. Reliance Jio opposed this as it would have to pay a higher fee.

Legal issue The DoT has also other options including asking everyone to pay a flat fee of 5 per cent. While this would make it revenue neutral for the Government, Reliance Jio may challenge it in court on grounds that it was promised 1 per cent fee when it bought broadband spectrum in 2010. The DoT is taking legal opinion on its proposals

The Telecom Commission is expected to meet this week to take a view on the way forward before the Empowered Group of Ministers makes a decision.

A decision on this issue is crucial for the bidders in the upcoming auction because a flat fee will encourage operators buy more spectrum while an escalating charge may hold back companies from increasing their air wave holdings.


Published on March 12, 2018

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