This section provides further information on authorization objectives, a subject that was introduced earlier in the module. Governments and regulators have normally had a range of reasons or objectives for authorization ICT service providers. Some common authorization objectives are set out below:
(i) Privatization or Commercialization – An authorization is usually necessary where a state-owned incumbent (a PTT) is privatized. It is a key document in the privatization process. The authorization specifies the rights and obligations of the service provider. It also specifies what the investor is buying and what the government expects from the service provider and the investor.
(ii) Expansion of Networks and Services and Other Universal Service Objectives – Authorizations are an important tool for expanding infrastructure investment and promoting universal service and universal access objectives in developing countries. Network roll-out and service coverage obligations are often included in authorizations. This is particularly the case where a PTT is privatized, or where some degree of exclusivity is granted (e.g. to a duopoly cellular licensee, with a right to use scarce spectrum). Universal service objectives are discussed in detail in Module 4, “Universal Access” in this Toolkit and in Module 6 (Universal Service) of the Telecommunications Regulation Handbook.
(iii) Regulating Provision of an Essential Public Service – Basic telephony is viewed as an essential public service in most countries. While there has been an irreversible trend toward privatization and reliance on market forces, most governments continue to impose some controls to ensure that basic voice services are provided in the public interest. Authorizations are an important tool for exercising such control in many countries.
(iv) Regulating Market Structure – A key element of authorization policy is the determination of the market structure of the ICT sector, and in particular, the number of service providers authorized to provide ICT services. In many countries a prime reason for authorizing new ICT service providers is to increase competition. Authorization of new service providers has made competition the dominant mode of supply in most ICT markets (e.g. cellular, ISP), though competition has not yet fully matured in some market segments, such as fixed voice telephone services. A major objective of the authorization process in many markets is to ensure the viability and benefits of new competitive entries. On the other hand, authorization requirements are also used to limit market access. This is the objective of authorization authorities in some countries where monopoly, duopoly or other exclusive rights have been granted for political or financial reasons. For example, governments in many countries have increased privatization proceeds to the government treasury by granting a newly privatized service provider monopoly rights for a fixed term of years. Monopoly supply arrangements generally reduce efficiency in ICT markets, and dampen economic growth in services that are dependent on ICT. However, many governments traditionally accepted these disadvantages in order to generate cash for purposes like national debt reduction. Today, however, it is becoming less common to grant monopoly rights, even to newly privatized service providers.
(v) Establishing a Competition Framework – In countries that do not have a well developed regulatory framework, authorizations may include conditions to establish a “level playing field” for competition, and to limit the prospect that incumbent service providers will abuse their dominant position in ICT markets. Such conditions are generally referred to in authorizations as “anti-competitive safeguards” or “fair trading conditions”. (Examples of such conditions are discussed in greater detail in Module 2, Competition and Price Regulation of this Toolkit.
(vi) Allocation of Scarce Resources – Finite resources required in the operation of an ICT service (such as radio spectrum, numbers and rights of way) should be allocated between service providers fairly, efficiently and in the public interest. This allocation often requires a balancing of competing interests and priorities. Radio spectrum, for instance, may be auctioned to the highest bidder or allocated at low cost to reduce prices or to encourage the rollout of new services. Issues related to the authorization of spectrum are dealt with in greater detail in Module 5, Radio Spectrum Management of this Toolkit.
(vii) Generating Government Revenues – In many countries, the authorization of ICT service providers and of radio spectrum has provided significant revenues to governments. An auction for new authorizations can generate high one-time revenues. In addition, annual authorization fees often provide a continuing source of revenue to fund the operations of the regulator, or for other purposes. Issues related to authorization fees are dealt with later in this module. In addition, authorization of new service providers can increase the size of ICT markets and generate higher tax revenues for governments.
(viii) Consumer Protection – In some countries, conditions relating to consumer protection are included in ICT authorizations. This is particularly true in countries that did not have a well-developed regulatory framework to deal with such issues. However, the better practice is to have consumer protection provisions included in rules of general application to the industry or to certain classes of service providers.
(ix) Regulatory Certainty – Regulatory certainty is a critical element of the authorization processes where the aim is to attract new service providers and investment. This is particularly true in cases where foreign investment is sought in developing or transitional economies struggling with political and/or financial instability. By clearly defining the rights and obligations of the service provider and the regulator, an authorization can significantly increase confidence in the regulatory regime.
(x) Facilitating the Development of Next Generation Networks – Facilitating the emergence of Next Generation Networks (NGNs) has become an increasingly important authorization objective. In order to reap the full economic and social benefits of technological innovations, regulators and policy makers have become highly attuned to structuring a regulatory environment conducive to the development of NGNs. Measures taken in regards to this objective include, for example, the adoption of technology-neutral and service-neutral authorizations, permitting infrastructure sharing, and allocating spectrum to service providers without restricting the services for which such allocations may be used. Thus, this objective has required regulators and policy makers to reconsider the very nature of authorizations and their terms and conditions. NGNs and authorization practices and trends related to the emergence of NGNs are discussed in greater detail in section 8 of this Module.