This section provides further information on a subject introduced earlier in this module, namely a pre-qualification process for applicants for individual licences.
Pre-qualification criteria are minimum requirements that must be met in order to participate in a competitive process an award of licence. Generally, pre-qualification criteria are aimed at ensuring that applicants have the financial and technical resources and experience to successfully provide the authorized service. In order to enhance transparency and certainty in the licensing process, it is preferable that the pre-qualification criteria be objective rather than subjective measurements of financial viability and technical competence.
An objective pre-qualification criterion that is often used requires applicants to demonstrate that they, or an affiliated entity, have actually operated a network of a certain size. For example, applicants might have to demonstrate that they have run a mobile cellular telephone network with 100,000 subscribers in order to pre-qualify for a mobile cellular licensing process. While such a criterion is objective and effective in ensuring experience, it would preclude financially capable new entrants from participating. This can be counter-productive, since adequately financed new entrants can usually ‘buy’ good cellular operating experience by hiring some of the thousands of engineers and business people who have worked in the global cellular business.
In some cases (typically licensing processes for spectrum allocations), the pre-qualification criteria include the requirement that applicants already hold a particular kind of telecommunications or ICT licence. In these cases, the pre-existing licence acts as a proxy for financial capability and technical competence: presumably, the applicant had to satisfy such criteria when it obtained the first licence. Thus, the fact that the applicant holds the specified licence is evidence of its ability to meet financial capability and technical competence requirements. Nigeria used this approach in its 2007 800 MHz spectrum auction. One of the pre-qualification criteria for participating in the auction was a requirement to hold a national network operating licence or a Unified Access Services (UAS) Licence. In order to acquire either of these licences, applicants would have had to satisfy a number of criteria relating to financial capability, operating experience, and technical expertise. See Box 1 to review the pre-qualification criteria featured in the 800 MHz spectrum auction.
Singapore also used this approach in its 10.5 GHz spectrum auction in 2007. Participation in this auction process was restricted to holders of Facilities-Based Operator (FBO) Licences and the Singapore Armed Forces, the Singapore Police Force, and the Civil Defence Force. The criteria for obtaining an FBO Licence in Singapore include, among other things, evidence of the applicant’s financial capability and strength; the applicant’s technical plan and capability; and the technical soundness of the applicant’s plans. Thus, FBO licensees would have already satisfied an evaluation of their financial capabilities and technical competence prior to participating in the 10.5 GHz auction.
Box 1: Pre-Qualification Criteria for the 2007 Nigerian 800 MHz Spectrum Auction
Applicants were required to confirm that they met the following pre-qualification criteria in order to be eligible to participate in the auction:
The Applicant must:
• be a company operating in Nigeria;
• possess a subsisting national network operating licence or a Unified Access Services (UAS) Licence;
• must not already have a cumulative spectrum size equal to or more than 5MHz on any or combination of spectrum band(s), except for point-to-point microwave frequency band;
• not have any outstanding obligations, including any obligations relating to administration, licence, and operating fees owed to the Nigerian Communications Commission and interconnection debts, due at the time of the deadline for submitting applications;
• not have a relationship with any other Applicant, where a relationship is defined as a situation where an Applicant owns directly or indirectly an ownership stake of ten percent or more in another Applicant; and
• pay the Intention-to-Bid Deposit (Niara 40 million) into a specified account.
Applicants were further required to submit confirmation that they met the above criteria using the templates provided in the Information Memorandum issued with respect to the auction. Applications were required to be accompanied by proof that the Intention-to-Bid Deposit had been paid into the designated account and that the funds had cleared. The Information Memorandum specifically stated that bank guarantees were not acceptable substitutes.
Source: Nigerian Communications Commission, Information Memorandum: 800 MHz Spectrum Auction
Some countries impose foreign ownership restrictions that establish minimum levels of local ownership for authorized service providers. Foreign ownership restrictions are generally contrary to the spirit, if not the letter of international trade agreements, including the GATS. However, various WTO signatories have registered exemptions permitting them to continue to apply foreign ownership restrictions. Over time, such restrictions are expected to be phased out in most countries. Until they are, the restrictions should be noted in any pre-qualification criteria.
Qualification Criteria and Selection Criteria