New spectrum trading policy adds new regulations and fees on buyers

To avoid the fiasco like 2G spectrum scam, the Department of Telecom (DoT), the in-charge of airwaves in India is going to issue definite rules for spectrum auctions and spectrum trading soon. Mobile service providers in India need new frequencies to broadcast as the number of users is growing and market is already facing congestion problems such as call drops.

Sources close to the development said that there are two disappointing rules in the new policy outline. The government is going to charge non-refundable fee of 1% of the total transaction value or 1% of the price of purchased spectrum.  The money received from the spectrum auction will be added to the adjusted gross revenue (AGR). The AGR decides license fee and spectrum usage charge for each company.

The telecom industry experts have pointed out that new policy will definitely improve the present situation.  Earlier, the only seller of spectrum was government. But more flexibility in the sale of spectrum is required along with less regulations.

1% fee on the transaction value and regulation of the price is definitely a discouragement for the free market economics as it is reducing incentives to buy spectrum. Ideally, the government should leave the pricing part entirely on the players involved. The leasing of spectrum is impossible due to new policy as government has disallowed direct transfer of right to use frequencies.

There would be a validity period for purchased spectrum through trading. The players involved in spectrum trading transactions will have to inform the government 45 days before the trading. The new spectrum policy will consolidate the telecom market which has large number of companies in India.