The Department of Telecom will fix spectrum usage charges (SUC) at a flat rate of 3% for the upcoming auctions, according to a report by The New Indian Express.  SUC is payable by a telco to the government for providing mobile access services, as a percentage of their Adjusted Gross Revenue.

Earlier In June, the telecom commission recommended SUC at 3% of average gross revenue across all bands, except for the 2300 MHz band, for which SUC was recommended at 1%. Back in January 2014, the government had decided to levy a flat 5% SUC on spectrum at future auctions. The Department of DoT) has also been considering lowering SUC further to a flat 4.5%.

 Why this matters

 India has been gearing up for the largest ever spectrum auction:

-The 2016 auctions is auctioning off spectrum worth Rs 5.6 lakh crore, which is almost 5 times more than what the government made through auctions in 2015—Rs 1.09 lakh crore.
– A total of 2,354.55 megahertz of spectrum across 7 different bands will be auctioned off in 2016, which is again 5 times more than what government sold in 2015—418.05 MHz of spectrum.
-The 700Mhz spectrum, which is dubbed to be crucial for LTE and 4G penetration is being sold for Rs 11,485 crore per MHz for pan India airwaves. This is the most costliest reserve price for any band being sold via auctions.

While approving auction proceedings in June, the Cabinet also approved an alternate payment structure that allows telcos to pay 25% of the bid amount upfront for all bands. Rest of the bid amount can be paid after a 2-year moratorium period in 10-year installments. The alternate payment option was initially suggested by TRAI in April after concerns were raised about costly prices for spectrum. By setting a flat SUC rate, telcos could expect to shell out a bit lesser for holding and maintaining spectrum, and could also motivate them to bid for the crucial 700MHz.

Telcos raised concerns: Back in February, Airtel India CEO Gopal Vittal said that TRAI’s recommended reserve price for the 700 MHz band is very expensive and that they might not be able to afford to buy spectrum at this price. While last month, Telenor India criticized the Telecom Commission’s approval of the base price for the 700 MHz band.  Even the DoT earlier expressed its skepticism over the prices set as per TRAI’s recommendations.