EGoM advocates fixing min. price for CDMA Airwaves in the 800 MHz band at 1.3 times the Base Price for GSM Airwaves in the 1800 MHz band

An Empowered Group of Ministers (EGoM) headed by home minister P Chidambaram finalized the rules for upcoming second generation (2G) spectrum auctions, recommending the fixing of minimum price for CDMA airwaves in the 800 MHz band at 1.3 times the base price for GSM airwaves in the 1800 MHz band.

• The EGoM rejected the Department of Telecom’s (DoT) suggestion that reserve price in the 800 MHz band for CDMA players be twice as that of airwaves in the 1800 MHz band.
• The EGoM recommended that the minimum price for GSM airwaves be cut to Rs 14,000 to Rs  16,000 crore.
• The EGoM’s decision discomfited the mobile phone companies as they were tossing for an 80% reduction from the Rs 18,111 crore suggested by the telecom regulator, TRAI.
• The EGoM has suggested 2 specific reserve price for the 1800 MHz band at Rs 14,111 crore and Rs 15,111 crore for 5 units of airwaves on a pan-India basis.

The EGoM provided two options to the Cabinet on the spectrum usage charge that forms part of the revenue share for mobile phone companies:

1. To keep this levy at 5% of the tele-company’s annual revenues, or
2. Calculate this levy as per the current rules.

At present, the spectrum usage charges range b/w 2% to 7% of the tele-company’s yearly revenues depending on 2 factors – the quantity of airwaves and the availability of third generation airwaves.

• The EGoM also stated that fresh entrants and companies that lost their mobile licences owing to the Supreme Court’s ruling can bid for a maximum 6.25 MHz of airwaves in the 1800 MHz band in the forthcoming auctions, whilst existent operators in the GSM space can bid for a maximum of 2 blocks or 2.5 MHz of airwaves.

What is the argument being put up against this decision?

• It is being argued that discrimination b/w CDMA and GSM is being broadened by holding the auction reserve price for 800 MHz at 1.3 times of 1800 MHz on the principle that less than 5 MHz is being put up for auction. A like alternative is nevertheless not being offered to GSM operators to retain their 900 MHz spectrum at a price of 1.3 times of 1,800 MHz in the event that less than 5 MHz is obtained at the time of the license extension.
• The prerequisite for 25% of upfront payment for CDMA and 35% of upfront payment for GSM is another instance of discrimination b/wn CDMA & GSM.
• It is being argued that this discrimination will go against the aim of crafting a level playing field among the operators.

Month: Current Affairs - July, 2012