Editorial: Regulatory arbitrage

Sep 25 2013, 02:44 IST
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SummaryTrai does well to level a uniform spectrum charge

With the telecom regulator coming out with a recommendation of a flat spectrum usage charge of 3% for all spectrum bought in an auction—it varies from 3% to 8% for non-auctioned spectrum today—a host of companies have begun objecting to this. The biggest objections have come from the broadband wireless access (BWA) firms who say that the government had set a flat 1% spectrum charge when the auctions were conducted in 2010, so why should they now be asked to pay more? While that is no doubt correct, the reason why this was fixed at 1% was that it was never envisaged that BWA licensees would also be providing voice telephony—if it was, where was the question of charging them a 1% spectrum usage fee when others were paying up to 8%?

By proposing a flat 3% charge, Trai is cleaning up the system which, till now, has been full of regulatory arbitrage opportunities. When the access deficit charge (ADC) was kept at a higher rate for international calls, some firms were caught disguising their international calls as local ones. When a lower rate was charged for data services, some telcos were showing higher revenues from data.

At the end of the day, with convergence taking place and mobile devices offering both data and voice services, it is not possible to police the system to find out what kind of service is being used— voice or data? Indeed, while the original proposal was to charge companies just a flat 1% for their 3G services since the spectrum was being auctioned, the reason why this proposal was dropped was precisely because it was not going to be technically possible to separate the 2G calls from the 3G calls—the solution then found was to simply hike the 2G spectrum charges by 1 percentage point each and tell firms to pay this rate on their combined 2G and 3G revenues. While there is a case for, eventually, lowering even this 3% charge, for now the government would do well to accept the recommendation as it helps clean up the arbitrage opportunities. It also allows BWA firms to acquire 2G voice telcos and offer these services seamlessly to their customers.

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