The telecom commission has asked the Telecom Regulatory Authority of India (TRAI) to study the circle-wise impact of the proposed reserve price of spectrum on call rates.
Sources say the department of telecommunications (DoT) is trying to build a case for reducing the proposed reserve price in the upcoming spectrum auction.
Earlier, TRAI had said that the spectrum pricing will only raise the tariff by up to four paise per minute. The regulator had calculated the tariff on pan-India basis.
The country is divided into 22 telecom circles. Generally, boundary of a circle coincides with that of a state. There are two exceptions — Mumbai is a separate telecom circle and the North East states also form a single circle.
In the 2010 auction of 3G spectrum, the combined price of spectrum in Delhi and Mumbai accounted for about 40% of the total pan-India price. The two metros account for only about 2% of India’s population and 7.8% of the total subscriber base.
Similarly, in 2001 auction, the two metros accounted for about 23% of the total spectrum price.
If spectrum pricing impact on tariff is calculated circle-wise, then tariff for telecom services in the two metros should have been many times more than that in category ‘B’ circles. However, this is not the case.
“If tariff is calculated circle-wise, then it would present a distorted picture of impact of pricing on tariff,” said a former TRAI member.
The average tariff fell from about Rs. 1 per minute to about 45 paise per minute when the new entrants launched services in 2008.
“Telecom commission wants circle-wise impact of pricing on tariff so that a new scenario may emerge where there may be a case for reducing reserve price,” said a source familiar with the developments.
The prices will also impact the licences for the metros that come up for renewal in 2014.