Lending institutions are also more likely to closely scrutinise the business plans of potential applicants if prepayment of fees is required. Annual fees may have the advantage of easing any credit constraints on applicants, especially smaller operators. However, annual fees may fail to promote efficient use of the spectrum if an operator acquires a licence with the intention of surrendering it whenever business conditions are unfavourable. Royalties could minimise the risk to licensees of overvaluing the available spectrum as the licence fee would be tied to the actual value or benefit the licensee derives from the use of the licence. On the other hand, royalties are likely to be passed on as higher prices to consumers.
Royalties also share the advantages and disadvantages of annual fees.
The latter in particular may be unattractive to licensees. Licensees could also be incentivised to roll out by the prepayment of fees, by the imposition of financial penalties or by the offer of a rebate on licence fees for rolling out, subject to any legal constraints under the Licensing Directive or other obligations under the EC Treaty. The RA invites the views of industry and other interested parties on the Scenarios under consideration for packaging and delivering the available spectrum at 3.4 and 10 GHz. Respondents should therefore place any confidential information into an annex which is clearly marked as confidential.