DoT should implement TRAI's flat spectrum usage charge before auction: ASSOCHAM

In order to have a successful spectrum auction in January, the government should implement a flat spectrum usage charge as operators will be "discouraged" to buy airwaves if the levy continues at the current escalated regime, ASSOCHAM said on Thursday.

"We support the TRAI's recommendations and urge the government to announce the implementation of uniform SUC before the forthcoming auctions," ASSOCHAM's National Telecom Council Chairman TV Ramachandran told reporters in New Delhi.

The SUC, which is levied annually by government as percentage of revenue earned by telecom companies from telecom services, varies between 3 to 8 percent in case of mobile operators.

TRAI had suggested that the annual SUC be set at a flat 3 percent of companies' revenue for the spectrum they buy from auctions.

"None of the spectrum reforms being introduced by the government like spectrum sharing, revised mergers and acquisitions will take off until there is a uniform SUC regime as the operators will be discouraged to purchase spectrum if the SUC continues at the current escalated regime," he said.

Ramachandran, who is also the Resident Director of regulatory affairs at Vodafone India, said if no decision was taken on SUC before the auction, it might affect the process.

He said the concerns of the Department of Telecom (DoT) that uniform charges may cause a loss of Rs. 2,500 crores to its exchequer over a period of 10 years are "incorrect".

"If the government believes that three percent SUC will result in a loss, it can set the uniform SUC at a rate that will give the government revenue neutrality," he added.

Ramachandran said the last two auctions failed on account of high reserve price and "escalated SUC regime".

"167.50 MHz of spectrum in 1800MHz band remained unsold in November 2012 auctions. Even taking today's reserve prices, the loss to the Government exchequer on account of this unsold spectrum is Rs. 1,744 crores per year (annual instalment with repayment term for 20 years at 10 percent interest)," he added.

Ramachandran also said that additional rural rollout obligations should be imposed in place of a USO levy.

"If additional rollout obligations are being prescribed, there is no rationale to continue with a USO levy. Already there are over Rs. 28,221 crores (as on September 30, 2013) lying unutilised in the USO Fund," he said.

He also sought allocation of spectrum in contiguous blocks.

The Department of Telecom (DoT) is all set to start the auction process tomorrow with a pre-bid conference. DoT has already issued a Notice Inviting Application (NIA), which say the auction will start from January 23.

The companies can seek clarifications on rules stated in the NIA by December 28 and the last date for submission of applications by interested companies is January 4, 2014.