PM asked to reject EGoM proposal on one-time fee

The Association of United Telecom Service Providers of India (Auspi) has written to Prime Minister Manmohan Singh to reject the recommendation of the Empowered Group of Ministers (EGoM) on imposing a one-time spectrum fee of Rs 27,000 crore (Rs 270 billion) on existing mobile service providers.

Auspi, one of two associations of telecom service providers, often at odds with each other, represents dual technology mobile companies such as Tata Teleservices and Reliance Communications. It says the move is not "legally tenable".

Last week, the EGoM, chaired by Finance Minister P Chidambaram, had proposed a one-time fee on GSM mobile service providers with more than 4.5 MHz of spectrum and CDMA operators with more than 2.5 MHz airwaves.

Meanwhile, Planning Commission deputy chairman Montek Singh Ahluwalia, in a communication to Chidambaram dated October 7, has said existing operators with spectrum up to 6.2 MHz should not be charged for the remaining licence period. There is a need to ensure a level field between the new entrants and the existing operators who have invested and built a market-strategy on exploiting the spectrum, Ahluwalia had said.

"I would go further and urge that if the present licence terms are indeed so open-ended, they should be revised to make the circumstances for intervention much clearer. These licence terms should be applicable for all future contracts and existing licence holders should be given the option to switch to the new terms if they wish," he said in the note.

"The EGoM recommendations should be reconsidered and rescinded, as they are not legally tenable and against the well-established principle of bounden duty of the government to honour its existing contracts with the licensees," Auspi said in a letter dated last Friday (October 12) to Singh, mentioning that the commendations also clash with the opinion of the attorney general.

The government will have to take a decision on the one-time fee before Friday and the cabinet is expected to discuss these on Tuesday.

Auspi's letter said the contracted spectrum for GSM was 6.2 MHz and for CDMA it was 5

MHz. The operators had already paid the spectrum fee, as the licence came bundled with spectrum up to the contracted limit.

"Charging for any spectrum below the contracted limit now...is illegal and in complete breach and violation of its contractual obligations and provisions of the Contract Act," Auspi said in the letter. Copies were also sent to all EGoM members, the cabinet secretary and the principal secretary to the PM.

However, the government believes the contract at issue would at best apply to the quantity of spectrum and not to its price. The decision to charge an auction-determined price from the existing companies could hurt the dual-technology players.

According to the Auspi letter, the enforcement of prospective charging is likely to create more inequalities and discrimination among the existing players, as the residual period of valid licences vary from two years to 10 years between GSM players and late entrants like Tata Teleservices and Reliance Communications.

"We therefore request you that keeping in mind the benefit of the consumers, the EGoM recommendations of mid-term unilateral change to the contracts of our member-service providers by imposing a one-time charge for spectrum beyond 4.4/2.4 MHz of GSM/CDMA spectrum and up to 6.2/5 MHz that is contracted spectrum may immediately be shelved," Auspi secretary general Ashok Sud wrote.

In July, the Cabinet had referred the matter on the one-time fee to the EGoM for the latter's view. Later in the month, the EGoM had deferred a decision till the outcome of a presidential reference to the Supreme Court on the authority to decide. Following the SC's okay, the government is now free to decide.

DoT had made four proposals to the cabinet on charging a one-time fee for spectrum held by existing telecom operators. These were for no charge; a one-time fee on all airwaves held by existing telecom companies; imposing a fee on airwaves held beyond the start-up spectrum of 4.4 MHz and levying a fee on airwaves held beyond the contracted spectrum of 6.2 MHz.