Obtainment of licenses for maintenance and operations with telecommunication networks

Recently there have been observed some problems with licensing activities in Ukrainian telecommunication market, to be exact in the field of maintenance and operation with telecommunication networks licensing . However unlike classical licensing procedural difficulties in this case some surprises are to be expected from a different prospect.

According to statistics the share of illegal telecommunication networks in Ukraine is around 50% of the total amount. The National Commission for the State Regulation of Communications and Informatization had been trying to make "gray" entrepreneurs to work legally or to remove them from the market completely for years. However such regulations and attempts of cooperation with legal operators resulted in nothing. Until now.

Reasoning strategy of the National Commission for the State Regulation of Communications and Informatization is still a mystery for everybody but analyzing the number of legal advice requests it can be concluded that the message reached the recipient. Some telecommunication network operators started to demand licenses for the maintenance and operations with networks from their contractors and suppliers in order to continue cooperation. After examination of the regulatory framework it is possible to conclude that such demands have a legal background.

Comprehensive analysis of the legislation shows that the maintenance of telecommunication networks among other things includes service (warranty) maintenance or repair of a network, its elements, installed equipment, planned preventive maintenance, expansion of the existing network and others.

Thus telecommunications network construction contractors and equipment suppliers who want to conduct further operations and maintenance do have to obtain licenses in the field of telecommunications. Thus telecommunication networks in particular include mobile networks, wired telephone, television and radio networks, any networks of the Internet service providers including the usage of «wi-fi» technology or other radio technologies.

Perhaps license obtainment would be a rather simple task but there is an important nuance.

The legislation sets the official fee in the amount of 4250 UAH for obtaining of such a license for each administrative unit covered by a telecommunication network which is serviced by a business entity. In practice we have a situation when a business entity that conducts maintenance of a network or even separate equipment of it must pay an official fee based on the size of the whole network in order to receive a telecommunication license.

For example mobile network localization will be determined not only by the actual placement of antennas, substations and other facilities and equipment but also by the signal coverage area which reaches the end users. This nuance shows that while the equipment of mobile operators is compactly located in a small area it generates considerable coverage radius around itself and the total amount of all base stations form a network of the nationwide scale.

These official rules of license payment calculation make maintenance of large networks by subcontractors unprofitable.

For those market players that solve the dilemma in favor of illegal business conduction it should be reminded of the liability for activities without a license.

When a license for this type of business activities is not obtained the Code of Administrative Offences contains provisions for a fine up to 1,700 UAH with confiscation of tools, money obtained by the commissioning of this administrative offense or without it. If the offence mentioned above also has qualifying features (recurrence, obtainment of significant profits) the penalties will be increased fivefold. To ensure the actual collection of these funds to the state budget the tax authorities may impose an administrative arrest on the property of an enterprise which is aimed to limit activities of exercising  the ownership rights over such property or even prohibit  activities related to property disposal or use completely.

When a company obtains a license not for all administrative units that are covered be a network but only for some of them there is such license cancelation risk by the National Commission for the State Regulation of Communications and Informatization in connection with violations of license conditions which will result in inability to obtain such a license within next 12 months after the decision of the authority. Such a long absence on this market can significantly affect the competitiveness and profitability of the company.

Illogicality of the situation when payment is required for each administrative unit is understood by everybody both business entities and the regulator itself. It is obvious that none of the representatives of the telecommunication market will afford such licensing fees so the National Commission for the State Regulation of Communications and Informatization has already made some attempts to solve the problem. Only one thing is for sure – this area will be more transparent and regulated in the nearest future so market participants should not rush to obtain licenses as well as should try not to be aside from legal regulatory issues - such lobby often works as a catalyst for adopting decisions which take into account interests of business entities.

Publication date: 14/12/2012

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