Introduction to Telecommunication Licenses

Telecommunications Licenses

A telecommunications license authorises an entity to provide telecommunications service or operate telecommunications facilities. Licenses also generally define the terms and conditions of such authorisation, and describe the major rights and obligations of a telecommunications operator.

Licenses for new entrants in telecommunication markets are frequently granted by means of competitive licensing process, which involves the selection of one or more operators from a group of applicants. In other cases, general authorisations are issued. These authorise any entity that complies with the basic terms and conditions of the authorisation to provide a telecommunications service, without the need for an individual license.

Licensing is a relatively recent development in many telecommunications markets. Historically, state-owned incumbent operators provided telecommunications services on the monopoly basis in most markets. Telecommunications operations were treated as a branch of the public administration, along with postal services, road transportation and other government services, and licenses were not considered necessary.

In many cases, licenses for the incumbent operators were prepared as part of their privatisation process. By specifying the rights and obligations of such operators, investors were provided with some certainty as to the business in which they were investing. The licenses provides all stakeholders, including consumers, competitors and the government with the clear understanding of what the operator is and is not permitted or required to do.

Licenses are particularly significant in the context of emerging and transitional economies. Licenses provide certainty for investors and lenders, and with it the confidence that is required to invest the millions or billions of the dollars required to install or upgrade telecommunications infrastructure in such economies.

Licenses do not have the same importance in all countries. In a few countries where monopoly telecommunications operators have long been privately owned, notably the US and Canada, there have traditionally not been telecommunications licenses. Instead, regulatory terms and conditions were imposed through decisions, orders or tariff approval processes of a government regulatory authority. In some other countries, including Latin American countries, privately-operated telecommunications carriers were traditionally granted concessions of franchises.

While the terms license and concession and franchise may be defined differently in the laws of different countries, these terms generally refer to the same basic concept. In the context of telecommunications regulation, they all refer to the legal document granted or approved by the regulator or other government authority that defines the rights and obligations of a telecommunications service provider. For the sake of simplicity, we will use the term license only in this module. In most cases however, what is said about licenses applies equally to concessions and franchises.

The process of licensing incumbents and new entrants is sometimes handled by independent telecommunications regulators and sometimes directly by governments of ministers. In this model, for ease of reference, we will generally refer to the licensing authority as the regulator. This term is intended to include other licensing authorities, such as Ministers.

No matter which government authority is responsible, the licensing process is generally one of the most important "regulatory" processes undertaken in the course of reforming the telecommunications sector. The licensing process is integrally tied to the structure of telecommunications market, the number and types of operators, the degree of competition between them, the revenues earned by the governments in the opening markets, and, ultimately, the efficiency of the supply of telecommunications services to the public.