'One-time spectrum fee levied to ensure level playing field'

Last Updated: Thursday, October 11, 2012 - 21:53

New Delhi: The Empowered Group of Ministers' decision to collect Rs 27,000 crore of one-time spectrum fee from existing telecom operators was aimed at ensuring a level- playing field between old and new firms, sources said.

Sources privy to the EGoM decision said the ministerial panel went with the option of levying one-time charge on operators which hold spectrum of more than 4.4 MHz as it was "most viable, tenable and sustainable compromise" for ensuring a level-playing field between old and new operators.

In choosing the 4.4 MHz-plus option, the panel, whose recommendation will now go to the Cabinet for final approval, ignored the Attorney General's view of levying the charge only on operators with spectrum of more than 6.2 MHz.

Sources said the EGoM decided against the option to charge existing operators above the contracted spectrum of 6.2 MHz as this could have led to claims from operators who had been assigned only 4.4 Mhz for allocation of the remaining airwaves without any charge.

The obligation under the licence is to provide spectrum up to 6.2 Mhz to GSM operators.

"Such a situation may not be conducive to ensuring a level playing field between existing and new players since the new entrants would be paying for their entire spectrum at the auction price," a source said.

While Attorney General GE Vahanvati has suggested levying of one-time fee on existing operators for spectrum above 6.2 Mhz from July 2008, the EGoM decided to levy the fee from the date when the Cabinet takes the decision.

The EGoM felt that choosing the option would result in the widest gap between the existing players and the new entrants amongst all the options present.

"The option does not appear to be acceptable from the perspective of striking a balance between preserving a level playing field and sanctity of contract," sources added.

The Department of Telecom has proposed three options which include levying one-time fee on all airwaves held by existing telecom companies; imposing fee on airwaves held beyond the start-up spectrum of 4.4 MHz; or levying fee on airwaves held beyond the contracted spectrum of 6.2 MHz.

The EGoM was of the view that choosing the option to charge operators above 4.4 Mhz may insulate the government from claims by operators, who had received only 4.4 Mhz, to grant additional spectrum without payment.

The option, however, may have legal challenges for the government.

The operators may challenge the government as under the licence contract, 6.2 Mhz is the contracted spectrum which they are entitled to without any further payment, both by those who are already received and those who are yet to receive the balance quantum of spectrum.

However, the government believes that contract would at best apply to the quantum of spectrum and not to the price of spectrum.

The government feels that even now the initial allotment of 4.4 Mhz was not charged.

"It may enable the government to put up a robust legal defence against the claim," sources added.


First Published: Thursday, October 11, 2012 - 21:53

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