Spectrum sale: Telecom Commission prefers higher base price than Trai

New Delhi: The government wants to leave no stone unturned to earn maximum revenue from upcoming spectrum auctions, after two previous botched attempts. So the decisions of the Telecom Commission on Wednesday, where it overturned the pricing formula of sector regulator Trai, should be seen in this context.

The government is eyeing Rs 11,000 crore revenue from auctioning 900 mhz spectrum in three circles and 1800 mhz spectrum in all circles in January 2014. The Telecom Commission recommended that:

1. Base price of 1800 mhz spectrum pan India should be raised by 15 percent since it will be higher for eight circles (metros and A category circles). The increase is from prices recommended by Trai.

2. Base price of 900 mhz spectrum in three circles (where auctions are proposed) should be higher by 25 percent compared to what Trai recommended.

3. It has now also asked for pricing from Trai to auction the 800 mhz band simultaneously.

According to minutes of the Telecom Commission meeting which were reviewed by Firstpost, Trai has been asked to submit its recommendations on pricing of the 800 mhz CDMA band within the next fortnight. The regulator had waived off any need to even conduct auction for these airwaves, terming CDMA a “dying technology” but the Telecom Commission decided that auction for 800 mhz airwaves should be done along with the auction for 1800 mhz and 900 mhz scheduled in January.

The Telecom Commission also rejected Trai’s contention of creating an ‘EGSM’ band, saying this would mean 10 mhz of spectrum remains unutilised. Besides, EGSM would also need vacation of some spectrum by defence services which will obviously take time.

So is the DoT justified in seeking to raise prices just when everyone in the telecom industry was cheering the massive reduction that Trai proposed? Well, the increase in the case of both, 1800 mhz and 900 mhz is moderate to if these recommendations are accepted as it is by the Empowered Group of Ministers (EGoM), the upcoming auctions should see healthy participation by all telcos.

Telecom Commission members agreed with what seems logical: that the increase in prices of 1800 mhz band in the top eight telecom circles of the country is justified since there is higher data growth poetntial in these circles and generally high usage customers exist in these circles. If people have the capacity to pay more, so to say, why not charge them - this is the logic that seems to have governed the Telecom Commission decision.

Lets be clear that apart from the top eight revenue generating circles for mobile telephony, the Telecom Commission has not recommended any price increase for 1800 mhz in any of the remaining 14 telecom circles. These eight top circles are Delhi, Kolkata, Mumbai, Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu.

Another crucial issue-spectrum usage charge or levy that telcos have to pay to use spectrum-is still awaiting a decision by the Telecom Commission. And a decision must be had before the auctions are held in January since telcos will think of acquiring spectrum only when they know this annual levy. Trai has suggested a flat spectrum charge but DoT thinks this will lower its overall revenue. As per the present law, spectrum usage charge rises with each extra chunk of spectrum.

And on the issue of reserving some spectrum for incumbent telcos which hold all of the 900 mhz airwaves in Delhi, Mumbai and Kolkata, the Telecom Commission has merely referred the matter to the EGoM. Trai had specifically recommended that these telcos be given neither any priority in bidding afresh nor should any spectrum be reserved for them in the 900 mhz band. This is sure to be bad news for big daddies like Bharti and Vodafone whose licenses in this band come up for renewal next year.