April 19: While preparations are underway for operating 4G services based on the policy of ‘Technology Neutrality’, the government is likely to lose substantial amount in revenue estimated at tens of millions of rupees.

The revenue loss is because the frequency is being distributed on the basis of minimum price instead of auction bidding. Though the existing policy about radio frequency has a provision of competitive bidding for distributing frequency of high commercial value, Nepal has not implemented auction bidding in frequency distribution so far.

Nepal Telecommunication Authority (NTA) is already distributing frequency of 1800 band for 2G and GSM. And the frequency policy has accepted that there is no possibility of auction bidding for these frequencies as these are already being distributed. Now as 4G frequency too could not be priced on the basis of auction bidding, this is going to affect the government revenue directly. There is worldwide practice of pricing this kind of natural resources through auction bidding.

However, Digambar Jha, Chairman of NTA, claims, “there will be little effect on government revenue as the revenue which is supposed to be received through frequency will be recovered from the fee that the government will get for frequency license and renewal of the license.” According to present practice in Nepal, service provider needs to pay Rs 357.5 million for basic telephone services and Rs 20.132 billion for renewal fees every 10 years.

NTA has moved ahead with preparation of operating 4G services based on the policy of Technology Neutrality. NTA has informed that as per the policy, service provider will be awarded 1800 band which is considered as ‘Golden Band’ to operate 4G service.

The existing frequency policy has fixed the fee of allocated minimum frequency of 1800 band  at  0.4 percent of total annual income of the service provider. Similarly, the fee for additional frequency above the  minimum frequency is Rs 4 million per megahertz while for maximum frequency the fee is Rs 8 million per megahertz. The policy also provides for charging  1.5 times of minimum fee of frequency if the service provider is to operate 3G or any other new services in 1800 band. In such condition, the price of 3G is likely to be applicable in case of the frequency allocated for 4G too.

The Radio Frequency (allocation and pricing) Policy 2069 BS says that the allocation and pricing of the radio frequency to be allocated for new services and technology under new band will be fixed through the market mechanism on the basis of auction bidding. It was also publicized earlier that operation of 4G services will be allowed to be operated with 700 and 2600 band frequency. Since these two bands are new, the NTA had started preparation for allocating the 4G frequency through auction bidding.  

But that is not possible now, says Bijay Kumar Roy, a Deputy Director of NTA. According to him, for that to be possible the telecom act needs amendment to incorporate in it the auction bidding provision of the policy.  “It is not possible to allocate the frequency in 700 and 2600 bands without amendment in the act,” he says. Due to this, there are only two alternates: either to postpone the 4G services till the Act is amended or to start it without auction bidding.

Even though there are six telecommunication service providers at present, only three have obtained mobile service licenses. “Therefore, there will not possibly be significant competition even if we go for auction bidding,” says Min Prasad Aryal, the spokesperson of the NTA. In his opinion, the best solution in these circumstances is to fix a ‘best price’ for 4G frequency and move forward. “However, that too would require amendment in the Frequency Policy,” he adds.