Uniform spectrum charges are fair, will raise revenues
With the telecom ministry continuing to oppose Trai’s suggestion of a flat spectrum usage charge (SUC), on grounds it will lower telecom revenues, the government’s M&A policy is also all set to go for a toss. If, as per the present law of SUC rising with each extra chunk of spectrum, companies that buy out one another, or share spectrum, will find their annual charges going up dramatically, and this will act as a disincentive. Besides, as has happened in the past, differential SUC—one rate for data, another rate for voice, for instance—will also encourage firms to disguise voice traffic as data traffic since it is very difficult to figure out the difference when packets of information are moving across networks. Besides, there is no question of a revenue loss to the government with a uniform SUC—if the government gets RX from the escalating SUC today and the 3% rate suggested by Trai is lower than RX, raise the rate to 3.5% or whatever the revenue-neutral rate is.
And even over the short term, a flat SUC will encourage firms to share spectrum, thereby increasing revenues for the government. A company like BSNL, for instance, has 340.1 MHz of spectrum in all its circles and paid just R112.5 crore of SUC in Q1FY14, or R33 lakh per MHz of spectrum. A Bharti Airtel, on the other hand, has 232.65 MHz of spectrum and paid R494.66 crore, or R2.13 crore per MHz. A Videocon, with 30 MHz of spectrum, paid just R7 lakh per MHz and an MTNL just R36 lakh per MHz—the current escalating SUC penalises firms that have more customers and so encourages inefficient use of this precious natural resource. Once there is a uniform rate and a Bharti Airtel shares spectrum with a BSNL or an MTNL or a Videocon—this will allow the former to serve more customers or get existing ones to use the network more intensively—the government will get more money in terms of its revenue share per unit of MHz. The Telecom Commission, which has to take a final call on the Trai recommendations, would do well to recognise that uniform SUCs are an integral part of the M&A strategy and other plans to grow the sector.