By opting for a slab-based spectrum usage charge (SUC), the Empowered Group of Ministers has made a mistake. Under this, newly acquired airwaves will attract an SUC of 5 per cent of the annual gross revenue. Existing operators will have to pay a revenue charge based on the weighted average of their SUC bands plus 5 per cent on the revenue from new spectrum.
The move neither brings new and existing operators on the same playing field, nor does it remove arbitrage opportunities. The system of escalating levies for higher amounts of spectrum persists. It should have been discontinued with the introduction of the auction system for allocating spectrum. The escalating regime worked fine when the Government was allotting spectrum on the basis of an operator’s subscriber base, with no upfront fee.
An escalating levy was then put in place to discourage operators from hoarding spectrum. But with the Government now selling airwaves through an auction mechanism, there is no rationale for the Government to collect an additional fee. This is like having to pay monthly rent even after one buys a house.
The other concern is over allowing broadband operators to continue with their existing 1 per cent revenue share. This could give an arbitrage opportunity to those with 4G spectrum. For example, operators such as Airtel and Reliance Jio will soon launch both voice and data services on smartphones. While the data would be carried on 4G, the voice services would be loaded onto 3G and 2G spectrum. It would be very difficult to check if the operator is separating revenue correctly. In the past, operators have been penalised for showing higher income on spectrum licences that mandate a lower revenue share.
A complete waiver of SUC is the ideal solution, but considering revenue implications, a flat fee of 1 per cent for all would have been the next best option.
The upshot of all this is that the consumer loses out, marking the end of an era of cheap mobile telephony.