3.1 Authorization

Authorization is addressed in Module 3, Authorization of Telecommunication/ICT Services. It is a general term applied to all the legal instruments (such as licences or concession agreements) used to facilitate entry to the electronic communications markets for services (including content) and networks. These legal instruments set out the rights and obligations of the authorized party and in the case of concession agreements, also those of the government. The authorization process is the means of introducing and intensifying competition in the sector.

Granting an authorization can confer certain privileges on the grantee (especially where there are a limited number of authorizations). Consequently, the authorization process is best performed outside the political process. In circumstances where only a small number of operators are to be authorized, transparent competitive processes are considered best practice. While the use of radio spectrum is most frequently associated with limited market entry, there is a growing presence of “unlicensed spectrum” market entry.[1]

When competition was first introduced, the original licences were hefty documents containing specific details regarding the technology to be used and behavior of a particular licensee. These documents represent the high point of ex ante regulation. Gradually the legacy of this practice is being superseded by issuing light-touch, general authorizations that apply across all sectors or in a particular sub-sector or “class.” In some instances, no authorization or formal approval is required. Here market entry is unlimited and any regulation that takes place is ex post in the context of competition policy. General authorizations are well suited to activities characterized by rapid technological change and dynamism. Nevertheless, in many jurisdictions the legacy of the original licensing practices lingers on.

Many of the original heavy-duty licences were issued around the time that the MPTTs and PTTs were being restructured and some assets were being privatized. At the time there was a very limited body of regulation, and consequently the detailed license was used as the primary regulatory instrument. Since that time, regulators have implemented and updated a substantial body of regulations, so it is no longer necessary to issue particular, detailed, and specific authorizations, but merely to refer to the regulations in place where necessary.

Convergence introduces a new set of issues for the authorization agenda. Authorization has tended to follow a process that allows applicants to provide specific services with specific technologies. In a converged environment such distinctions become irrelevant. Authorizations will increasingly become service-neutral or multi-service and technologically neutral. Unified licences are starting to appear in some jurisdictions, such as Kenya and India, which allow the licensee to use any platform to deliver any service. Clearly, there will be restrictions on the number of licences issued where resources like the radio spectrum are limited. Consequently, “individual” licences are likely to remain but these should not preclude various arrangements that would facilitate, for example, fixed mobile integration. Existing restrictions on, or unequal treatment of, authorized operators may impede convergence. For example, where Cable TV operators are allowed to enter the voice and data markets, but telecommunications operators are excluded from the video market, these aspects of the existing authorizations will need to be re-examined, taking account of competition policy issues.

The early authorization methods also had an impact on the fees charged, the legacy of which is still present. Fees are frequently composed of different elements but generally entail an initial component and recurring charges. Many initial fees were established at auctions where particular privileges were for sale, often linked to a scarce national resource. By this means, governments were able to have early access to the future income streams of operators rather than waiting for their tax contributions over the life of the authorization. In the end it is usually the customer who pays the fees of the operator. One way of optimizing consumer welfare and promoting competition is to charge fees that enable the regulator to recover the costs of regulation. This also minimizes the costs of regulation. Though this is regarded as best practice numerous other methods have been adopted that tend to distort the functioning of the market.