Significance and Needs For Telecom Licensing

Rizwan Ahmed HydriDG(Licensing),PTA

July 2015

Introduction

• Historically State Owned Incumbents• Monopoly Based• Telecom a Branch of Public Administration• No Licensing• Deregulation and Privatization in 1990s• Necessitated Licensing (Incumbents &

Competitors)

Presentation outline

1. What is a Telecommunications License?

2. Fundamentals of Licensing

3. Licensing Objectives

4. Types of Licensing Frameworks

5. Principles of Licensing

6. Latest Licensing Trends – Convergence, Unified Licensing

What is a Telecommunications License?

• An official authorization to provide services and operate networks

• Licenses describe rights and obligations of licensees

• Provide confidence to investors to invest millions or billions

• Clarifies what the licensee is and is not allowed to do

• Can be a small document or a self contained regulatory code that defines the terms and conditions under which the licensee may operate.

Licenses Vs Development Status Of Regulatory Framework

Country Licensing Practice Development Status of Regulatory Framework

Canada Short license Well developed

USA Short license Well developed

UK License issued to BT in the 80s was a self contained regulatory code

At the time there was no regulatory frame work

India Fairly detailed license Fairly developed

Pakistan Fairly detailed license Fairly developed

Fundamentals of Licensing• Licensing a core element

•Determines degree of competition, revenues earned by governments, and conditions for operation and supply of services.

• Effective and forward looking licensing framework essential‐

• An essential public service

• Framework that defines what is regulated, who is regulated, and how they are regulated. This is the purpose of licensing

Fundamentals of Licensing

Key regulatoryquestions

Potential scope of Regulation

Defined scope of regulation

What toregulate?

Which services,technologies andfacilities are regulated?

Those telecommunications networks or services that are offered to the public on commercial terms generally require a license to operate or provide.

Who toregulate?

Which network andservice providers areregulated?

Incorporated entities licensed under a country’s telecommunications regulatory framework.

How toregulate?

Which regulations applyand how are theyadministered?

Those general regulations provided the telecommunications regulatory framework or within an individual telecommunications license.

Licensing provides a clear scope for regulation

Licensing Objectives• Regulating 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

• Fees/taxes to generate revenues for Governments/ regulators

• Fairly and efficiently distribute scarce resources (spectrum, numbers)

• Support consumer protection through mandated license conditions

• By clearly defining rights and obligations, licenses underpin regulatory certainty

Types of Licensing FrameworksType of Licensing

Requirement Main Features Examples

Individual Licenses(Operator Specific Licenses)

Issued to a single operator Usually a customized document Often contains detailed conditions Frequently granted through competitive process

Basic PSTN services Mobile & fixed wireless

services (Spectrum)

General Authorizations(Class Licenses)

Where significant regulatory objectives can be achieved by establishing general conditions

Sets out basic rights and obligations, and regulatory provisions of general application.

No competitive selection process; all qualified are authorized.

Data transmission services Resale services Private networks

Open Entry

No authorization process or qualification No requirements, beyond rules generally

applicable to the ICT sector Registration requirements or other rules of

general application are sometimes imposed by regulation

Internet Service Providers Value added services

Country Licensing Category Business TypeJapan Open

i. Notification onlyii. Registration required

i. to operate a telecom businessii. to operate a telecom business by

installing telecom circuit facilities

Australia Individual Licensing

Pakistan i. Individual Licensingii. General Authorization

(Class Licensing)

i. Operation and provision of telecom systems and services

ii. Value Added Services

India Individual Licensing Operation and provision of telecom systems and services

Singapore Individual Licensing Operation and provision of telecom systems and services

UK General Authorization Operation and provision of telecom systems and services

EXAMPLES OF LICENSING FRAMEWORKS

Licensing Framework StatutesExamples

Japan’s Registration/Notification Framework • Before 1 April 2004, telecommunication carriers in Japan were categorized into

two types under the Telecommunications Business Law: “Type 1 telecommunications carriers,” which offered services using their own facilities, and “Type 2 telecommunications carriers,” which did not have their own facilities and which leased their lines.

• Carriers were required to obtain permission to engage in a Type 1 business or

were required to submit a registration or notification of their entry into the market to engage in a Type 2 business.

• In light of heightened competition and the emergence of numerous substitute services – and also out of a desire to review the regulations for market entry and service provision -- the Telecommunications Business Law was completely reviewed in 2003 and the amended law came into force on 1 April 2004.

• The amendments (April 2004): – abolished the distinction between telecommunication circuit facilities of Type 1 and Type 2

carriers; – abolished the permission system for market entry and withdrawal and introduced a registration

and notification system in its place;– abolished tariff regulation; and– improved consumer protection rules, holding carriers more accountable for service provision

and handling of complaints.

• With regard to registration and notification, the amended Telecommunications Business Law states that:– Any person who intends to operate a telecommunications business by installing

telecommunications circuit facilities on a scale exceeding the standards specified in the applicable Ministry of Internal Affairs and Communications (MIC) ordinance shall obtain registration from the Minister for Internal Affairs and Communications.

– Any person (except a person who has to obtain registration) who intends to operate a telecommunications business shall submit a notification to the Minister for Internal Affairs and Communications.

Japan’s Registration/Notification Framework

Thailand’s licensing framework

• Act on Organization to Assign Radio Frequency and to Regulate the Broadcasting and Telecommunications Services 2010 established the National Broadcasting and Telecommunications Commission (NBTC).

• Section 27(6) provides NBTC with the power “to license and regulate the operations of…telecommunications services…and prescribe licensing criteria and procedures, conditions, or licensing fees.”

• Telecommunications Business Act 2001 requires that any entity carrying out a telecommunications service must hold a valid license. There are three categories of telecommunications licenses that can be awarded by the NBTC:– Type 1 license: For operators who do not own their own network

infrastructure.– Type 2 license: For operators with or without their own network infrastructure

but who target only a segment or segments of the telecommunications market.– Type 3 license: For operators with their own network infrastructure who

provide services to the general public.• Foreign ownership of a Type 2 or 3 licensee is capped at 49%, however there are no

restrictions on the proportion of directors who must be Thai or on the nationality of a person authorized to sign contracts on behalf of the licensee.

Principles of LicensingBest practice for licensing processes

• WTO General Agreement on Trade in Services (GATS) and Annex on Telecommunications provide trade rules that are applicable to telecommunications regulation and licensing. The Reference Paper provides additional requirements that are legally biding for countries that commit to them.

•Where a telecommunications license is required, the following shall be made publicly available:

– All the licensing criteria and the period of time normally required to reach a decision concerning an application for a license; and

– The terms and conditions of all individual licenses.

• The reasons for the denial of a license will be made known to the applicant on request.

•Any procedures for the allocation and use of scarce resources, including frequencies,

• numbers and rights of way, will be carried out in an objective, timely, transparent and nondiscriminatory manner. The current state of allocated frequency bands will be made publicly available, but detailed identification of frequencies allocated for specific government uses is not required.

Principles of Licensing

Fundamental Principles of Licensing• Transparency - Licensing process be Conducted openly and the criteria

be published well in advance. Advance publication of a call for applications Separation of qualification and selection processes Return of unopened financial offers Public opening of sealed financial offers

• Public Consultation- Good understandings of all stakeholders on the scope , terms and conditions of the license.

• Renewal, Amendment and Renegotiation- Criteria for renewal upon initial tenure expiry

• License Fees- Various Fees imposed on licensee w.r.t ARD, Spectrum Fee etc. A fee paid to operate systems and provide services Administrative charges to manage spectrum Administrative charges to regulator for other regulatory functions

Principles of Licensing

Fundamental Principles of Licensing (Continued)

• Balancing Certainty and Flexibility- permitting license amendments with mutual consent

Unilateral amendments Short License Amendments with mutual consent Unilateral amendments of specific types license conditions

• Spectrum Auctions. License for service and associated spectrum provided together

• Service Areas- Geographical areas defined in the license

Financial Viability

Larger areas permit cross subsidization

National licenses provide seamless service to consumers

Principles of Licensing

Fundamental Principles of Licensing (Continued)

• Qualification Criteria- Distinguish between qualification and selection criteria. General authorizations only qualification criteria

• Selection Criteria-

Single criterion

Auction

Lowest subsidy bidder wins

Comparative evaluation

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Principles of LicensingTypical License ConditionsTable of Contents

Part I: The License1. Period of License2. Payment of License Fee3. License is not Transferable4. Description of Systems and ServicesPart II: Basic Obligations of the Licensee5. Provision of Domestic Services6. Provision of International Services7. Provision of Emergency Call Services8. Public Maritime Emergency Services9. Co-operation with Civil/Public Bodies10. Provision of Directory Enquiry Services11. Provision of Integrated Directories12. Integrated Directory and Enquiry Services13. Public PayphonesPart III: Technical Obligations14. Use of Telecommunication Equipment in the System15. Operation of Radio Communication Stations16. Use of Radio Frequencies17. Assignment of NumbersPart IV: Access and Interconnection Obligations18. Requirements to Provide Access19. Connection to Other Systems20. Arrangements for Connection System21. Changes to System22. Infrastructure Sharing and Deployment

Part V: Service Obligations23. Price Control/Tariff Arrangements/Quality of Service Standards24. Publication of Charges, Terms and Conditions and Other Information25. Confidentially of Subscriber InformationPart VI: Other Obligations26. Codes of Practice27. Number Portability28. Accounting Separation29. Restriction on Undue Discrimination30. Restriction Against Anti-Competitive Arrangements31. Restriction on Exclusive Arrangements for International Services32. Contracts with Third Parties to Operate or Provide Licensed System or Services33. Ownership, Shareholding and Management Arrangements34. Direction by the Regulator35. Dispute Resolution36. Provision of Information to the Regulator37. Participation in Emergency Activities38. International obligationsPart VII: Suspension, Variation and Termination39. Penalty Framework for Breach of License Conditions40. Variation of Terms of License41. Suspension/Cancellation42. Termination of License Part VIII: Misc43. National Security44. Force Majeure

Licensing and ConvergenceWhat is convergence?

From a licensing perspective, there is no universally accepted definition of convergence. The term has variously been used to describe recent technological developments, merger and acquisition strategies and new service and application types. However, major global institutions have attempted to define convergence for the purpose of legislative and regulatory reform:

“The ability of different network platforms to carry essentially similar typesof services and applications.” European Union

“The coming together of previously technologically and commercially distinctmarkets such as broadcasting, print publishing, cable television, fixed wirevoice telephony and cellular mobile and fixed wireless access.” ITU

“The processes by which communications networks and services, which werepreviously considered separate, are being transformed such that: differentnetworks and services carry a similar range of voice, audio visual and data‐transmission services, different consumer appliances receive a similar rangeof services and new services are being created.” OECD

Licensing and ConvergenceConvergence trends

Trend in licensing practices reflects developments in telecommunications market, especially rapid growth in data and internet services. Licensing types and categories tend to reflect the value chain of telecommunications services.

Value chain consists broadly of network infrastructure, followed by content delivery and other applications, and value added services.‐

Key challenge for licensing frameworks is rise of internet services ( ‘over the top’ or OTT services). Includes applications such as Skype, WhatsApp, Viber, LINE, etc. Are extraterritorial and often don’t need physical infrastructure to operate in a jurisdiction.

Trend towards unified licensing

Convergence in the telecommunications sector has meant countries have begun to reevaluate how regulatory layers are defined, including how best to structure license categories.

A unified license combines licensing for both the provision of services and the operation of network facilities. A unified licensing regime should provide a simplified licensing procedure, allowing service providers to use any technology, ensuring greater flexibility and an efficient use of resources.

India’s transition to unified licensing

Unified Licensing-India• India issued guidelines for Unified Access Services licensing (UASL) in 2003.• Salient features:-

– Existing operators were provided option to continue or migrate towards new UASL. – Other terms and conditions w.r.t service area, roll out obligations and Bank Guarantee remained

same.– Any technology can be deployed by UASL without any restriction.– No additional fee for Cellular operator to migrate to USAL.– Basic Service Operator shall pay fee equal to cellular operator fee for migrating to USAL.

• Authorization under Unified License comprises for any one or more services listed below:– Unified License (All Services)– Access Service (Service Area-wise)– Internet Service (Category-A-B-C with All India jurisdiction)– National Long Distance (NLD) Service– International Long Distance (ILD) Service– Global Mobile Personal Communication by Satellite (GMPCS) Service– Public Mobile Radio Trunking Service (PMRTS) Service– Very Small Aperture Terminal (VSAT) Closed User Group (CUG) Service– INSAT MSS-Reporting (MSS-R) Service– Resale of International private Leased Circuit (IPLC) ServiceReference- i-http://www.ictregulationtoolkit.org/en/toolkit/docs/Document/652

ii- http://www.dot.gov.in/licensing/unified-license

Multi Service Licensing-Malayasia• Malaysia has moved from a system of 31 different types of service-

specific authorizations to four different multi-service authorizations. • The four categories of authorizations are: – Network Facility Provider (NFP) Licenses

• NFP Licenses authorize licensees to provide network facilities. NFP licensees include owners of satellite earth stations, fibre optic cables, communications lines and exchanges, radio communication and transmission equipment, mobile communication base stations and broadcasting towers and equipment

– Network Service Provider (NSP) Licenses • NSP licensees are authorized to provide network services such as basic connectivity

and bandwidth that support a variety of applications.

– Application Service Provider (ASP) Licenses,• ASP Licence may provide various application services such as voice services, data

services, Internet access services, and VoIP. CASP Licenses are a special subset of ASP Licenses

– Content Application Service Provider (CASP) Licenses.• CASP licensees are authorized to provide traditional broadcast services and other

content-based services such as online publishing and information services

Thank you

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.