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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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