No entry fee likely for 3G

Finance ministry fears hike in telecom tariff.

Mobile service providers may not have to pay a one-time spectrum fee for next-generation services.

The finance ministry does not approve of the fee because it feels that levying it can lead to a hike in telecom tariffs. Department of telecommunications (DoT) officials said levying an entry fee might not be a legally sound move as existing telecom licences permitted all types of services and did not distinguish between second-generation and third-generation (2G and 3G) services. "There is also a clause that there cannot be an entry fee for a new service," said an official.

The move comes after Prime Minister Manmohan Singh sought comments from the finance ministry and the DoT on the matter in the wake of allegations of favouritism and hectic lobbying for extra spectrum for 3G services.

Finance Minister P Chidambaram is expected to finalise his ministry's stance on the matter after he returns from Germany. The finance ministry and the DoT are expected to submit their proposals to the prime minister towards the end of the month.

The Telecom Regulatory Authority of India (Trai) had last month submitted its recommendations to the DoT, which were then forwarded to the wireless planning and coordination wing in the department. Trai has also asked CDMA and GSM operators and Internet service providers to submit their comments on its recommendations.

The Tatas have argued in favour of a one-time entry fee for service providers. The proposal has also been supported by the Left.

According to a finance ministry note, revenue-sharing is the best option. Trai had proposed that spectrum charges be reduced from 6 per cent of the adjusted gross revenue to 4 per cent.

Sources added that the global experience of bidding for 3G licences had shown that companies bid beyond their means. "If a similar situation arises in India, the operators will expect the government to bail them out. Also, by levying an entry fee, operators will price 3G services in a way that it will be out of reach of the common man, or alternatively, the tariff for plain vanilla services may go up," said an official.

A section in the government was, however, of the opinion that an entry fee would help the government mobilise higher non-tax revenue.

Across the spectrum

DoT says entry fee may not hold legal ground as licences permit provision of all types of services

Finance ministry says revenue share is the best option

Trai wants spectrum charges reduced from 6% of adjusted gross revenue to 4%

Some in the govt see entry fee as a source of non-tax revenue