The case for “unified licenses” in telecommunications

Author: Ricardo Tavares
Published: 2014-11-16

Nearly 140 years after the first commercial telephony service was launched in 1877, many governments still award telecommunications licenses based on detailed service and technology specifications (although most do not anymore). For years telecommunications was considered a natural monopoly, and later limited competition created duopolies. Technology innovation – and the transition to full competition in most markets – has rendered the old model obsolete.

The initial liberalization of telecommunications services, which started to bring about real competition in the 1980s, was conducted against the same old background of service- and technology-specific licenses. As the mobile revolution gained pace in the ‘80s and ‘90s licenses were still strictly categorized. It was not until the end of the 1990s that technology-neutral licenses began to be introduced by forward-thinking regulators to acknowledge the accelerating technological changes in mobile communications.

Early in the 21st century, “unified” and multi-service licenses emerged in response to technology convergence to permit the provision of multiple services through single or multiple technology platforms. This new breed of licenses aimed at fulfilling two primary goals:

• Resolve disputes between different types of licensees competing to provide similar services, establishing a “level playing field,” and

• Improve the general licensing framework to promote economic efficiency and strengthening the case for investments in telecommunications infrastructure.

Regulators and governments around the world were challenged by technology convergence making their telecommunications licensing regimes outdated. In this process, the rationale for unified licenses changed from conflict resolution to economic and social benefits. Advances in technology have meant a single platform can deliver multiple services. If licenses have the effect of restricting the adoption of technological capabilities, then the licensing regime has become an obstacle to economic efficiency and social welfare.

The revenue opportunity arising from providing multiple services is obviously greater than when providing a single, narrowly-defined, service. The return on investment (ROI) increases as both capital expenditures (Capex) and operational expenditures (Opex) decrease proportionally due to the provision of multiple services. So investments are more likely to happen, providing services that benefit the economy and society as a whole. Unified licenses also enhance competition, as they allow for entry in any or all market segments by any player. In their own interests, and the interests of their subscribers, operators should be free to provide all services and to make their own choices about the use of single or multiple platforms as best suits their business model.

But the key for success is a migration strategy aimed at providing a level playing field for all operators. Universal licensing must be the solution, not the problem. Differing licensing costs for different technologies or services is a particularly sensitive issue — it is unfair when companies that paid hefty licensing fees suddenly face competition from others who paid very little or nothing. The greatest economic benefit, the most equitable arrangement for operators and the best outcomes for consumers are derived from a peaceful transition in licensing regimes.

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