Licensing Selection Criteria

Selection criteria are the criteria that are used in the assessment of applicants for a licence to determine which applicant will be awarded the licence.  The selection mechanism plays an important role in shaping the selection criteria featured in a licensing process.  While auctions require a set of criteria that are largely quantitative, beauty contests, by contrast, may feature more qualitative criteria.  Hybrid approaches typically feature both qualitative and quantitative criteria.  The decision whether to include a pre-qualification or a qualification stage also impacts the type of selection criteria that are applied in a licensing process. 

The following table compares the advantages and disadvantages of the selection criteria associated with different types of selection mechanisms.

Possible Selection Criteria

Selection Criteria

Advantages

Disadvantages

Comparative Evaluation – based on subjective assess­ment and comparison by the regulator of applications based on a list of qualitative and/or quantitative criteria

Maximum flexibility and discretion to select the most attractive application

  • Allows applicants to focus on factors they believe are important and to convince regulator accordingly
  • Non-transparent
  • Subject to accusations of bias or corruption from losing bidders which are hard to refute and damage regulatory credibility
  • Risk of confusion among bidders who may not clearly understand regulatory pri­orities

 

Pure Auction – selection from among qualified bidders based on the highest financial bid

  • Maximum transparency
  • Market efficiency – licence awarded to the bidder which values it most
  • High bidder will have strong incentive to roll out service quickly to recover its bid
  • Suited to licensing in competitive markets

 

  • Payment of fee can divert financial resources from service provision to auction fees (government revenue)
  • Encourages applicants to minimize resources devoted to other important priorities (i.e. rollout, coverage etc.)

Pure Auction – selection based on quantitative criteria, other than cash, relating to the service (i.e. time required to meet roll-out target, commitments on maximum prices for consumers)

  • As above
  • Regulator can focus bidder resources on service devel­opment or other priorities as opposed to government revenues
  • Encourages applicants to minimize resources devoted to priorities which are not selection criteria, unless they make business sense

Combined auction/comparative selection via weighted formula

  • A compromise which has many of the benefits of both auction and comparative selection
  • Applicants are awarded points based on selection criteria
  • Difficult to develop a sound formula that compares “apples to apples”
  • Compromise has disadvan­tages of both comparative selection and auctions
  • Less transparent than pure auctions

 

Regulators around the world have adopted diverse selection criteria.  What follows is a sampling of some of the selection criteria that have recently been applied by regulators in various licensing processes:

 

·     The 2008 Macedonian 3G spectrum licensing process featured a comparative evaluation.  Bidders were evaluated on the basis of a number of criteria which were assigned particular weightings.  The Bidder that scored the most points in the evaluation was declared the winner of the authorization to use the spectrum allocated for 3G services. The selection criteria and their assigned weightings (out of a total of 100 possible points) were:

 

  •       the amount offered as a one-time fee for granting the authorization in question (4 points);
  •    Prices for wholesale services, including:
  •  Prices for mobile services (18 points); 
  • Prices for fixed mobile services (wireless local loop) (18 points);
  • Prices for Internet services (18 points);
  • Prices for services for citizens, including:
  •  Prices for mobile services (14 points);
  • Prices for fixed mobile services (14 points); and
  • Prices for Internet services (14 points).

 

·    The 2008 Polish tender for two exclusive nation-wide frequency licences in the 880-990 MHz and the 925-935 MHz bands features a comparative evaluation process.  Applicants receive points based on the assessment of their application with respect to four main criteria.  For some of the criteria, the points are determined using a formula.  The tender states that the most important criterion is the assurance of conditions for competition.  The four criteria that will be used in the comparative evaluation are:

 

  •  The bid amount of the applicant (maximum points available: 200);
  •  Assurance of conditions for competition (preventing the creation of a dominant market position or the strengthening of a dominant market position) (maximum points available: 300);
  • Financial credibility, understood as the fulfillment by the applicant of the obligation to pay fees and charges for spectrum resources or orbital resources in the past and the obligations to pay taxes, charges, and fees for social and health insurance (maximum points available: 103); and
  • Applicant’s proposal in its tender with respect to the speed of network roll-out (network rollout is a mandatory obligation) and wholesale offer for telecommunications services to be offered using the spectrum resources being auctioned (optional obligation for the applicant) (maximum points available: 150).

 

·     The 2007 Icelandic GSM spectrum tender featured a comparative evaluation process that focused primarily on the ability of an applicant to roll out GSM services as quickly as possible, to as many people as possible.  The evaluation of the offers received in the tender process took into account: the population coverage of GSM services to Icelanders via the applicant’s own network, and when the applicant’s subscribers would receive access to the GSM network.  Applicants were also required to demonstrate that they had the financial strength to carry out the network rollout plans proposed in their tenders.

 

·        In the 2007 Nigerian licensing processes for the issuance of spectrum licences in the 800MHz range and the 2GHz range, the successful applicants were determined using auction processes.  In both cases, the auctions featured two phases.  The first phase was a simultaneous, multiple round auction.  The top bidders after the completion of bidding in Phase 1 were eligible to participate in Phase 2.  In both auctions, Phase 2 consisted of a sealed bid single round auction.  The winners of both auction were determined on the basis of the highest bid submitted for the licences.

 

 

·        In the 2004 Estonian 3G licensing process, the successful application was selected using a multi-stage tender auction with an unlimited number of stages.  The sole selection criterion was the amount of the tender offer.  The applicant that bid the highest tender offer was awarded the licence.

 

·        In the Nepalese Rural Telecommunications Services (“RTS”) licensing process in 2003, the successful applicant was entitled to both the RTS licence and a subsidy to provide the RTS services.  The selection mechanism used in the RTS tender process was an auction in which Qualified Applicants bid on amount of the RTS subsidy.  The sole selection criterion was the bid amount for the RTS subsidy.  The Qualified Applicant that bid the lowest RTS subsidy was awarded the RTS licence, along with the RTS subsidy.

 

 

 ·        In the 2003 Swiss GSM telecommunications services licensing tender, the selection of the successful applicant was based upon a comparative evaluation of the applicants.  OFCOM, the Swiss regulator, conducted a weighted assessment of four selection criteria: 

 

  • the quality of the applicant’s business and service plan, which involved a comprehensive market and risk analysis and an assessment of the risks facing the applicant regarding the realisation of the project (20%);
  •  technical concept and implementation, including an evaluation of the project organisation, process planning and scheduling; coverage schedules;  the economic use of frequencies; and the planned start date for commercial services (20%);
  •  market stimulation and innovative strength, which involved an assessment of the impact that the project would have on the Swiss mobile radio market, the extent of the stimulation of the entire market, and the ability of the applicant to demonstrate innovation, especially with respect to technology, services, and pricing models (50%);  and 
  • coherence and plausibility of the project, which involved an evaluation of the quality of the information supplied (10%).

 

·        The regulator in Bahrain also used a comparative evaluation approach in the tender process for the issuance of a second mobile telecommunications licence in 2003.  Applicants were evaluated on the basis of the following selection criteria:  business plan;  telecommunications sector experience;  financial strength and stability;  network rollout;  and commitment and guarantees.  The tender document notes that particular consideration will be given to the first three criteria (business plan;  telecommunications sector experience; and financial strength and stability).  The tender document provides further details about the basis of evaluation for each of these criteria.  It also includes a detailed guide concerning the information required to be presented for assessment of each criterion. 

 

·        In the 2002 South African tender process for a licence to provide public switched telecommunications services (“PSTS”), a comparative evaluation was used to select the successful applicant.  The South African regulator evaluated each valid and eligible application based on the following seven selection criteria:

 

  •  Financing and business plan (30 points);
  • Experience in the provision of PSTS, strategic vision regarding the integrated provision of the service and a competitive strategy (15 points); 
  • Human Resource Development Policy and practices for training and promotion, especially entry level positions (10 points); 
  • Demonstration of the technical feasibility of the project (15 points); 
  • Proposed integration of the BEE into management of the Licensee company and board representation (10 points); 
  • Proposed integration of Eskom and Transnet into management of the company and board representation (10 points); and 
  •  Empowerment of women, disabled person, and youth (10 points)
  •  Total Points:  100

 

The application form for the PSTS licence includes sections on a variety of matters, such as ownership and control;  experience and ability;  business plan;  technical plans;  network rollout;  service implementation;  universal access and universal service obligations;  economic development; and performance guarantee, among others.  In each section, applicants are required to respond to a number of questions.  The applicants’ responses to these questions comprise a major part of their applications, and are evaluated on the basis of the seven selection criteria set out above.

 

·        The Norwegian 3G licence tender process in 2000 featured a comparative evaluation as the selection mechanism.  Applicants were evaluated on the basis of two primary selection criteria:  geographic coverage and coverage in terms of population of network and services, and network roll out.  The tender document notes that particular emphasis will be placed on achieving geographic coverage as extensive as possible in Norway.  The tender document also notes that emphasis may be placed on the following criteria: 

 

  • financial aspects related to the planned mobile telephony network;
  • range and quality in the mobile telephony services provided by the applicant;
  • commitment to environmental concerns, including offers of collocation, terms and conditions of such collocation, and compensation for collocation;
  • the applicant’s documented experience and expertise in similar operations in comparable conditions, or the documented experience of collaborative partner; and 
  • further development of the Norwegian mobile telephony market, including the integration of the planned network with other telecommunications networks.

Related Materials

For a discussion on the specific considerations relevant to eligibility and selection criteria in universal access and services (UAS) bidding processes, see Module 4, "Universal Access and Service", section 7.1.3, "Design of Bidding Process".

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