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Notes at page 85-86/n deals with the Draft Note to CCEA
received from Department of Telecom seeking financial
approval for Rs. 1077.16 crore for laying an alternative
communication network for the India Air Force. After the
alternative network is laid the IAF is expected to release 45
MHz of spectrum.
02. The Note was examined earlier on another file and
FSs and FMs minutes thereon have been extracted as part
of the comments to the Note on this file.
03. At this stage, the basic issues relating to pricing of
spectrum maybe raised. The discussion and
recommendations thereon may be on the basis of specific
formulation(s) received form DoT.
04. Para 4.0 of DFA has been amended based on Finance
Secretarys note dated 11th February, 2008. Amended DFA
may please be considered for approval.
Sd/-
(Bindhushree Khullar)
Additional Secretary (EA)
03.04.2008
FS.
1. This was discussed with FM today. The note used for
discussion is placed below.
2. FM agreed that spectrum usage charges should be
increased reflecting the scarcity value of spectrum as
indicated in our note of 11 February, 2008.
3. On pricing of spectrum, FMs view is that we must insist,
in principle, on pricing spectrum (beyond 4.4 MHz)
although details can be worked out after the auction of
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3Gs spectrum.
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4. Please modify the OM accordingly. Please let me see it
before issue.
Sd/-
(D. Subbarao)
Finance Secretary
7.4.2008
AS(EA)
JS(Infra)
Dir(Infra)
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FILE NO.3/11/2003-INFRA
Ministry of Finance
Department of Expenditure
Infrastructure Division
New Delhi, April 6, 2008
OFFICE MEMORANDUM
Subject: Financial approval of Rs.1,077.16 crore for laying
of alternative communication network for Indian
Air Force for release of Spectrum.
Ministry of Communications and Information Technology
(MoC&IT), Department of Telecommunications (DoT) may refer to
UO No.11/1/12/12006-Policy-I, dated January 29, 2008 enclosing
therewith a Draft Note for CCEA on the subject mentioned above.Comments of Ministry of Finance (MoF) Department of Economic
Affairs (DEA) on the proposal at Para 6.1 of the Draft Note as
under:
2.0 As pointed out by DEA in the meeting of the Full Telecom
Commission, held on September 4, 2006, the proposal to
commence work on co-ordination of spectrum vis--vis Armed
Forces has been taken up prematurely, without evolving a
consensus on security issues, particularly with the Army, and tying
up budgetary provisions in advance. In absence of adequate
groundwork, there have been cost and time overruns, and the
Project, initially slated to finish by December, 2006 has got
delayed by nearly two years. Moreover, taking up implementation
of the Project without first securing necessary approvals from
Competent Authority amounts to a procedural lapse, which may
not be repeated in future.
3.0. However, in view of the compelling urgency of making
available adequate spectrum for further development of 2G/3G
services, the proposal of DoT is agreed to, subject to the following
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observations:
1. DoT may take urgent steps to get the spectrum available
with Army and Navy vacated within a maximum period of
6 months, and actual implementation in this regard to
also commence within this period;
2. Pricing of the spectrum being vacated to be in such a
manner, as to not only ensure recovery of costs of the
Project, but also to ensure an adequate source of
receipts for General Revenues;
3. As regards allocation for funds, DoT may present their
case before the Planning Commission for the allocation
of the amount from within the overall authorized GBS.
4. Union Cabinet, in its meeting on October 31, 2003, inter alia,
decided that spectrum pricing would need to be decided mutually
between DoT and MoF so as to provide incentive for efficient useof spectrum as well as disincentive for sub-optimal usage. In the
context of this decision, the issues that need to be decided in
respect of 2G spectrum were discussed by Finance Secretary in
three rounds of meetings with Secretary (Telecom) in February,
2008. Accordingly, the following amendments are being
suggested in Pricing of Spectrum, its allotment among Access
providers and Spectrum Usage Charges:
1. Any allotments of spectrum to access subscriber licensees
under UASL regime beyond the initial start up allocation
of 4.4. MHz may henceforth be specifically priced and
charged for. Details in this regard can be worked out;
2. The price determined as above may be made applicable to
both the new and existing operators; such operators who do
not intend to pay the new charges may be given the option
of surrendering the spectrum allotted to them;
3. Spectrum Usage Charge, instead of being charged as a
fixed percentage of Adjusted Gross Revenue (AGR) for
different spectrum bands, may henceforth be charged as a
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percentage of AGR based on volume of business
categorization, so as to better reflect and capture the circle
specific scarcity value of spectrum. The revised charges
proposed for various Circles are as per the table annexed to
this OM and as agreed in the discussions between Finance
Secretary and Secretary, Department of Telecom;
4. The recommendations of TRAI for revising the subscriber
base criteria for allotment of spectrum may be considered
for implementation in the interest of enhancing efficiency of
spectrum usage and encouraging technological innovations.
4.1 The recommendations as above would be applicable to
allotments of spectrum in the 2G range as commonly
understood, irrespective of the type of technology deployed and
the quantum of spectrum held.
5.0 The principles which would be employed to govern allotment
of spectrum in the 3G range as commonly understood, may be
settled in consultation with DEA, in accordance with the October
31, 2003 decision of the Union Cabinet, referred to above.
6. This issues with approval of Minister of Finance.
Sd/-
(Govind Mohan)
Director
Department of Telecommunications,
(Sri S Behuria, Secretary)
Sanchar Bhawan, New Delhi
Recommendations of TRAI dated August 28, 2007; Paras 2.61,
2.62, pp 38-39 of the Report.
Comments of Department of Economic Affairs.
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ANNEX
Proposed Enhanced Scheme for Spectrum Usage Charge
Category Spectrum Usage
Charge % of AGR
Metro-I (Delhi, Mumbai) 8%
Metro-II (Kolkata) 8%
Category-A 8%
Category-B 6%
Category-C 4%
Comments of Department of Economic Affairs.
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FILE NO. 3/11/2003-INFRA
Ministry of Finance
Department of Expenditure
Infrastructure Division
New Delhi, April 8, 2008
OFFICE MEMORANDUM
Sub: Financial approval of Rs. 1,077.16 Crore for laying of
alternate communication network for Indian Air Force
for release of Spectrum.
Ministry of Communications and Information Technology
(MoC&IT), Department of Telecommunications (DoT) may refer toUO NO. 11/1/12/12006-Policy-I, dated January 29, 2008 enclosing
therewith a Draft Note for CCEA on the subject mentioned above,
Comments of Ministry of Finance (MoF), Department of Economic
Affairs (DEA) on the proposal at Para 6.1 of the Draft Note are as
under: -
2.0 As pointed out by DEA in the meeting of the Full Telecom
Commission, held on September 4, 2006 the proposal to
commence work on co-ordination of spectrum vis--vis Armed
Forces has been taken up prematurely without evolving a
consensus on security issues particularly with the Army and tying
up budgetary provisions in advance. In absence of adequate
groundwork, there have been cost and time overruns, and the
Project, initially slated to finish by December 2006 has got delayed
by nearly two years. Moreover, taking up implementation of the
Project without first securing necessary approvals from Competent
Authority amounts to a procedural lapse, which may not be
repeated in future.
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3.0 However, in view of the compelling urgency of making
available adequate spectrum for further development of 2G/3G
services, the proposal of DoT is agreed to, subject to the following
observations:
1. DoT may take urgent steps to get the spectrum available
with Army and Navy vacated within a maximum period of
6 months, and actual implementation in this regard to
also commence within this period.
2. Pricing of the spectrum being vacated to be in such a
manner, as to not only ensure recovery of costs of the
Project, but also to ensure an adequate source of
receipts for General Revenue;
3. As regards allocation of funds, DoT may present their
case before the Planning Commission for the allocation
of the amount form within the overall authorized GBS.4.0 Union Cabinet, in its meeting on October 31, 2003 had, inter-
alia, decided that spectrum pricing would need to be decided
mutually between DoT and MoF so as to provide incentive for
efficient use of spectrum as well as disincentive for sub-optimal
usage. In the context of this decision, the following amendments
are being suggested in Pricing of Spectrum, its allotment among
Access providers and Spectrum Usage Charges:
1. Any Allotments of Spectrum to access subscriber
licensees under UASL regime may henceforth be
specifically priced and charged for. The charge may be
determined, Circle wise, by adopting the Entry Fee, fixed
for that circle in 2003-04, and thereafter inflating it by the
multiplier, which represents the growth in aggregate
AGR per MHz between 2003-04 and 2007-08; hence,
for a Pan India operator, the Circle fee fixed in 2003-04
(Rs. 375 Crore per MHz) would be inflated by a multiple
of 3.5 (which represents the growth in AGR/MHz
between 2003-04 and 2007-08) to yield the new
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Spectrum price of Rs. 1,312 Crore per MHz
(approximately);
2. The price determined as above may be made applicable
to both the new and existing operators; moreover, the
entire range of spectrum allotted may be charged, for
both new and existing operators; such operators who do
not intend to pay the new charges may be given the
option of surrendering the Spectrum allotted to them;
3. Spectrum Usage Charge, instead of being charged as a
fixed percentage of Adjusted Gross Revenue (AGR) for
different Spectrum bands, may henceforth be charged as
a percentage of AGR based on volume of business
categorization, so as to better reflect and capture the
circle specific scarcity value of Spectrum. The Base
Charges proposed for various Circles, applicable as a
flat rate for Spectrum allotment upto 2x5 MHz are as perthe Table in Annex to this OM;
4. In order to ensure that service providers make use of
various possible technological features for enhanced
spectrum efficiency before they ask for additional
Spectrum, for any additional Spectrum allotted beyond
2x5 MHz, the access subscriber licensees under UASL
regime may be charged @ 1% of AGR per MHz allotted
(pro rata), in addition to the Base Rate, uniformly for all
circles;
5. The allotment of Spectrum may continue to be linked to
the subscriber base; however, TRAI, in its
recommendations of August, 2007 on Review of
License terms and conditions and capping of number of
access providers have inter alia concluded that the
present Spectrum allocation criteria needs to be
immediately reviewed as it is not spectrally efficient and
has not taken into consideration the present technology
innovations for increasing spectral efficiency. TRAI have
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suggested creation of a Multi-Disciplinary Committee to
frame a new long term spectrum allocation Criteria; and,
in the interim, recommended a revision of the existing
subscriber base criteria which enhances the present
subscriber norms; the recommendations of TRAI may be
implemented with immediate effect, in the overall interest
of optimum utilization of a scarce national resource.
4.1 The recommendations as above would be applicable to
allotments of spectrum in the 2G range as commonly
understood, irrespective of the type of technology deployed and
the quantum of spectrum held.
5.0 The principles which would be employed to govern allotment
of spectrum in the 3G range as commonly understood, may be
settled bilaterally between DoT and MoF, in accordance with theOctober 31, 2003 decision of the Union Cabinet, referred to
above.
6.0 This issues with approval of Minister of Finance.
Sd/-
(GOVIND MOHAN)
Director
Department of Telecommunications
(Sri S. Behuria, Secretary)
Sanchar Bhawan
NEW DELHI
Fax No. 23711514
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ANNEX
Proposed Base Rates for Spectrum Usage Charge
Category Spectrum usage Charge
% of AGR
Metro-I (Delhi, Mumbai) 8%
Metro-II (Kolkata) 8%
Category-A 8%
Category-B 6%
Category-C 4%
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