Indian Telecom Operators will share revenue with Government for 3G airwaves

Apart from spending big money to bid for the 3G spectrum, Indian telecoms giant will have to shell out more if they secure the spectrum.

TELCOSwho enter the Indian telecom market for the first time by offering high-end data services, popularly called 3G, may have to pay 3% of their aggregate revenues to the government for the use of these airwaves. Existing telcos such as Bharti Airtel, Vodafone Essar and Idea, who at present pay 2-6% of their aggregate revenues as user charge for offering 2G mobile services, may have to pay an additional 1% if they secure airwaves to launch 3G services. This will take the total user charge of the existing operators to 3-7% if they offer both 2G and 3G services.
Existing operators, especially the GSM players, are unhappy with this move. “As 3G will account for only a small segment of our revenues initially, a flat 1% increase will translate into a disproportionately higher payout to the government,” said an executive with a GSM operator. The executive added it would be a better idea for the government to charge 1% of incremental revenue that accrues from 3G services, rather than the an across board levy, as had been specified in the 3G policy.
These user-charge proposals will be implemented if they are cleared by the Telecom Commission, the highest decision making body of the Department of Telecom, in its meeting on Tuesday . These charges will be implemented from the second year of launch of 3G services.
3G radio frequencies will enable telcos to offer highend data services such as high-speed Internet, fast downloads of movies and music, interactive gaming, video conferencing on mobiles amongst other services. Currently, all telecom services in the country operate on second generation (2G) radio frequencies, which are best suited for phone calls and not for high speed data applications such as Internet downloads and video streaming.
In addition to telcos currently offering mobile services in the country, several foreign companies such as AT&T, NTT DoCoMo, Deutsche Telecom, and Verizon are expected to bid for 3G airways in an auction that is scheduled to take place early next year.
Globally, telcos shell about between 0.1% to 5% of the aggregate revenues for using the airwaves on which high-end service are offered. However, some countries, do not charge a usage fee since these airwaves are acquired through a bidding process.
Interestingly, the DOT proposals are at variance with the current 3G policy guidelines that were announced in August 08. The 3G policy had said that telcos would have to shell out 1% of the incremental revenues from 3G services as the levy to use these frequencies. While GSM operators had supported this recommendation, it had been opposed by CDMA operators and the finance ministry on the grounds that it would be impossible to segregate revenues from 2G and 3G services. However, even the DoT’s new proposals are also not completely in line with recommendations of telecom regulator Trai. The regulator had said all telcos offering 3G services must pay only one per cent of their total revenues from these high-end services to the government as usage charges for offering mobile services on these airwaves. Besides, Trai did not say that standalone 3G operators be charged 3% of their revenues as spectrum usage charges.