Issuing of Licences

The are multiple methods available to the regulator:

1 Comparative Evaluation Processes or Beauty Contests

The decision rests with the authority (regulator or minister). Selection criteria generally include evidence of financial resources, technical capability, business plan, range of service commitments, and increasingly in some countries local empowerment initiatives.

However the selection process does not eliminate subjectivity, and challenging the decision made by the evaluators is expensive. Beauty contest carry little benefit for government, unless licensee pays to enter the contest. Selection of the best candidate where applicants are equally worthy of the licence is difficult.

2 Auctions

Licence is issued to the highest bidder. Auctions award licences to those who value it most highly. They usually generate large capital for the treasury. The final decision of the object rests with the bidders. In the UK, the government secured £22.5 billion, equivalent to £1.000 for every household, for the 3rd generation mobile licence(The Guardian). High returns are guaranteed in incidences where there are few and conservative bidders.

It can lead to over-pricing of licences, as in the case of most 3-G licences awarded in Europe. Critics have stated that the high costs of the licence are transferred to the customer, whereas the additional capital could be better utilised for roll-out in low income areas. Smaller businesses that do have access to large capital are excluded in the process. Unless linked to service criteria (for example quality of service), and technical capabilities and financial health, auctions can result in waste of opportunities in the market, limit sector growth and deteriorating services as costs of licences are recovered. Furthermore, bidders may experience problems with payment.

3 Concession Based (Licences)

Licences provided by way of concessions are more simplified. They stipulate the rights and obligations of both the licensee and the operator. Concession-based licences can assume multiple forms, for example build- operate- transfer (BOT), built-transfer-operate (BTO) or build-operate-own (BOO). Examples of BOT can be seen in Botswana, where the UK based Cable and Wireless was granted a BTO type concession with Botswana telecommunications corporation (BTC). Telkom South Africa conceded to a BOO type concession with Telkom Malaysia and the United States based SBC. Such concessions are often premised on transfer of management skills, increased investment in the network and improved performance of the existing operator. The disadvantage with concession based licences is that they are not real licences, but contracts and therefore lack the weight of investor long term commitment characterised by licences. It may also require excessive government compromises to secure the contract.

3 Lottery

Applicants allow chance or luck to select the winner. They are generally inexpensive and less time consuming than the above listed methods. However, like auctions, unless they are annexed to service criteria they can obstruct market growth. Lotteries were used mainly in the United States and are not commonly used elsewhere.