Regulator takes on govt over pricing of 800-MHz spectrum

Says will give recommendations only after fresh reference is made

The Telecom Regulatory Authority of India (Trai) has refused to give its recommendations on pricing and valuation of 800-MHz spectrum within the 15 days stipulated by the Department of Telecommunications (DoT). The regulator, in a communication dated November 14, has said DoT must make a “fresh and new” reference if it wants Trai’s suggestions on pricing for the band.

In the communication, the regulator has made it clear that it had completed the task of suggesting the valuation and reserve price for the spectrum to be auctioned in January. The “original reference is over and done with”.

“There can be no continuing reference to the earlier one. It is now for the government to take a final decision,” Trai Secretary Rajeev Agarwal has said in the letter, addressed to DoT Secretary M F Farooqui.

PRICING PING-PONG

JUNE:

• DoT asks Trai for recommendations on valuation and pricing of spectrum

SEPTEMBER :

• Trai suggests cutting reserve price for 1,800-MHz spectrum by 37% and 900-MHz by about 60%. Recommends creation of an EGSM band out of 800-MHz spectrum

OCTOBER:

• Telecom Commission sends Trai plan back to the drawing board; seeks reconsideration of most key suggestions; asks for Trai views on valuation and reserve price of 800-MHz spectrum
• Trai reiterates its suggestions; says there is no need for auction of 800MHz spectrum

NOVEMBER:

• Telecom Commission decides to go ahead with auction of 800-MHz spectrum
• DoT writes to Trai; wants a formula to determine base price for 800-MHz band within 15 days
• Trai says the “original reference is over and done with”; asks DoT to make a fresh reference

Earlier this month, the Telecom Commission had rejected Trai’s suggestion that an extended GSM (EGSM) band be created out of 800-MHz CDMA spectrum. Following this, on November 12, DoT had sought the regulator’s views on valuation and pricing of 800-MHz band.

Agarwal has said in the communication that Trai shall initiate action on suggesting a formula to determine the base price for 800-MHz spectrum only after the government clarifies “this request” is indeed a fresh and new one. “Until the clarification is received, the authority shall be unable to proceed further,” he has said, adding the pointed reference to an earlier request is not in sync with the Trai Act.

The regulator has pointed out that DoT has given it a time limit for suggesting 800-MHz pricing, but "there is no provision in the Trai Act which enables stipulation of a time limit".

"There is no provision that allows a preference on time limits to be indicated by DoT… It is clearly not appropriate for DoT to presume it can suggest a time limit (even as a preference)," Trai has said.

The regulator's firm stance essentially means the government might not be able to auction 800-MHz spectrum, along with the 1,800-MHz and 900-MHz bands, in January.

Trai had given its recommendations on the “original reference” in September and then clarifications on the issues raised by DoT in October. That reference had been made in June after an empowered group of ministers (EGoM), headed by Finance Minister P Chidambaram, decided Trai's views should be sought on pricing, as the government's previous auction rounds — in November 2012 and March 2013 — had seen muted participation.

Clarifying on its views, Trai had told DoT there was no need to auction 800 -MHz spectrum, as there was a wide difference in the opportunity cost of 800 -MHz spectrum in the proposed EGSM band and the price at which it was sold in the previous auction rounds.

When DoT, advised by the Telecom Commission, had sought Trai’s recommendations on 800-MHz pricing, the regulator had said: “What must be considered is the opportunity value of that spectrum band, using the most optimal technology. The government should fully explore the feasibility of adoption of the EGSM band before reaching a conclusion.” It had also pointed out: "It would simply not be prudent... to take a hasty decision in the matter."

Earlier, Trai Chairman Rahul Khullar had told Business Standard in an interview that CDMA players were seeking a cut in reserve price for 800-MHz spectrum so that they required to pay less as one-time fee for radiowaves held in excess of 2.5 MHz, on the basis of the auction price.

He had also pointed out that it would be a mistake for the government to sell this spectrum at a fraction of its value. Besides, given that there was only one player coming for the CDMA auction and the Tatas having returned some spectrum, it was clear no one was interested in the auctions.

Trai's EGSM recommendations had been cheered by the GSM operators, but the CDMA ones had said adoption of EGSM would block their growth path.