India's TRAI OK With 2G Fee Hike

The Telecom Regulatory Authority of India (TRAI) has agreed to the Department of Telecom's proposal to jack up the revenue sharing charges mobile operators must pay for 2G spectrum and has asked the DOT to revisit the price of licenses allocated for each service area. (See A Guide to India's Telecom Operators.)

The Department of Telecom has proposed a 1 percent, across-the-board increase in the portion of adjusted gross revenues (AGR) a mobile operator pays to use blocks of spectrum. The percentage charge scales up in relation to the amount of spectrum an operator has been allocated, and TRAI had proposed increasing fees beyond blocks of 8MHz, as shown in Table 1.

Table 1: Spectrum fee recommendations
Amount of spectrum Current % of AGR charged TRAI recommendation (%) DOT recommendation (%)
Up to 2 x 4.4 MHz/2 x 5 MHz 2 (fixed in 2002) 2 3
Up to 2 x 6.2 MHz 3 (fixed in 2002) 3 4
Up to 2 x 8 MHz 4 (fixed in 2002) 4 5 (up to 8.2 MHz)
Up to 2 x 10 MHz 4 (fixed in 2002) 5 6 (up to 10.2 MHz)
Up to 2 x 12.5 MHz 5 (fixed in 2004) 6 7
Up to 2 x 15 MHz 6 (fixed in 2004) 7 8
Beyond 2 x 15 MHz "-- 8 (new) 9

The Department of Telecom wrote in a letter to the regulator that "the rate revision in the past did not address the spectrum range of 4.4-8 MHz which contributes to the bulk of the customer reference... The proposed option is unlikely to burden the service providers."

The TRAI, in its response Wednesday, disagrees, saying, "the proposed option is likely to burden the service providers, as in view of the Authority, the proposed changes would amount to around Rs. 1000 crores [10 billion Indian Rupees/US$233 million] as additional payment of spectrum charges by the service providers."

But, as with its recent recommendations on WiMax and 3G spectrum, the regulator is acquiescing to the DOT's proposals to get things moving. (See Indian Regulator Responds to DOT on 3G and India's Regulator, DOT Butt Heads on WiMax.)

"However," it says, "the Authority has decided to go along with the proposal of enhancement of spectrum charges along with the amendment in spectrum slabs as mentioned in the letter of DoT taking into consideration the broader picture of telecom sector."

The TRAI says it will also consider approving a one-off charge for operators that have received blocks of spectrum beyond their initial allocation and were not required to pay for it.

Spectrum is allocated initially in a block of 4.4 MHz for GSM-based operators and 2.5 MHz for CDMA operators. Additional spectrum is granted on the basis of subscriber growth and efficiency benchmarks.

The regulator has suggested applying the charge to operators with more than 10 MHz of spectrum, but the DOT proposes charging them for more than 6.2 MHz.

TRAI writes: "in order to reconsider the issue, the Authority request DoT to clarify what will be the 'suitable one time charge'. The details of this scheme 'one time charge' would be very necessary for examining the proposal from legal and financial point of view. After receipt of the details of scheme of one time charge, the Authority shall send its recommendations to DoT."

The revisions come as several new operators prepare to enter the market and existing operators expand their network coverage in the world's fastest growing mobile market. The Department of Telecom has recently allocated spectrum to operators in a number of India's telecom circles, or service areas, and is looking to free up some additional frequency in other circles. (See Indian Gov't Grants Mobile Licenses, India Begins Allocating GSM Spectrum , and Vendors Queue Up for Indian Deals .)

As the TRAI notes in its letter, the license and spectrum fees mobile operators pay was set based on bidding for the fourth mobile license issued in 2001. It's a very different market today, with 12 carriers and as many as five more on the way.

Fees for obtaining a unified access service license (UASL) and the portion of adjusted gross revenues an operator pays vary depending on the category of the circle. (See page 5 of A Guide to India's Telecom Operators.)

With that in mind, "The Authority feels that as the DoT is revisiting the various levies being charged from the UASLs, therefore it is appropriate time for the DoT to revise the entry fees of the different service areas also, so as to bring them in line with the present market realities."

— Nicole Willing, Reporter, Light Reading

Interested in learning more on this topic? Then come to Broadband 2.0: Making the Business Case, a 2-day roadshow that will provide attendees from among India's fixed and wireless carrier communities with an exclusive and intensive overview of how broadband wireline and wireless services can be enhanced to improve ARPU, ROI, and churn. The event will be staged in New Delhi on September 10 and Mumbai on September 12.

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