LICENSING FRAMEWORKS:

Who to regulate, What to regulate,

How to regulate?
 OUTLINES

1. Fundamentals of licensing
2. Types of licensing frameworks
3. Principles of licensing
4. Licensing and convergence
5. Transitioning to a new licensing framework
6. Conclusions
 FUNDAMENTALS OF LICENSING

• Licensing is one of the core elements of any communications market’s regulatory framework. Licensing
is integrally tied to the structure of the communications market.
• Licensing determines the degree of competition between operators, revenues earned by governments
from fees, and the conditions under which market participants can operate and supply services in the
market.
• An effective, forward‐looking licensing framework is essential for the successful deployment of
value‐maximizing technologies, the promotion of effective competition between operators, and for the
facilitation of investment in the communications sector.
• Telecommunications is viewed as an essential public service with large positive externalities (like other
network industries such as water, electricity and gas). Public policy places a strong emphasis on effective
regulation.
• Given that the telecommunications sector must be regulated, governments and regulators need a
framework that defines what is regulated, who is regulated, and how they are regulated. This is the
purpose of licensing.
 FUNDAMENTALS OF LICENSING:
LICENSING PROVIDES A CLEAR SCOPE FOR REGULATION

Key regulatory Potential scope of Defined scope of regulation

questions regulation

What to Which services, technologies Those telecommunications networks or services that are
regulate? and facilities are regulated? offered to the public on commercial terms generally require
a license to operate or provide.

Who to regulate? Which network and service Incorporated entities licensed under a country’s
providers are regulated? telecommunications regulatory framework.

How to regulate? Which regulations apply and Those general regulations provided for in the
how are they administered? telecommunications regulatory framework or within an
individual telecommunications license.
 WHAT IS A COMMUNICATIONS LICENSE?

• An official authorization to provide services or operate networks. Can also be a regulatory code that defines
the terms and conditions under which the licensee may operate. Licenses frequently describe the rights and
obligations of the provider.
• Licenses:
 Regulate the provision of an essential public service through some controls to support the public interest (e.g.
safety).
 Assist in expanding network coverage and other universal service objectives.
 Represent a key element in shaping market structure (e.g. number of players)
 Establish a competition framework through fair trading conditions.
 Generate fees as part of revenue raising for Governments and regulators.
 Support consumer protection efforts through mandated license conditions.
 By clearly defining rights and obligations, licenses underpin regulatory certainty.
 PRINCIPLES FOR EFFECTIVE COMMUNICATIONS
LICENSING

• Licensing regimes must ensure they facilitate rather than restrict growth in services. Must provide businesses with
flexibility and certainty required to invest in new and existing operations. Five key principles to effective licensing are
therefore:
 Service and technology neutrality: Regulators increasingly allow licensees to offer a range of services using the
most efficient technology and infrastructure.
 Simplicity: Move towards a consolidated licensing framework that requires operators to hold a minimum number
of licenses and to be subject to a minimum number of different licensing processes.
 Flexibility: Operators should have the ability to respond to changes in the market quickly with a minimum
regulatory friction.
 Certainty: Licensees should be subject to clear and consistent license conditions. Where there is provision for
discretion in setting or modifying license terms, regulators and ministers should ensure adequate consultation
smooth transition.
 Avoidance of discrimination between types of licensees: Governments should treat licensees on a consistent
basis and ensure a level regulatory playing field.
 LICENSING CATEGORIES AND SERVICE DEFINITIONS

• The establishment of licensing categories and service definitions is central to the development of
regulatory regime. This is because it dictates ‘who to regulate’ and ‘what to regulate’. Ideally any
definitions used to identify a class of industry participants or activities will cover the following
features:
• The definitions should be clear and concise: industry participants, regulatory agencies and
policy makers should all be able to make unambiguous and quick assessments about the class or
classes of service provider to which industry participants belong.
• The definitions should be stable so that technological and market changes should not create
uncertainty about how the commercial strategies of industry participants will be affected.
• The definitions should be relevant and clearly linked to legislative provisions and other
policy arrangements that serve national objectives.
• The definitions must be clear now and into the future and based on the constant underlying
features of the industry and not on variable technology and market structure dynamics.
 OBJECTIVES OF LICENSING

• Licenses provide countries with a useful tool to ensure regulatory certainty for
investors and to help a country keep up to date with technology developments
and demands and meet policy objectives
• Licensing has few essential attributes
it effectively determines the structure of the market by determining the services
to be licensed and the number of market players
it sets the basic terms and conditions under which services are offered
it helps accomplish policy objectives – availability and affordability for all
in some cases it can be a source of revenues for government
 KEY OUTCOMES

• Competition–an effective licensing framework can increase competition, offer

more and better networks and services to end-users, and lower prices—but can
only begin in markets with low entry barriers. Regulatory frameworks that
establish level competitive playing fields provide the greatest benefits for users
• Market forces–a level playing field to allow competition, growth and innovation
- intervention only in case of market failures or where there are specific issues
relating to scarce resources
• Foster new technologies-Service providers should be allowed to fully use and
update their networks and offer services efficiently and effectively and to reduce
costs as appropriate
• Investor Confidence–a well justified and stable licensing framework encourages
investors to enter the market and to stay and make further investments
 FACTORS DETERMINING LICENSING
FRAMEWORK

• Degree of Evolution of the Market

• Vision of the Market
• International and Regional Trends and
Commitments
• Legal, Institutional and Administrative
Framework
 DEGREE OF EVOLUTION OF THE MARKET

• Status of the Incumbent

a) Privatization Issues
b) Exclusivity Issues
• Level of Competition already in the Market
• Number and types of operators and their performance
• Need to ensure “no worse off” situation to existing operators
• Accommodation of Convergence and of New Services and Technologies
 Technologies or services using unlicensed bands or which are generally exempt from licensing (e.g.
WiFi/RLAN,VSAT)
 New challenges sucand emerging technologies
 The need for simplification of license categories and administrative procedures
 VISION OF THE MARKET

• Any licensing framework must be designed to cater for specific

competition and consumer protection issues expected to be
encountered, and can therefore only be developed with a specific
vision of the structure of the liberalized market in mind
• The right balance must therefore be struck between ease of market
entry, competition between different access technologies, technical
efficiency and consumer protection
 LICENSING REFORM IN PRACTICE:
CHECKLIST

• Deciding which entity or entities will be responsible for licensing, authorizations, and notifications and ensuring
that the mandate is clear
• Deciding which model of licensing will be adopted and deciding on the categories
• Mapping various services and deciding which services may still be subject to licensing, which may require only an
authorization or notification process and which may become unlicensed
• Redesigning the application process
• Defining and publishing transparent licensing
• criteria
• Deciding on License Fees
• Deciding whether the existing licensing framework will be overhauled in one step or through a gradual, phased
in fashion
 LICENSING REFORM IN PRACTICE: CHECKLIST

• Developing a regulatory framework that incorporates recent

technological developments and anticipating a continuous technical
and market evolution.
• Ensuring a level playing field under the new licensing regime
• Revising existing universal access/ service regulations, strategies and
financing mechanisms
• Reviewing and updating other regulations such as quality of service,
interconnection, spectrum and numbering
• Developing regulatory capacity to regulate disputes, enforcement and
sanctions.
 TYPES OF LICENSING CATEGORIES

• Licensing based on type of service provided (fixed; international; national long distance;
local; mobile; data;VSAT; value added services,VoIP, ISP; various satellite services,
undersea cables, etc. )
• Licensing based on facilities-based and services-based competition (Singapore model) –
differentiates between licensees based on the nature of their operations.
• Facilities-based operations refer to the deployment of any form of
telecommunications networks, systems and facilities by any persons, outside of their
own property boundaries, to offer telecommunications services to third parties.
• Operators intending to lease telecommunications network elements so as to provide
their own telecommunications services, or to resell the telecommunications services
of FBOs to third parties, may apply for a Service Based Operator (SBO) license
 TYPES OF LICENSING CATEGORIES

• Unified (or global) authorizations: these authorizations are

technology- and service- neutral. They allow licensees to provide
all forms of services under the umbrella of a single authorization,
using any type of communications infrastructure and technology
capable of delivering the desired service
• Multi-service authorizations: these authorizations allow
service providers to offer multiple services under the umbrella of
a single authorization, using any type of communications
infrastructure and technology capable of delivering the services
in question.
 TYPES OF LICENSING CATEGORIES

• With service- and technology-specific licensing:

• operators may have to reapply for a license or authorization for every
new service or application added to the network.
• There may be restrictions that impede them from offering new
services, e.g., telephony operators cannot offer cable service; mobile
operators cannot provide broadcasting (mobile) services; or joint
ownership or cross ownership restrictions.
• This could result in a situation where an operator may be hindered
from offering new services
 TYPES OF LICENSING CATEGORIES

• Recent trends show that many countries have modified their licensing regimes, which typically involves changing
from a technology or service specific structure to a technology neutral, simplified set of licensing categories, and in
some cases, a unified (single/global) license and/or multi- service authorizations for all technologies and services
 SIMPLIFICATION IN MALAYSIA

Network Facility Provider

Network Service Provider

Applications Service Provider

Content Applications Service Provider

SIMPLIFICATION IN UGANDA
MAPPING OUT NETWORK AND SERVICES
MAPPING OUT NETWORK AND SERVICES
 LICENSING CATEGORIES-CHECKLIST

• Is the licensing framework based on a general authorization regime or

are there specific categories of licensing for facilities and services?
What are the categories of licensing (e.g., individual, class, declaration,
registration, open entry)?
• What are the reasons given for individual licensing (e.g., public order,
use of scarce resources)?
• Are licenses service-specific or has there been a move to a system of
unified licensing in which large categories of facilities and/or services
fall within each category?
• Are licenses or authorizations technology- neutral?
 LICENSING CATEGORIES-CHECKLIST

• For a framework based on individual and class licenses, are the

licenses hierarchical whereby an individual license replaces a class
license and allows the individual license holder to offer all types of
facilities and services in both license categories?
• Does the law provide for exceptions for certain activities?
• Do any of the licenses provide for exclusivity? If so, what are the
conditions and timing?
• Do any quantitative restrictions exist on the number of licenses?
 LICENSE FEES

• One Time Fees

• Market set fees
• Price Floors and Minimum Bids
• Spectrum Evaluation Fees
• Annual Recurring Fees
• Revenue Based Annual Fees
• Other Fees for Regulatory Cost Recovery
• Spectrum Usage Fees
• Administrative Incentive Pricing
• Additional Contributions
 TRANSPARENCY IN LICENSING
CRITERIA

• In accordance with the WTO

• Licensing Criteria must be publicly available, meaning:
• All the licensing criteria and the period of time normally required to
reach a decision concerning and application for a license, and
• The terms and conditions of individual licenses
• The reasons for the denial of a license must be made known to the
applicant upon request
 TRANSPARENCY IN LICENSING CRITERIA

• Why is transparency important?

• Regulators use transparency to safeguard their legitimacy and
efficiency
• Regulators obtain information from the regulated industry and
other interested parties that they need in order to base their
decisions on all relevant facts and diverse views
• Operators, service suppliers, consumers and other stakeholders
depend on transparency to ensure that their concerns are heard
and that they play a role in shaping important decisions.
 TRANSPARENCY IN LICENSING CRITERIA

• How to ensure transparency?

• Systems and processes to:
 gain valuable information
 consult all stakeholders
 render their decisions
 justify them based on the public interest and the facts
provided to them, with evidence of transparency and unbiased
decision-making
 TRANSPARENCY IN LICENSING CRITERIA:
CHECKLIST

• Are all licensing criteria and the terms and conditions of licenses published and publicly available, for
example on the regulators website?
• Are all parties aware of the obligations and rights of other parties?
• Are all applicants subject to the same procedures, unless there is an objective reason for
• differentiation? Are the reasons for differentiation defined?
• Does the law provide that any entity that fulfills the conditions adopted and published by the
regulatory authority is entitled to receive a license?
• Is it clear which activities fall into each category of license? Who determines the categories of licenses?
• Does the regulatory framework establish the mechanisms to be used in case of limitation in number of
licenses,– beauty contests, auctions?
• Should operators be permitted to obtain exemptions to use spectrum in bands which have licenses on
an unlicensed basis?