DoT asks Trai for more research on spectrum pricing

The Department of Telecommunications (DoT) has asked the Telecom Regulatory Authority of India (Trai) to indicate the formula used in international markets to fix the ratio between the reserve and the discovered prices of 2G telecom spectrum. Trai has assumed that the base price should be 80 per cent of that of the auction discovered price which is much higher than the internatioanl norm of 50 per cent.

For the coming re-auction of 2G spectrum, Trai has suggested a reserve price of Rs 3,622 crore (Rs 36.22 billion) for every 1 MHz of spectrum in the 1,800 MHz band. The Telecom Commission, the highest policy making body of DoT, has decided to leave the decision on fixing the reserve price to an empowered group of ministers (EGoM) and asked Trai for an analysis on various relevant areas, such as the impact for customers on mobile telephony rates.

Trai has said the impact would be no more than four to six paise per minute, while telecom companies say there'd be an increase of up to 100 per cent in some circles. The EGoM is scheduled to meet on Tuesday.

During the auction of 3G spectrum in 2010, the base price set (Rs 3,500 crore [Rs 35 billion]) was 20 per cent of the final auction price (a little over Rs 16,000 crore [Rs 160 billion]).

DoT

wants Trai to undertake an analysis impact on mobile rates if the cost impact of the proposed increase in spectrum price is passed entirely to consumers. And, the impact if the cost is absorbed by telecom service providers to the extent feasible, while still providing for adequate return on investment/ capital employed.

Further, it has said an analysis should be made if the increased cost of spectrum is applied only to future allocations or to all spectrum, including that currently held. Also, a separate study for 800 MHz and 1,800 MHz, by service areas.

Trai has also been asked to say if spectrum price could be fixed for 10 years, though allocation could be for 20 years; the price after 10 years being the market price at that point of time.

DoT said the need for government to continue to have a fair share of the enhanced value of spectrum in a rapidlychanging technology scenario has to be maintained and the need was to ensure an adequate window of certainty to investors on the spectrum price. DoT has also sent on several representations received from various telecom industries/associations.