Elon Musk’s satellite internet company, Starlink, is likely to face a new tax on the use of spectrum in India. This tax, which could be around 3% of the company’s adjusted gross revenue, is expected to increase the cost of providing internet services in the country. In addition to this tax, Starlink will also have to pay an 8% license fee, making it more expensive for the company to operate in India.
A Major Financial Burden for Starlink
The Indian government had removed spectrum usage charges (SUC) for traditional telecom companies like Reliance Jio, Airtel, and Vodafone Idea in 2022. However, for satellite internet providers like Starlink, the government is planning to impose this tax, which could even be higher than 3%. The Telecom Regulatory Authority of India (Trai) is currently discussing the final percentage.
Unlike telecom companies that acquire spectrum through an auction, Starlink will receive its spectrum through an administrative process. This means the company will not have to bid competitively, but in return, the government argues that a spectrum usage charge should still be applied. This tax, combined with the 8% license fee that all telecom operators must pay, will add a significant cost to Starlink’s operations in India.
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The imposition of the spectrum tax is a major concern for Starlink as the company is working to make satellite internet more accessible to people in rural and underserved regions. Higher operating costs could lead to increased service charges for customers, which might affect Starlink’s competitiveness in the Indian market.
Government Review and Approval Process
The final decision on the spectrum tax is still pending. Before it can be officially imposed, several government bodies need to review and approve it.
First, Trai will submit its recommendations on how satellite spectrum should be allocated and priced. The Department of Telecommunications (DoT) will then analyze these recommendations and may request additional clarifications. Once satisfied, the DoT will pass the matter to the Digital Communications Commission (DCC) for further assessment. The last step involves approval from the Cabinet before the tax is implemented.
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In June 2022, the Indian government decided to remove SUC for all spectrum that had been auctioned after September 15, 2021. However, since satellite operators receive their spectrum without an auction, the government believes they should still be subject to this tax. This new rule will not only affect Starlink but also other satellite internet companies such as Eutelsat OneWeb (partly owned by Airtel’s promoter Sunil Mittal) and Reliance Jio’s satellite internet venture, Jio-SES.
Impact on Satellite Internet Providers
The spectrum tax will add financial pressure on Starlink and its competitors. Satellite internet services already face high infrastructure costs, including the deployment of satellites and ground stations. Additional taxes will further increase service costs, which may lead to higher prices for consumers in India.
Starlink has been planning to expand its presence in India, targeting rural and remote areas where traditional broadband services are unreliable or unavailable. However, with these new financial obligations, the cost of providing satellite internet in India could rise significantly. This may also slow down the company’s ability to roll out its services quickly.
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Some critics believe that the new spectrum tax could create an uneven playing field. While terrestrial telecom providers enjoy tax exemptions, satellite providers like Starlink are being asked to pay more, despite the potential benefits their services bring to the country. Starlink’s internet services could be a game-changer for remote villages, schools, and businesses that currently lack reliable internet access.
As discussions continue, Trai is expected to finalize its recommendations soon. Once all approvals are secured, satellite internet companies will need to comply with the new tax regulations. For now, Starlink and other satellite operators must wait for the final decision to determine how much they will need to pay to operate in India.
