Flat 3% spectrum usage charge for auctions

Source: Business Standard, Aug 04, 2016

New Delhi: The Cabinet on Wednesday approved the Telecom Commission’s proposal of a flat three per acent spectrum usage charge (SUC) for airwaves to be procured in future and weighted average for the remaining spectrum.

The notice inviting application is expected to be issued next week and auction will commence in September. An official statement said spectrum that will be acquired in the forthcoming auction in 700, 800, 900, 1800, 2100, 2300 and 2500-MHz bands would be charged at the rate of three per cent of adjusted gross revenue (AGR) excluding the revenue from wire-line services.

“The weighted average of SUC rates across all spectrum assigned to an operator in all access spectrum bands including BWA (broadband wireless access) spectrum obtained in the 2010 auction would be applied for charging SUC subject to a minimum of three per cent of AGR excluding revenues from wire-line services,” it said.

The weighted average is to be derived by the sum of product of spectrum holdings and applicable SUC rate divided by the total spectrum holding. The weighted average rate shall be determined operator-wise for each service area.

According to the weighted average formula, if an operator has 20 MHz of BWA spectrum (2,300-Mhz band) in any circle which has a SUC of 1 per cent and 2X5 (10 MHz) in other band for which SUC is, say, 5 per cent, the weighted average can be calculated as follows: 20X1+10X5/30=2.33 per cent. But as the floor rate is 3 per cent, the operator will have to pay a minimum 3 per cent SUC and not 2.33 per cent. Similarly, if an operator has spectrum in more bands, the weighted average can be calculated by the sum of product of spectrum holdings and applicable SUC rate divided by total spectrum holding. For spectrum acquired in 2015, a SUC of five per cent is charged. Earlier, for administratively allotted spectrum, the SUC was linked to quantum of airwaves (charge with slab rate of three-eight per cent).

The government will get Rs 5.66 lakh crore if all the airwaves are sold at base price. In the current financial year, it expects to raise Rs 64,000 crore from the auction of 2,300 MHz of spectrum and Rs 98,995 crore from various levies and services in the telecom sector.

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

SUC, one of the many levies that 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.

Currently the SUC being charged varies across bands. The government gets around Rs 7,500 crore annually from SUC and it will increase after the new method kicks in.

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