as was the case in the European 3G mobile auctions, which may result in fees 

that are widely out of line with the least cost alternative approach and so may 

fail to have the desired impact on investment decisions.  If the price is set too 

high, Service Providers will be deterred from entering the market or, if they do, 

may be deterred from acquiring sufficient spectrum to address a wide market, 

choosing instead to concentrate on high spending, non price sensitive users.  

If too low, there will be no incentive to use spectrum in the most efficient 

manner. 

iii) 

Basis of pre auction bid amounts. This approach was used while 

awarding the fourth cellular licenses. 

4.4.1.3 

Based on cost recovery 

In the case of cost recovery the fees are generally set on a service by service 

basis and depend on the actual costs incurred by the regulatory authority in 

the licensing of the networks / services concerned and associated 

management of the radio spectrum.  There will be additional  indirect  costs 

such as international activities or work on licence exempt services that cannot 

be directly attributed to a service that is licensed.  These costs will have to be 

spread across the different services according to some transparent basis.  For 

example it could be done according to the ratio of fees payable by the 

different services so each one only pays a small addition in comparison with 

their own costs of management.  Alternatively, some Regulatory Authorities 

recover costs by means of a levy on turnover. 

Cost based pricing is appropriate where there is no excess demand for 

spectrum and may be applied as a minimum fee where AIP is deployed, to 

ensure that the regulator's costs are always covered. 

4.4.1.4  Continue with revenue share 

Another option is to continue with the existing revenue share model. This 

methodology has already been discussed earlier. 

4.5 

Issues in Spectrum charging 

While adopting an approach towards spectrum pricing, it is important to take 

note of the existing legacy. The existing operators have already treaded a 

certain path towards spectrum charging i.e., they have been paying annual 

charges based on revenue for allotment of spectrum upto 10 + 10 MHz. In the 

event we choose to migrate to a new regime, it is important to take care of 

level playing field issues of new operators vis a vis the existing operators. 

One option could be that, for those existing service providers, who have not 

reached 10 + 10 MHz, the present revenue share mechanism be continued till 

they reach 10 + 10 MHz or a certain time frame, say 3 years. After a lapse of 

the period or the attainment of this spectrum, whichever is earlier, the new 

charging mechanism will be applicable. 

The options for applying any new methodology are 

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