Telecom Commission sticks to its model for calculating SUC

Source: Business Standard, Jul 26, 2016

New Delhi: The Telecom Commission has decided to continue with its earlier model for calculating spectrum usage charges (SUC) using the weighted average, but it has added a condition that the annual charges for any operator will not fall below 3 per cent.

For new spectrum auctions, a flat rate of three per cent will be charged, for the remaining airwaves the weighted average method will apply.The Telecom Commission, the highest decision-making body of the department of telecommunications, decided to overlook the recommendations by the Telecom Regulatory Authority of India (Trai) for calculating SUC incorporating the market-determined price and technical efficiency of a band.

Sources in the Department of Telecommunications (DoT) said the panel’s decision would create a level-playing field among operators and also increase the revenue of the government.The decision will now be placed before the Cabinet for approval next week after which a notice inviting application (NIA) will be issued. After the issuance of the NIA, spectrum auction is likely to start in 45 days.

The government expects to garner Rs 5.66 lakh crore at base price from the spectrum auction, the biggest ever.

“We have to maintain a level playing field and then move towards a level of three per cent, which Trai has been suggesting. The recommendation made by the Telecom Commission earlier will stay. A new point has been added that all telecom operators will have to pay three per cent,” an official source said.

Elaborating on the decision, the source said DoT would adopt the weighted average formula as it had calculated in its last proposals to the Cabinet, but if an operator’s SUC fell below 3 per cent, it would have to pay the government the floor rate.

The SUC issue became complex due to a difference in rates for the 2,300 megahertz (Mhz) band and other bands. SUC for the 2,300 Mhz band is one per cent while it is higher for other bands.

Bharti Airtel, Aircel and Reliance Jio Infocomm won spectrum in the 2,300 MHz band in the 2010 auctions. As the SUC slabs are different for different bands, DoT wanted to simplify things by introducing a weighted-average formula.

The decision led to SUC for Reliance Jio being 2.88 per cent, Aircel 2.83 per cent and Airtel 3.8 per cent.

However, with the panel suggesting a new clause of a minimum three per cent SUC, Reliance Jio will have to pay 3.05 per cent, Aircel three per cent and there will be no change for Airtel. Reliance Jio’s 3.05 per cent is because it has spectrum sharing and trading agreements.The decision has no impact on Vodafone, Idea Cellular and other companies, which do not hold spectrum in the 2,300 Mhz and 2,600 Mhz bands that were auctioned in mid-2010.

Vodafone pays around 4.8 per cent SUC and Idea 4.5 per cent.SUC, one of the many levies telecom operators pay to the government, has been a bone of contention. Telecom companies have been asking for a uniform charge across bands, given the difficulty in calculating separate charges, with multiple operators offering data services on various bands.

The SUC now varies from five per cent to one per cent across bands. The government gets around Rs 7,500 crore annually from SUC and it will increase after the new method kicks in.

“Though SUC rates will come down, the actual realisation will increase with fresh spectrum purchase. Gradually, our effort is to achieve a three per cent uniform rate and in future we may even go lower as recommended by Trai,” the source said.

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