Slowly, it seems, the regulatory mess in telecom is being sorted out. The Telecom Regulatory Authority of India, or Trai, has recommended that spectrum trading should be allowed. In other words, if an operator has unused spectrum in a circle, it can sell it to another operator. This will help in two ways. One, operators will use spectrum, a scarce natural resource, with greater efficiency. And two, it will help them monetise idle assets.
The caveat is that only the spectrum that has been bought in an auction or for which the operator has paid the market price can be traded. Spectrum that has been allocated by the government - at a significant discount to the market price - cannot be traded. Some critics have said that this restricts the pool of spectrum that will be available for trading. But this pool will only increase in the days to come as most of the allocated spectrum is ready to complete its 20-year life and incumbents will have to replace it with spectrum bought in auction. However, Trai has said that trading will not include spectrum and the government can collect a one per cent fee on the transaction. These could somewhat restrict the attractiveness of the whole thing. In addition, those who buy this spectrum will be prohibited from selling it onwards before two years.
In spite of these hiccups, the industry is more or less satisfied with Trai's recommendations. In contrast, a furore broke out on Monday when an empowered group of ministers, or EGoM, turned down Trai's recommendation to charge all telecom operators a flat spectrum user charge, or SUC, of three per cent of their average gross revenue, irrespective of spectrum bands and technologies. Instead, it said SUC should be one per cent for broadband wireless access, or BWA, operators; a weighted average of the various SUC rates levied currently (these range from two per cent to six per cent, with the higher SUC being charged for additional spectrum) for the GSM incumbents; and a flat five per cent for spectrum to be auctioned in the future. The GSM operators are up in arms. They were hoping for a significant reduction in SUC to three per cent. Now they say the gains will be minimal: they will collectively save less than Rs 100 crore in a year. What has also upset them is the EGoM's decision not to raise SUC for BWA operators. Reliance Jio is using this spectrum to launch its mobile telephony service. But the EGoM was on a sticky wicket here. The notice inviting application for auction of BWA spectrum had specified SUC of one per cent. To change it now would invite legal challenges. In fact, the attorney general, whose advice was sought on the matter, had agreed that the condition shouldn't be changed.
Still, in the future, as the sector relocates from allocated to auctioned spectrum, there will be uniformity of SUC (at five per cent). The question to ask at the moment is: how relevant is SUC after telecom operators have bought spectrum in an auction? India perhaps is the only country where buyers pay SUC even after paying market price for spectrum.
