Auctions  

Administrative Incentive Pricing (AIP) 

Recovery of operating costs of the frequency management / 

regulatory bodies ( cost recovery ) 

Payment related to Service Provider's revenue arising from the 

licensed service and/or use of the radio spectrum (generally 

referred to as a  levy ). 

Based on Market Indicators. 

Each method has advantages as well as disadvantages but where the aim is 

to ensure efficient use of the radio spectrum then one of the first two methods 

are generally used.  In the case of auctions the charges payable by the 

winning Service Providers are set directly by the market, except where there 

are insufficient bidders. In such cases only the reserve price be paid.  

Administrative Incentive Pricing (AIP) requires the charges to be set by the 

Regulator.  This has been a common approach in many countries. 

4.3 

Present Pricing Policy and the need for change 

The present level of spectrum allocation and the concerned bands have 

already been discussed in Chapter 2. The following text provides a brief 

history of spectrum pricing in India. 

4.3.1  Spectrum Pricing Policy for Cellular Mobile Services 

4.3.1.1 Entry fees for spectrum 

The first mobile licences were awarded in 1994 for metros using a beauty 

contest (with license fees and call charges as given parameters). For Non 

metro Service Areas, the Government on the basis of highest levy quoted 

decided the license fee. In 1999, these operators were migrated to a revenue 

share regime with a model having an entry fees & an annual license fees 

revenue share. In addition, the operators pays an annual spectrum fees as 

revenue share. An auction process was carried out to award the 4

th

 CMSP 

license in 2001.   

The entry fees paid at that point of time included spectrum and thereby in 

effect included an one off Spectrum Charge. The entry fees paid by CMSPs 

reflected the scarcity value of CMSP license, and this scarcity reflected in the 

oligopoly was a result of spectrum scarcity. However, it is very difficult to 

assess the amount that has been paid by operators at that time for spectrum 

alone.  

Basic Service Licenses were initially allocated through tender during the first 

round, but 2001 onwards these licenses were granted on meeting certain pre 

specified criteria. The right to use spectrum was on a first come first serve 

basis and the entry fees was pre defined. Also, 2001 onwards Basic Service 

Operators were permitted to offer limited mobility. 

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