India' telecom regulator retains high spectrum price, concern on tariff rise remains

New Delhi, May 14 (PTI) Despite pressure from the industry, India's telecom regulator TRAI has stood by its recommendation of high base price for auction of spectrum saying the increase in the tariff can be absorbed by the operators, but gave marginal relief in the price of frequencies being used for CDMA services. In its response to Department of Telecommunications (DoT) on Spectrum auction proposals, Telecom Regulatory Authority of India (TRAI) said Sunday that its analysis shows that recommendations do not adversely impact the profitability of the wireless industry or the entry of new operators nor do they adversely affect the affordability of the consumer. "The results indicate that mostly, the impact on tariff is less than 4 paise (100 paise in one rupee) per minute and often much lower. This can be either absorbed by the service providers from the additional minutes that are generated or recovered through charges for different retail and wholesale service," TRAI said. On May 2, the DoT had sought clarification from TRAI on likely impact of telecom tariff if its recommendations on spectrum auction is put in place. TRAI has recommended a base price of Rs 36.22 billion (nearly USD 700 million) per megahertz (MHz) pan-India spectrum for 1800 Mhz band (being used for GSM service), which is almost 10 times higher than the price at which 2G licences bundled with 4.4 MHz spectrum were allocated in 2008 by the then Telecom Minister A Raja. Justifying the recommended price at par with international prices, which in European countries ranges between Euro 0.4 to 0.6, TRAI said "present recommended reserve price of Rs 3622.16 crore per MHz for 1800 MHz band works out to only 0.25 euro per MHz per population." The regulator has also recommended that price of spectrum in 800 Mhz and 900 Mhz band should be double the price of 1,800 Mhz. However, in its clarification, TRAI gave some concession to telecom operators for providing telecom services in the 800 Mhz frequency band which is currently being used for CDMA service. "The Authority would be open to the Government fixing the reserve price of 800 MHz spectrum at 1.3 times the 1800 MHz reserve price. This is only where 5 MHz spectrum is not being made available," TRAI said. TRAI also did not differ on its stand for refarming from 900 Mhz spectrum to 1800 Mhz, but reiterated need to create Spectrum Refarming fund to compensate existing users of the frequencies for upgradation of their equipment. This is one of the major concern for old GSM players, mainly Bharti Airtel, Vodafone and Idea Cellular, as cost of infrastructure increases for providing mobile services through high spectrum band compared to low frequencies. If TRAI's refarming recommendation is approved, then old GSM telecom operators will have to use high frequencies of 1800 Mhz band for transmitting signals for mobile services compared to 900 Mhz band frequency which they use at present. Telecom companies Vodafone and Idea Cellular have indicated that refarming will cost them Rs 100.0 billion (about USD 1.9 billion) and Rs 170.0 billion (about USD 3.2 billion), respectively. Taking high reserve price of spectrum and cost of spectrum refarming, telecom operators have said that tariff in some telecom service area can rise up to 100 per cent over existing rates. However, TRAI's recommendations have addressed some concerns raised by Norwegian telecom company Telenor by not forcing network roll-out obligation on companies. "...the bidders will be bound only by the conditions stipulated in the auction tender document; mandating roll out obligations on the successful bidders subsequently may not be legally feasible," TRAI said. Telecom companies have pointed out that mandating roll-out obligation along with high spectrum price will make it tough for them to do business. Roll out obligations were mandated on operators to ensure that they rolled out services in rural areas and increased connectivity across the country within a stipulated time. PTI