Revolutionizing India's Satellite Spectrum Charges for a Connected Future
The Telecom Act 2023 optimizes satellite spectrum allocation in accord with global norms, enabling the DoT to uniformly implement a 1% SUC rate for GMPCS, mirroring its approach with BSNL's GSP
Background
In a decisive move on January 17th, 2023, the Department of Telecommunications (DoT) issued a notification, effectively reaffirming the continuation of the prevailing annual spectrum usage charges for six months. This comprehensive notification outlined several key stipulations, which can be broadly categorized as follows:
Continuation of Established Charges: The notification emphasized the adherence to the formula-based Spectrum Usage Charge (SUC) calculation, initially established on March 22nd, 2012. This directive serves as the cornerstone for calculating royalty charges, particularly concerning the allocation of frequencies to Captive Users. This category encompasses all government entities and includes Single Channel Operators for Fixed/Land/Land Mobile Stations/Terrestrial Broadcasting. The links to respective orders are - PP-I, PP-II, PP-III & PP-IV.
Revenue Share-Based Charges for VSAT and Inmarsat Services: The DoT stipulated the imposition of percentage revenue share-based spectrum charges tailored for two distinct services:
Commercial/Captive Very Small Aperture Terminal (VSAT) Networks, as defined on April 16th, 2003.
Inmarsat-based Global Satellite Phone Services, instituted on June 28th, 2021.
Mandatory Undertaking for Revised Charges: A pivotal provision accompanied the issuance of this order: all respective wireless users are mandated to submit a formal undertaking. This commitment ensures the payment of the revised spectrum charges—determined through a market-related mechanism or an equivalent alternative—from the date denoted in the Letter of Intent (LoI) for the provisional allotment of spectrum.
Following this, on December 11th, 2023, the DoT introduced an additional order, which primarily influences the spectrum charges designated for Captive Users. This development is significant for two reasons:
Supersession of Previous Orders: This directive predominantly addresses the spectrum charges slated for assignment to Captive Users. It is particularly noteworthy because it supersedes the earlier mandate dated March 22nd, 2012 (PP-I, II, III & IV), which focused on the assignment of spectrum based on the formula-based SUC calculation.
Retention of Previous Charging Mechanisms: Despite the new order, the preceding directives concerning the charging mechanisms for VSAT and Inmarsat-based Global Satellite Phone Services, dated April 16th, 2003, and June 28th, 2021, respectively, remain unaltered.
Current Charging Landscape and Unresolved Aspects: As of the present date, it is evident that spectrum usage charges for captive users of radiofrequency services, which are not commercially oriented, continue to be levied on a formula basis. Conversely, commercial users are subject to charges based on a revenue share model—specifically, 3% to 4% for VSAT and 1% of the Adjusted Gross Revenue (AGR) for BSNL's 'sui-generis' category.
However, a critical aspect remains unresolved: the percentage rate applicable to operations under the Global Mobile Personal Communication by Satellite (GMPCS) is yet to be defined.
Objective and Forward-Looking Perspective: The essence of this discourse is not just to revisit the decisions and strategies employed by the DoT and the Telecom Regulatory Authority of India (TRAI) in establishing these rates. More importantly, it aims to highlight the transitional developments precipitated by the DoT's strategic shift towards auctioning satellite spectrum. This discussion unfolds against the backdrop of the recent enactment of the Telecom Act 2023, which introduces a paradigm shift towards the administrative assignment of spectrum for satellite services, marking a new era in telecommunications policy and spectrum management.
TRAI’s Recommendations
In November 2020, the Department of Telecommunications (DoT) sought guidance from the Telecom Regulatory Authority of India (TRAI) regarding the revision of the licensing framework for satellite-based low-bit rate applications. The DoT pinpointed a critical issue: the existing non-commercial VSAT services' fee structure, with its flat rate of Rs 10,000 per terminal, was untenable. This model proved prohibitively expensive, particularly for operations involving a vast network of remote terminals or sensors, as opposed to the relatively fewer VSAT terminals. Additionally, the commercial VSAT services were hamstrung by a spectrum of challenges, notably the elevated charges from the Network Operation and Control Center (NOCC).
Responding to this request on 26th Aug 2021, the TRAI critically analyzed the existing framework, specifically the DoT's Order No. P-11-14/34/2009-PP (III) dated March 22nd, 2021, for calculating spectrum charges for GMPCS license users on a per-terminal basis. TRAI flagged this approach as non-scalable and overly restrictive. Advocating for a more adaptable and growth-friendly model, TRAI proposed a shift to an AGR-based spectrum charge framework. Specifically, TRAI recommended a Spectrum Usage Charge for satellite frequencies under the GMPCS service authorization, set at 1% of AGR. This revised structure was designed to encompass the spectrum charges for both handsets/user devices and Earth Stations (as outlined in clause 3.39 (ii)).
Moreover, TRAI reflected on the historical context where BSNL's 'sui generis' license for satellite-based Global Satellite Phone Service (GSPS) was also subject to a formula-based charge mechanism. Echoing its stance for a more progressive and scalable model, TRAI, in its recommendations dated December 27th, 2018, advocated for the replacement of the formula-based system with an AGR-based spectrum charge, set at 1% of BSNL's satellite-based services' AGR under the 'sui-generis' category. This recommendation resonated with the DoT, culminating in the issuance of a notification on June 28th, 2021, formalizing the SUC at 1% of AGR for the 'sui-generis' license. This transition marks a significant stride towards a more sustainable and scalable satellite licensing framework, aligning fee structures with operational realities and fostering the growth of satellite-based services.
DoT's Endorsement and Deliberation on TRAI's Recommendations
On March 9th, 2022, the Department of Telecommunications (DoT) communicated its resolution to the Telecom Regulatory Authority of India (TRAI), following a high-level meeting on January 4th, 2022. The decision was to adopt the bulk of TRAI's recommendations issued on August 26th, 2021. This included the pivotal adjustment to set the Spectrum Usage Charge (SUC) for GMPCS licenses at 1%. However, DoT expressed reservations about one specific aspect, notably paragraph 4.9 (ii), which dealt with the National Long Distance (NLD) SUC. This clause advocated for a distinct accounting of revenues derived from satellite-based services separate from those of licensed services. The hesitancy stemmed from a perceived contradiction with TRAI's previous stance on July 28th, 2020, where the regulatory body recommended against such segregation due to the complexities involved in revenue separation.
In a subsequent response dated May 5th, 2022, TRAI addressed the concerns raised by the DoT. TRAI noted the absence of explicit challenges or issues from DoT regarding the implementation of revenue separation for satellite-based connectivity concerning NLD Service providers. TRAI underscored that its recommendation to transition from the traditional formula-based SUC calculation to an AGR percentage model, coupled with maintaining distinct financial accounts for satellite-based services, was premised on the clear identification of satellite services as a separate operational vertical. This distinction, according to TRAI, would facilitate a straightforward segregation of revenues between satellite-based services and other telecommunication services.
Reaffirming its stance, TRAI emphasized the practicality of its approach. It highlighted the feasibility for NLD service providers to distinctly segregate revenues emanating from satellite connectivity, thus underlining the operational viability of its recommendations. This exchange marked a critical juncture in the discourse between DoT and TRAI, shaping the trajectory of policy decisions concerning the financial structuring and regulatory oversight of satellite-based telecommunication services.
TRAI's Consultation on Space-Based Communication Services
On 3rd April 2023, the Telecom Regulatory Authority of India (TRAI) initiated a comprehensive consultation process concerning space-based communication services, rooted in the Department of Telecommunications (DoT)'s feedback received on August 16th, 2022, which addressed TRAI's inquiries from November 23rd, 2021. While the consultation process has yet to reach a definitive conclusion, it has been instrumental in meticulously delineating the myriad of issues associated with the allocation of spectrum for satellite communication services, with a particular focus on Spectrum Usage Charges (SUC).
In its consultative efforts, TRAI has diligently charted the international contours of satellite spectrum charges, illuminating their typically nominal rates, which are principally aimed at defraying administrative costs. Nonetheless, the legislative landscape has undergone a significant transformation with the introduction of the new Telecom Bill 2023, ushering in a potential shift in the relevance of certain elements of the consultation paper. Despite this evolution, the imperative to formulate regulations for the administrative allotment of spectrum for satellite services persists, a task yet to be addressed. This imperative encompasses the crucial matter of spectrum usage charges, marking an essential juncture in the ongoing refinement of policy and regulatory structures pertinent to space-based communication services.
Approach to Satellite Spectrum Charges: A Strategic Perspective
The discourse indicates a targeted approach by the Department of Telecommunications (DoT) in applying the formula-based charging mechanism exclusively to captive and non-commercial users. This approach is evidenced by DoT's recent order on December 11th, 2023, which precisely amends the directives set forth on March 22nd, 2012, while deliberately maintaining the charging frameworks for VSAT and Inmarsat-based Global Satellite Phone Services, established on April 16th, 2003, and June 28th, 2021, respectively, intact. This stance is congruent with DoT's communication to the Telecom Regulatory Authority of India (TRAI) on March 9th, 2022, post a strategic meeting on January 4th, 2022, wherein DoT confirmed its adoption of the majority of TRAI's recommendations from August 26th, 2021. A critical element of this endorsement was the standardization of the Spectrum Usage Charge (SUC) for GMPCS licenses at 1%.
Given this backdrop, DoT must reassess and align the SUC rates uniformly across different services. This entails an immediate revision of the April 16th, 2003 order, which currently imposes an SUC at a higher bracket of 3-4%, to mirror the 1% rate recommended by TRAI—a recommendation that DoT had previously embraced on January 4th, 2022. It's pertinent to note that on June 28th, 2021, DoT had already established a precedent by notifying a 1% SUC for BSNL’s Global Satellite Phone Service under the ‘Sui-Generis’ category. This model should serve as a benchmark, prompting the harmonization of SUC rates for both the VSAT and GMPCS categories of licenses, thereby ensuring a consistent and rationalized spectrum charging regime.
Conclusion: Navigating the Future of Satellite Spectrum Charges
The discourse crystallizes several pivotal developments in the realm of satellite spectrum management, painting a clear trajectory for future policy and regulatory actions. Firstly, the enactment of the New Telecom Act 2023 has laid a solid groundwork for administratively assigning spectrum for satellite services. Secondly, the Department of Telecommunications (DoT) has, on January 4th, 2022, aligned with the Telecom Regulatory Authority of India (TRAI)'s recommendation by endorsing a Spectrum Usage Charge (SUC) of 1% of Adjusted Gross Revenue (AGR) for commercial satellite services. This stance was further reinforced on June 28th, 2021, when DoT implemented TRAI's guidance by instituting a 1% AGR-based SUC for BSNL’s Global Satellite Phone Services.
Furthermore, DoT's latest directive dated December 11th, 2023, delineates its application of the formula-based charging mechanism solely to captive and non-commercial services. This nuanced approach necessitates a harmonized charging framework. To achieve coherence and foster the expansion of satellite services in India, DoT must extend the 1% AGR-based SUC to GMPCS and commercial VSAT services, echoing TRAI's recommendations. Such a measure will not only ensure uniformity in the spectrum charging regime but also resonate with consumer interests and national objectives, setting a conducive stage for the burgeoning satellite service sector in India.