Ministry of Communications and telecom regulator disagree over compensation for unused radio frequencies

The Ministry of Communications has put together a draft government decision to ensure compensation in excess of EUR 25 million is paid to the National Company of Radio-communications SA (SNR) for the radio frequencies it freed up in 2008. These frequencies were to be put up for sale to provide internet services in rural areas. However, so far no one has shown interest in buying them. Moreover, the draft stipulates this sum should be paid from the budget of the National Authority for Administration and Regulation in Communications (ANCOM), which has rejected the bill.

Otilia Haraga

The draft bill on compensation for the freed radio bandwidth of 3600-3657/3700-3757 MHz was forwarded by the Ministry of Communications for approval by ANCOM on July 14.

“Compensation of RON 92,420,939 (in excess of EUR 21.8 million), to which is added VAT worth RON 14,756,286 (approximately EUR 3.4 million), is approved for the National Company of Radio-communications SA, for investments made with a view to clearing frequency bandwidth 3600-3800 Mhz,” states the draft that was to land on the governmental table.

However, how this could be done is not known, as the authority’s budget is approved by Parliament which must give its consent. Contacted by Business Review, the Ministry of Communications, which drew up the draft, did not answer.

“Under the legislation in force, the Ministry of Communications does not have prerogatives concerning the sums available in the budget of ANCOM, this in fact being a requirement of community norms to ensure the independence of the authority in regulating electronic communications,” Catalin Marinescu, president of ANCOM, told Business Review.

This year, ANCOM’s budget is approximately RON 290.9 million (nearly EUR 70 million). This means that more than one third of the authority’s budget would be granted as compensation to the SNR.

ANCOM has snubbed the draft, citing various reasons. “ANCOM has rejected the draft of the government decision for granting a sum as compensation to the National Company of Radio-communications SA, regarding the value of the investments made for releasing bandwidth in the frequencies 3600-3657/3700-3757 MHz,” Marinescu told Business Review.

He explained that when it vetoed the draft, ANCOM took into consideration several legal aspects. “One of these is that the sums that were owed to the SNR came from the license tax that should have been paid by the winners of the new licenses for using the radio bandwidth, licenses that were to be granted in the frequencies cleared by the SNR. In other words, the costs of changing the use or the reorganization of some radio frequency bandwidth would be supported through the state budget from the license taxes and not from the budget of ANCOM, a budget approved through a Parliament decision,” says Marinescu.

The license tax is thereby paid to the state budget by the beneficiaries of the licenses and part of it should be returned as compensation to the SNR. “ANCOM is not part of this circuit, so the one who cashes in the tax (the state budget) should also honor the obligation for compensation. This however cannot surpass 50 percent of the cumulated value of the license taxes (EUR 7.5 million), according to the same legal stipulations,” says Marinescu.

Moreover, ANCOM is an institution financed exclusively through its own revenues and the budget of the authority is approved through government decision, according to the stipulations of the government emergency ordinance nr. 22/2009 regarding the foundation of the institution.

At the end of 2008, ANCOM started procedures for a public auction to grant licenses for the use of radio frequencies for systems of the BWA type (access on broadband radio support) which were to function in the bandwidth cleared by SNR.

The deadline within which the interested companies were supposed to submit their answers was February 2009. However, at that time no one had submitted offers to obtain the licenses. Since no one benefitted from these licenses and no taxes for the license were cashed in, there was no income source and the SNR could not be compensated. Therefore, at this point, the use of the bandwidth cleared by the SNR is uncertain, as the public bidding ended in no license being granted.

Previous data from ANCOM show that the number of active connections to mobile points for broadband internet access reached 2.5 million at the end of 2009, which represents a 66 percent growth compared to the value posted at the end of 2008. “As Romanians are more and more attracted to the use of broadband internet and mobile internet, we estimate this segment will continue its growth over the next period, which will also trigger a growth in the degree of penetration at a national level,” predicts Marinescu.

ANCOM data also indicate the number of fixed broadband internet connections registered at the end of 2009 had increased by 12 percent compared to the same period in 2008.

So, on December 31, 2009, there were 2.8 million connections to broadband internet at fixed points, of which 2.5 million were supplied to individual clients. At the same time, the degree of penetration for broadband internet at fixed points reached 13.1 percent per 100 inhabitants and 34.2 percent per 100 households.

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