Unit 2: Contents of Licences

ICT Industry and Markets

Page 65 of 73 pages. Chapter: 6: OLD Unit 2: Licensing and Approvals

Contents of Licences

The contents of licence documents vary considerably depending on the country, the service and the operator. As indicated above, much depends on the state of development of the regulatory regime in a country. Where it is well developed, licences tend to be shorter. Where it is not well developed, licences must often include considerably more detail, in order to provide a comprehensive regulatory framework for the operator or service being licensed. For example, if a price regulation regime already exists in a country, it will not be necessary to spell it out in a licence. However, where no rules on price regulation exist, it is essential that they be spelled out in the licence document (even to say that prices will be unregulated). Certainty is the key theme in good licensing practice.

Table 2- 3:
Possible Qualification Criteria

Licence Type	Possible Qualification Criteria	Rationale
First new competitive fixed network (local or international service)	Applicant not currently licensed to offer a competitive service; not associated with the incumbent Applicant has a minimum number of fixed lines in service in other countries/markets (an international PTO as partner) Relevant experience in similar markets (direct or by contract) Financial comfort letter from recognized bank Business plan, including pro forma financial statements and a marketing plan Technical plan, including details of network planning and roll out and technology selections	Effective competition will not develop between related entities Only experienced operators can meet the significant challenged facing a start up fixed line competitors Experience and contacts in local markets increases prospects of successful start-up Evidence of access to required financing Evidence of financial viability and likelihood of success of the project; disadvantage in that is costly to prepare plan Business plan and technical plan can demonstrate detailed and viable service plans and knowledge of local economic and other conditions
Competitive cellular service (first new entrant in an emerging market)	Similar to, but less onerous than above	Presence of competition reduces (but does not eliminate) public costs of failure Significant economic and sector development objectives will be achieved by successful launch Valuable and scarce spectrum will be allocated to the selected operator on an exclusive basis
Data transmission service in highly competitive market	None	General authorization is best approach No scarce resources involved Existing competition makes success or failure of this operator relatively unimportant
Broad wireless services in highly competitive market	Financial comfort letter Evidence of experience in successful operation of similar businesses in any market	Spectrum is a scarce and valuable resource. Regulator has a important role to play in ensuring efficient use and avoiding warehousing

Table 2- 4:
Possible Selection Criteria

Selection Criteria	Advantages	Disadvantages
Comparative Evaluation-based on subjective assessment and comparison by the regulator of applicants based on a list of qualitative and/or quantitative criteria	Maximum flexibility and discretion to select the most attractive application Allows applicants to focus on factors they believe are important and to convince regulator accordingly	Non-transparent Subject to accusations of bias or corruption from losing bidders which are hard to refute and damage regulatory credibility Risk of confusion among bidders who may not clearly understand regulatory priorities
Pure Auction – selection from among qualified bidders based on the highest financial bid Maximum transparency	Market efficiency - licence awarded to the bidder which values it most High bidder will have strong incentive to roll out service quickly to recover its bid Suited to licensing in competitive markets	Payment of fee can divert financial resources from service provision to auction fees (government revenue) Encourages applicants to minimise resources devoted to other important priorities (i.e. rollout, coverage etc.)
Pure Auction - selection based on quantitative criteria, other than cash, relating to the service (i.e. time required to meet roll-out target, commitments on maximum prices for consumers)	As above Regulator can focus bidder resources on service development or other priorities as opposed to government revenues	Encourages applicants to minimise resources devoted to priorities which are not selection criteria, unless they make business sense
Combined Auction/Comparative Selection via weighted formula	A compromise which has many of the benefits of both auction and comparative selection Applicants are awarded points based on selection criteria	Difficult to develop a sound formula that compares "apples to apples" Compromise has disadvantages of both comparative selection and auctions Less transparent than pure auctions

Table 2- 5 provides an example of the contents of a fairly comprehensive licence. It is based on the contents of a PSTN operator's licence in an emerging economy without a well-developed regulatory framework. This type of licence has been chosen as an example since it is fairly comprehensive. It also covers many of the areas often dealt with in licences for other services, such as mobile services- except that licences for such other services can usually be much less comprehensive. Some additional and different conditions will be required in licence for particular services.

Not all of the matters included in Table 2-5 will be necessary in all licences for PSTN services. In many countries some of the matters included in the table will already be covered in general laws, regulations or policies. Examples include general regulations on universal service or licence fees, a competition law or general rules of practice and procedure governing licensee information reporting or licence termination and renewal. It generally does not matter which type of legal document is sued to deal with these issues provided the provisions are stated clearly and are enforceable under local law.

Table 2-5:
Contents of a PSTN Operator's License: (Example for Emerging Economy)

Contents	Notes
Part 1: Background and Identification of Parties
Recitals	Provides background, governing law, licensing circumstances, etc. Important for posterity, and for courts and governments interpreting the licence
Naming of Parties	Ensure licensed entity has legal and financial substance
Definitions	Key to clarity of license conditions Should repeat relevant definitions from laws, regulations, etc., since these may change
Part 2: Grant of License
Describe scope of licence: services, facilities and spectrum licenses	Approaches may differ (e.g. licensing of facilities or services) Spectrum often licensed separately - refer to separate licence Sometimes useful to define exceptions - i.e. what licensee is not entitled to do Specify services licensee may not offer (e.g. to implement competition policy)
Exclusivity Rights	Define precisely, including time limits, possible extensions and any pre-conditions for extensions
Term of Licence	Duration of licence and renewals terms, if applicable Include effective date of licence
Part 3: Licence Fees
Licence Acquisition Fee	Usually based on competitive bid or fixed advance One time fee May be payable in instalments, with revocation penalty
Operating Licence Fees	Periodic fee (usually annual) Often intended to recover administrative costs of regulation Fees should not exceed demonstrable administrative costs Should be impartial assessment of fees across industry
Spectrum Fees	Include essential requirements and public interest matters applicable to all or most licenses for telecommunications services
Part 4: General Conditions of License
Application	Include essential requirements and public interest matters applicable to all or most licenses for telecommunications services
Eligibility	Cite requirements to retain eligibility to hold licence (if any)
Ownership and Control Rules	Cite any restriction on ownership and control of licensee (e.g. cross-ownership with major competitors, foreign ownership restrictions)
Facilities and Equipment	Rules on equipment that may be sued (e.g. type approval rules)
Books, Records and Reports	Any applicable rules (e.g. to verify price or revenue cap regulation) Specify reporting requirements and rules on provision of information to the regulator
Co-operation with Regulator	Specific obligation to provide access by regulator to information or premises, and to co-operate with regulator for specific regulatory purposes
Co-operation with other Government Authorities	Specify obligations to co-operate with other authorities (e.g. police and national security forces regarding interception of communications, environmental protection, health and safety rules if not covered by law of general application)
Access to Rights of Way and other Public Property	Rights of operator to access streets, sidewalks, road allowances and other property and rights of way for the purpose of constructing, operating and maintaining facilities Cite legal authority for any such rights Include rules for access if not stated elsewhere (e.g. payment, if any, public safety and convenience, aesthetics, compliance with applicable law)
Access to Private Property	Any rights of operator to access private property (e.g. rights of way for cable or microwave routes) including expropriation rights, if applicable Cite legal authority for any such rights
Part 5: Specific Conditions of License
Use of Radio Spectrum	Often dealt with in separate spectrum licence Including rules on efficient spectrum use
Numbering	Assignment of numbers, if applicable Refer to national numbers, if applicable Rights and obligations regarding implementation of number portability arrangements
Directory and Emergency Services	Obligations to provide such services, and co-operate with other operators in providing them jointly
Universal Access and/or Universal Service Obligations	See TR 506 - Universal Service
Network Roll-out and Service Coverage Obligations	Specific obligation (usually set out in Appendix, including maps, number of access lines, etc) See TR 506
Quality of Service	Specific obligation (usually set out in Appendix, including specific indicators, standard to be met by specified dates, reporting procedures, etc) May be covered or supplemented in other regulatory documents
Security for Performance of License Obligations	Reference details of performance bond or other method used to secure performance of license obligations Bond or security document)s) may be annexed to license
Part 6: Relations with Customers
Terms and Conditions of Service	Terms and conditions usually set out in regulatory documents May include mandatory contents of customer contracts May include consumer "code of rights"
Customer Complaints	Rules on handling and recording complaints May be set out in regulatory documents
Consumer Protection	Provisions may be in regulatory documents or approved customer contract (to Provide notice to customer Include protection of privacy Rules often published in telephone directories
Price Regulation	Price regulation (tariff) regime usually specified (e.g. price caps) Specify services to which price regulation regime applies Review period and rules for review often specified Key to financial viability of license Details in appendices or referred regulatory documents See TR 504 - Price Regulation
Dispute Resolution	Method to resolve disputes over application of license
Part 7: Relations with other Operators
Interconnection	See TR 503 Include rights and obligations to interconnect
Anti-competitive Practices	See TR 505 Include remedies and sanctions, if not specified elsewhere
Access to Shared Facilities (poles and conduits)	Rights and obligations regarding collocation and access to poles, towers, conduit, etc See TR 503
Resale	Rights and obligations regarding resale by licensee and by other service providers (e.g. for payphones, Internet services, valuable added and simple resale)
Dispute Resolution	Method to resolve dispute with other licensees, e.g. regarding interconnection (see TR 503)
Part 8: Amendment, Renewal and Termination
Amendment by Regulator	See License Fees Unilateral modifications should only apply to certain regulatory maters, not key commercial terms of license Procedural safeguards Competitive neutrality should be maintained
Amendment by Mutual Agreement	Provides certainty, where needed Key commercial terms usually only subject to amendment by agreements between licensee and regulator Competitive neutrality should be maintained
Compliance	Specify sanctions and penalties for failure to comply with various terms of license (e.g. fines, forfeiture of performance bonds, revocation)
Renewal	Include renewal rights (e.g. if certain performance targets met)
Termination for Cause	Termination, revocation and/or suspicion may be included Grounds (usually certain major, unresolved breaches only) Procedure (include due process) Include lesser penalties (e.g. fines) which will not disrupt service
Termination if no Renewal	Clarify surviving rights of licensee, property rights, treatment of assets, and effects of non-renewal
Part 9: General
Force Majeure	Excuse performance in case of specified types of events beyond control of licensee
Assignment	Often no assignment (at least without consent) Rules and restrictions on assignment of license
Transitional Provisions	Rules and timetable for coming into full compliance with license (important in licensing of PTT or other incumbent operator)