Telecom ABC - A

AIP - Administrative Incentive Pricing

Administrative Incentive Pricing (AIP) is a fee charged to users of the spectrum to encourage them to make economically efficient use of the spectrum.

Licences are issued through an administrative process, usually on a first come first served basis, and carry with them an obligation to make a regular payments to the regulator or government agency. The idea is that AIP will give the owner of the license an incentive to return unused spectrum rather than pay the fee. It may also help a licensee to use the spectrum more efficiently.

The fee is usually based on the opportunity costs of the use of spectrum. Opportunity costs can be based on three different principles:

  1. The value of the spectrum for a user with another service.
  2. The additional costs if the service had to make use of other means.
  3. The additional costs if the licensee had to make use of less spectrum.

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