Starlink in India: Elon Musk's firm may have to pay spectrum usage charge; check details

Elon Musk's Starlink is potentially facing additional financial burdens in India, as the company may be subject to a spectrum usage charge (SUC) of approximately 3% on its adjusted gross revenue. According to a report in the Times of India, Starlink is expected to face a spectrum usage charge (SUC) in India, a fee that had been eliminated for terrestrial network providers like Reliance Jio, Airtel, and Vodafone Idea a few years ago.

This move is part of a broader regulatory framework under the new telecom law passed in December 2023. Industry sources stated that this tax could drive up service costs, adding to the current challenges Starlink faces while navigating stringent compliance mandates related to internet suspension and interception policies in the country. The spectrum allocation to satellite operators like Starlink will be administratively done rather than through auction, necessitating the SUC. 

Spectrum Usage Charges (SUC) are payments made by telecom operators to the Department of Telecommunications (DoT) in exchange for the privilege of utilixing radio frequency spectrum. The SUC rate is calculated based on the amount of spectrum owned by the operator, with rates varying from 2% to 6% of AGR. Historically, spectrum was included with the license and SUC was imposed as a percentage of Adjusted Gross Revenue (AGR) by the DoT.

Sources quoted in the report said the Telecom Regulatory Authority of India (Trai) is in the process of finalising the specifics regarding pricing, tenure, and taxation for satellite spectrum. "Discussions within Trai are believed to have come to the conclusion that there is a requirement to mandate SUC for satcom players, since they will be allotted spectrum administratively at a pre-determined price," the source said. These recommendations by Trai are expected to be reviewed by the Department of Telecommunications (DoT) before potentially being presented to the Digital Communications Commission (DCC) and the Cabinet for final approval.

Starlink is not the only satellite operator that might be affected by this SUC policy. Other satellite communication players, such as Eutelsat OneWeb, which has investment links with Airtel's promoter Sunil Mittal, and Reliance Jio-SES, a joint venture between Jio Platforms and Luxembourg-based SES, are also expected to be impacted. The implementation of the SUC comes after a government decision in June 2022 to eliminate the SUC on bandwidth auctioned post-September 15, 2021, but the new law mandates SUC for satcom operators receiving spectrum without auction.

A critical aspect of the regulatory changes is the overarching financial impact on satellite communication services, which already carry an 8% licence fee applicable to all telecom companies. The exact rate of the SUC is still under discussion, and it "may even be higher than 3%, though this is still being discussed," according to another source quoted in the report. 

The potential SUC imposition comes as part of a broader strategy to regulate the satellite communications sector, ensuring that companies using administratively allocated spectrum contribute fair financial returns. As the regulatory landscape continues to evolve, stakeholders in the telecommunications industry are closely monitoring how these changes will affect market dynamics and competition, particularly as Starlink and other players seek to cement their positions in the rapidly developing Indian satcom market.