The furious differences spouted in the media would lead one to believe that the spectrum usage charge (SUC) is a subject more convoluted than rocket science. It is actually as straight as a line, once we invest two minutes to grasp that spectrum is a natural resource with two special characteristics.
First, like sunshine, but unlike an oil field, spectrum is a ‘renewable’ natural resource. If we extract oil, we deplete the oil field. But if we do not extract it, oil within the oil field stays preserved. Not so with sunshine and spectrum. If you have a productive use for these renewable resources, but do not put them to use, then you have squandered that value irretrievably.
That is what has happened to spectrum in India over the last seven years. Our immature governance institutions and commentators have rejoiced at high spectrum prices extracted by squeezing supply of spectrum, blissfully ignorant of the much larger value squandered by the country every passing day. Encouragingly, the Telecom Regulatory Authority of India (Trai), in recent months, has been advocating productive deployment of available spectrum. But so far it has been
stoutly resisted by the entrenched establishment. But let us leave that aside for now and move on to the second special characteristic of spectrum.
This time the roles are reversed.
Unlike sunshine, but like an oil field, spectrum is a ‘finite’ resource. There is no charge for sunshine because sunshine is available in almost infinite quantity. But if there are eight competing mobile operators for finite spectrum, then the State must step in to regulate supply, and to charge for the use of the spectrum. Apart from collecting revenue for the State, this charge ensures efficient deployment of spectrum. This, in essence, is the SUC.
The SUC is not a tax. The SUC is a lease charge. The situation is similar to the State leasing eight identical rooms in a State hotel to eight persons. You would assume that the State would charge each exactly the same rupee room tariff. You would be astonished if you were told that the room charges were instead calculated on tables based on the salaries of the individuals. But such is the case! How did this happen?
Well, when mobile services started, the SUC was indeed a specific charge. Competing operators in the same service area for the same unit of spectrum paid exactly the same rupee amount. But these