In a number of countries, the implementation of ICT market liberalization policies has forced regulators to deal with the issue of monopoly (or “exclusivity”) rights granted in the authorizations of existing operators. The introduction of competition sometimes runs counter to the incumbent operator’s legal rights to exclusivity in the provision of a certain services or operation of certain types of networks. The wave of liberalization in ICT markets in recent years, has sometimes caused governments to question why they granted exclusive rights to incumbent operators, in some cases lasting as long as 40 years or more.
In some cases, governments or regulators have not wanted to wait for the incumbent’s monopoly rights to expire, since they perceive this could delay the introduction of competition and the benefits that could bring in terms of sector development. Instead, they opt to terminate the incumbent’s monopoly rights prior to the expiry of these rights.
Terminating monopoly rights can be a difficult and controversial process. Monopoly rights are often highly valued by incumbents, and, failing agreement, many incumbents are prepared to take legal action to defend these rights. The arbitrary exercises of regulatory power to revoke or amend exclusive rights or other licence conditions may result in litigation and complaints under international trade agreements. In some cases, new legislation is introduced that mandates the termination of the incumbent’s period of exclusivity. However, such legislation may be subject to legal challenge in some countries on the grounds that it constitutes an illegal ‘taking’ or cancellation of property rights.
In other cases, governments or regulators have negotiated mutually acceptable arrangements with incumbent operators to terminate or amend their exclusive rights. In some cases, it is possible to agree to phase out an incumbent’s monopoly over a period of time in return for concessions, such as tariff reform, rate rebalancing, and the right to be issued additional operating rights under a new authorization scheme.
In Jamaica, for example, the first phase of telecommunications liberalization involved the negotiation of an agreement with the incumbent operator, Cable & Wireless Jamaica Limited (CWJ), for the early termination of CWJ’s monopoly rights. In September 1999, the Jamaican regulator successfully concluded an agreement with CWJ that provided for the termination of CWJ’s monopoly and the liberalization of the telecommunications sector on a phased basis.
Similarly, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines, acting under the auspices of the Organization of Eastern Caribbean States (OECS), negotiated with the Cable & Wireless (C&W) companies operating in each of these states for the termination of the C&W exclusivity rights in their countries. The agreement between the OECS states and the C&W companies was signed in April 2001. This agreement featured a phasing out of the C&W exclusivity rights over two periods.
Please click the link to section 6.3.3., Renegotiation of Licences (below) for a discussion of some good principles and practices relevant to the renegotiation of exclusivity or other licence conditions.
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