Mobile tariffs may go upward; spectrum delinked from licence

In a major shift in policy that may make mobile telecom services costly, telecom minister Kapil Sibal today said henceforth all operators would have to pay market price for initial as well additional spectrum.

Delinking spectrum from the licences in the aftermath of the second generation mobile telephony spectrum scam, Sibal said, "In future, the spectrum will not be bundled with licence. The licence to be issued to telecom operators will be in the nature of 'Unified Licence' and the licence holder will be free to offer any of the multifarious telecom services.

"In the event, the licence holder would like to offer wireless services, it will have to obtain spectrum through a market driven process," he told a press conference.

As of now the telecom operators were getting spectrum bundled with the telecom licenses which had paved the way for low tariff regime and intense price war among the service providers.

But now, the new operators, if their licences are held valid, would have to pay a market price for the additional 1.8Mhz of 2G spectrum and this may make their operations financially unviable.

For the old operators like Bharti, Vodafone and Idea, who are holding spectrum beyond 6.2Mhz, they would have to pay market driven price for the extra airwaves.

These changes would be implemented with immediate effect, Sibal said.

One of the new operators, when contacted, said that the new regime has given a major advantage to the old operators by allowing them to retain 6.2Mhz of spectrum while the new operators would be at loss as they have to pay market price for the additional 1.8 Mhz spectrum.

At a time when the new operators are struggling to get new subscribers, additional cost on them would hit them hard.

"We need to seriously consider the adoption of an auction process for allocation and pricing of spectrum beyond 6.2Mhz while ensuring that there is adequate competition in the auction process," Sibal told reporters here.

Sibal said department of telecommunication (DoT) will seek recommendations of telecom regulator Telecom Regulatory Authority of India (TRAI) on the pricing of spectrum. "Market-based pricing mechanism may include an auction, or any other market-based price mechanism," he added.

Last year, TRAI had floated the proposal for linking 2G spectrum prices with those of 3G radio wave rates. The proposal came after the auction for third-generation (3G) spectrum raked in over Rs67,000 crore for the government.

However, due to stiff opposition from the existing GSM service providers, TRAI had said it would revisit the issue and finalise the proposal.

TRAI's earlier recommendations included levying one-time charge on operators holding excess 2G spectrum beyond 6.2 MHz. It had suggested that every Mhz of spectrum beyond 6.2 should be linked to 3G auction bid and also at the time of renewal of licences.

Sibal also announced that there will be a uniform rate of revenue share to be paid by the operators, as spectrum charge to the government, as part of level playing field for all players.

He added, "We have also decided to provide adequate spectrum to the operators and we would be seeking a plan of action from the regulator in this regard very soon...at the same time (we will) ensure that adequate measures are taken that operators utilise spectrum efficiently and optimally."

On the The New Telecom Policy, 1999 (NTP-99), Sibal said the past policy was adopted to generate competition. But now the competition is here, and there is now a need to move to a new regime. DoT, meanwhile has decided to issue more notices for cancellation of licences.

"Now in the event the licenses are cancelled, then the dispensation will be under the new policy," Sibal added.

The department had allotted 4.4Mhz as a start-up spectrum, "if that is cancelled then everything will be done under the new policy which I have announced today, subject to TRAI recommendations," he said.