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DoT panel questions Trai’s spectrum reserve price view

The sharp reduction in reserve price of spectrum of up to 62 per cent by telecom regulator Trai has been questioned by an internal panel of Department of Telecommunications in its report submitted on Tuesday.

The internal panel of DoT, headed by member (technology), has suggested that 'Trai may be requested to reconsider the recommended reserve price...' for sharp reduction that regulator has made for 2G spectrum to be put up for sale in the proposed third round of auction.
For 2G spectrum in 1800 Mhz band that were freed from cancellation of 122 telecom licences, Trai has recommended about 37 per cent reduction in base price and for 900 Mhz -- premium 2G band -- the regulator recommended sharp reduction of about 62 per cent compared to the last reserve price.

Telecom Regulatory Authority of India had justified the reduction in spectrum price and showed various scientific methodologies to arrive at a final price.

The DoT panel for 1800 Mhz spectrum price, however, said, 'The deviation of various constants, co-efficient and variables to arrive at the reserve price under the different approached appears to be based on certain assumptions, on which no clarity could emerge from recommendation.'
For 900 Mhz spectrum price in three service areas - Delhi, Mumbai and Kolkata - the panel said that recommendations were based on price of 1800 Mhz band and 'Moreover, various assumptions...have not been clearly spelt out in the recommendation. In this situation, committee is not in position to arrive at a conclusion.'

The panel has suggested to seek clarification from Trai on the spectrum price as well price of 900 Mhz band spectrum in rest of 19 service areas of the country as well.

'The (internal DoT) panel has submitted its report. The panel was not for taking decision but to understand implication of Trai's recommendations. It has suggested taking reference for base price of 800 Mhz (CDMA) spectrum as their was a decision of EGoM on it,' a senior government official said.

Trai has suggested no auction for CDMA as of now since there was no demand for these airwaves in the last auction and only one company had participated in March 2013 auction.

The DoT panel has also raised doubts over implementation of the Trai recommendation to increase annual fee, spectrum usage charge, levied on Wireless broadband (BWA) of 4G spectrum from 1 per cent to 3 per cent from 1 April, 2014.
'In so far the raising of SUC with respect to BWA is concerned, it would be important to establish adequate rationale for such consideration... The committee observed Trai's recommendation for charging auctioned spectrum at a flat rate of 3 per cent does not appear to be implementable...' the report said.  

Trai recommended reduction of the upper limit of SUC from 8 per cent to 5 per cent but the DoT panel said: 'Trai has not provided any rationale or justification for arriving at the figure of 5 per cent as highest slab rate.'
On spectrum trading, the committee has called for a holistic view by government before allowing the mechanism. The committee report will be placed before inter-ministerial panel, Telecom Commission (TC), which is scheduled to meet on 3 October. 'The TC will take decision on Trai's recommendations and the Committee report,' the official said.

DoT will send the recommendations back to Trai for further clarifications if decided by TC. Or else, the decision of the inter-ministerial panel will be put before the Empowered Group of Ministers on spectrum matters, headed by Finance Minister P Chidambaram.
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