Telecom Commission proposes 3% spectrum usage charge

In a boost to telecom operators, the Telecom Commission on Tuesday proposed a lower 3 per cent spectrum usage charge (SUC) from the operators’ adjusted gross revenue (AGR) for all bands.

The government had in January 2014 decided to cap the SUC at a flat 5 per cent for spectrum that was to be procured in future auctions. 

Now, the SUC will be calculated using a weighted average formula based on the total spectrum holding. However, the proposal will be limited only to the upcoming auction. The Centre will decide later on user charges for auctions to be held in future.

“The proposal or the draft note, including all other related issues on the upcoming auction, is slated to go to the Cabinet within a week. If passed, it would be a ‘win-win situation for all,” government official told

BusinessLine . The move will result in lower spectrum user charges for companies while protecting the government’s revenues, and as a result, no one will be impacted, said the official. The annual SUC collection by government as of now goes up to ₹7,000 crore.

If approved, the decision could help operators such as Bharti Airtel, Aircel and Reliance Jio (then Reliance Communications) that had bought the 2,300MHz in 2010 auctions. According to government sources, it would bring down RJio’s SUC from 5 per cent to 2.88 per cent, Airtel’s from 4.90 per cent to 3.74 per cent and Aircel’s from 3.24 per cent to 2.83 per cent.

The decision was taken after the Department of Telecom sought the view of the Attorney General (AG), said the official. The AG reportedly said the DoT cannot increase the user charges of 1 per cent of AGR on 2,300 MHz bandwidth auctioned in the 2010 spectrum auctions.

“We have made a suggestion that we will take the weighted average, keeping 2,300 MHz (auctioned in 2010) band at 1 per cent and weighted average of 1 per cent. This is for all spectrum in the upcoming auction.,” a government official privy to the meeting said. The official said 3 per cent will be charged for all bands – 700MHz, 800MHz, 900MHz and 2500MHz – in the auction, slated for mid-July. The weighted average will be calculated accordingly.

Relief for telcos However, while the decision could bring relief for the telecom majors in the upcoming auctions, it may not be a good practice in future.

“The 5 to 3 per cent SUC for new spectrum may be a welcome step, but continuing effort to weighted average does not make sense as all spectrum is liberalised,” Rajan S. Mathews, Director General, Cellular Operators Association of India, said.