DoT and telcos unhappy with administration charges for 3G

The Cellular Operators' Association of India (COAI), the GSM operators' body, has opposed the telecom regulator's recommendation for levying an additional 2 per cent charge on 3G spectrum saying it is a ''retrograde step''. The COAI also said that this would only add to the financial burden of the service providers.

TRAI has advised the department of telecommunications about some changes that need to be made in the rules for 3G spectrum.

Among the changes, the regulator has recommended an annual administrative fee of 2 per cent of the highest bid amount for 3G.

Some of the key recommendations made by TRAI:

• Two per cent of the highest bid amount as annual administrative charge during the validity period of 3G spectrum.
• As the operators will take time to roll-out their services after the allocation of spectrum, therefore TRAI recommended a moratorium of one year from the date of allocation of spectrum in respect of payment of administrative charge.
• The standalone 3G operators who do not have any allotment of 2G spectrum should also pay an annual spectrum charge of 3 per cent of annual adjusted gross revenue  (AGR), which is equivalent to the lowest slab of 2G operator. It is clarified that this is besides the administrative charges.
• All available spectrums in 2.1GHz including anticipated spectrum availability within the next one year is put to auction so as to maximize the number of 3G service providers.
• The availability of 3G spectrum including anticipated should be put in public domain for the knowledge of bidders. It becomes particularly relevant as DoT has already decided to allocate spectrum to BSNL and MTNL. Therefore, it is essential that the principle of level playing field is urgently restored by putting all available spectrum for auction

Opposition from many quarters
Cellular Operator Association of India (COAI) has shown sharp displeasure over the TRAI suggestions. ''It is first submitted that this additional charge recommended by Trai is being viewed by the entire industry and stakeholders as a retrograde step and has come as a serious setback to both Indian and foreign potential bidders for 3G. It is apprehended that the imposition of multiple levies under different heads will not only cut down the attractiveness of the sector but also create a serious negative perception of the auction process,'' the COAI said in its letter.

The COAI also stated that the reasons provided by the regulator for seeking these levies were ''self-contradictory''. The letter, written today, is addressed to DoT Secretary and Telecom Commission Chairman Siddhartha Behura.

The Department of Telecommunication (DoT) is also unhappy with the TRAI recommendation since the 3G auction yield could fall by Rs.50 billion (Rs5,000 crore) due to 2 per cent administration charge. Its initial estimates of yield were at Rs350-400 billion.

The Telecom Commission will take a final decision on the levy issue.

Discontent has also been expressed by the US government.  It has asked India with questions on key policy issues in the telecom sector as the country  relating to the 3G mobile phone  auctions, which will allow services such as high-speed internet and video-conferencing.

Among the queries raised by the US Telecommunications Sub-committee is whether India will change rules to allow foreign companies to bid for 3G spectrum as 100% foreign entities. The panel also wants to know how much time foreign players will get to find an Indian partner if their bids are successful. 

The US has pointied out that while new 3G players will have to pay $410 million to obtain a unified access services UAS licence to provide wireless and wireline services, they won't get the start-up 2G spectrum that is required to provide traditional voice and data services.  Though a UAS licence covers both 2G and 3G, foreign companies will be debarred from starting 2G services.

The UAS licence will specifically include this prohibition. Indian operators, however, are free to offer both 2G and 3G.

The UAS licence, which costs Rs1,651 crore, came bundled with start-up 2G spectrum. Currently, all telecom services in India are offered on 2G frequencies.