DoT seeks PMOs nod to raise 2G spectrum usage charges for telcos

KOLKATA/NEW DELHI: Telcos will soon have to shell out more for holding second-generation (2G) spectrum. The department of telecommunications (DoT) has sought approval of the Prime Minister’s Office (PMO) to raise 2G spectrum usage charges for all telcos. The department’s proposal is backed by telecom regulator TRAI.

Currently, all mobile services in the country are offered on 2G frequencies and telecom operators pay 2-6% of their annual gross revenue (AGR), depending on the amount of spectrum they hold, as usage charges to the government.
The DoT move implies that all telcos will have to pay higher spectrum usage charges, irrespective of the quantity they hold.

This differs from its earlier plan to increase spectrum charges only for those telcos who hold over 6.2 MHz per circle in case of GSM players and above 5 MHz for CDMA. The DoT has now told the PMO that it cannot increase spectrum charges only for operators holding more than 6.2 MHz of spectrum.

Its rationale—only large GSM players and state-owned telcos BSNL and MTNL hold radio frequencies above 6.2 MHz and increasing the charges only for these operators would be a discriminatory and lopsided move. No CDMA operator holds more than 5 MHz of radio frequencies.

Telecom regulator Trai had recommended that the government increase spectrum charges by 1% only for telcos who hold radio frequencies beyond 6.2 MHz. However, DoT’s proposal will see a 1% increase in spectrum usage charges for upto 6.2 MHz for GSM and 5 MHz for CDMA. Beyond these limits, the DoT has prescribed a 2% increase in spectrum charges. DoT has told the PMO that it has Trai’s approval for its recommendations.

In its communiqué to the PMO, the DoT has noted: “We are suggesting an across-the-board rise of 1% of AGR along with the introduction of a new spectrum slab of 8 MHz. Effectively, it will mean a 1% increase for spectrum allocations upto 6.2 Mhz and 2% beyond that compared to existing rates. Trai has agreed with the current DoT proposal on spectrum usage charges.”

Justifying the move to increase spectrum charges for all operators, the DoT said: “Over 60% of the current revenue is provided by spectrum range up to 6.2 MHz. (This is because, most players hold less than 6.2 MHz spectrum per circle and even large players have radio frequencies beyond this mark only in select circles). Accordingly, if this range is not included in the revision of spectrum usage charges, the overall contribution from the rate increase would appear lopsided and unfair.”

The DoT has said that as per its estimates, the government is slated to earn about Rs 3,812 crore as spectrum usage charges in 2008-09. Touching on the impact of the decision, DoT notes: “The estimation of the impact of the 1% rise in 4.4 MHz spectrum indicates an average increase of Rs 1 crore for every Rs 100 crore that the operator earns. This is very significant as the revenues of operators are increasing.”

Currently, a GSM operator holding 4.4 MHz of spectrum and a CDMA player with 2.5 MHz pay 2% of their AGR as spectrum usage charges. For GSM players holding 6.2 MHz and CDMA operators with 5 MHz of spectrum, the usage charges stand at 3% of AGR. The DoT has sought approval to increase these charges by 1%.

Source : Economic Times