Putting to rest the uncertainty over collecting spectrum usage charge, the Department of Telecom has decided to allow telecom companies with broadband spectrum (2300 MHz band) to pay 1 per cent of their annual revenues as spectrum charges. Operators using other spectrum bands, including 900 MHz and 1800 MHz, will have to pay a 5 per cent charge.
For example, Reliance Jio, which has spectrum in the 2300 and the 1800 MHz bands, will be able to pay 1 per cent and 5 per cent of the revenues it earns respectively from offering services using these two frequency bands.
Although both these frequency bands are now suitable for broadband services using 4G technologies, the DoT has agreed to collect different charges because in 2010 when spectrum in the 2300 MHz was auctioned, bidders were told that they will have to pay a fee of only 1 per cent.
This was done because the Government wanted the winning bidders to offer affordable broadband services. But technological advancements have enabled operators to now offer broadband services on other spectrum bands, including the 1800 MHz and 900 MHz, for which the Government has decided to collect 5 per cent charge. Therefore, the big question before the DoT was whether revenue earned from different spectrum bands can be separated or not.
A technical committee of the Department of Telecom had earlier said that an audit mechanism must be set up to ensure 4G operators such as Reliance Jio correctly segregate revenues earned from broadband spectrum and other frequency bands. The DoT panel was worried that a player may load up higher revenues on the 2300 MHz band to take advantage of the lower spectrum usage charge.
Reliance Jio had, however, said it had a fool proof mechanism to separate revenues. Taking a middle path, another wing of the DoT had proposed a weighted average model. Under this formula, Reliance Jio would have had to pay close to 2 per cent of its annual revenues.
But the final order, which the DoT has prepared, keeps the original formula allowing broadband players to pay a lower fee for the spectrum they won in 2010.
The DoT has put the onus of revenue separation on the operators. “The operator will have to put in place a system of independently monitoring and verifying the revenue earned from broadband frequencies to prevent revenue misrepresentation,” states the DoT order seen by BusinessLine .