In Phase-I the Government divided the centers (cities where frequencies were offered to private bidders) in five categories for the purposes of license fee: A+ (reserved license fee Rs. 125 lacs), A (reserved license fee Rs. 100 lacs), B (reserved license fee Rs. 75 lacs), C (reserved license fee Rs. 50 lacs) and D (reserved license fee Rs. 20 lacs).

In light of the following:

Internationally (e.g. in case of Spectrum Allocation in Australia) the Government is free to determine a reserve price in case of scarce resources like frequencies so that due to imperfections, the market does not grossly undervalue the frequencies. In Phase I also, some licenses were granted to the bidders at the reserve price, as there were no other applicants. Even internationally, instances wherein there is only one bidder for a particular frequency are quite common (please see the note on Canada and Australia, Annexure III).

However, the purpose of such reserve price is again not meant for revenue maximization but only to prevent gross undervaluation. Reserve price must be objectively calculated on pre-published criteria in the light of alternate and probable uses of the frequency. It should necessarily reflect the lowest permissible price.

The Committee recommends that the historical reserve price of Phase I be followed. The Government can consider revising the reserve price in subsequent regimes.