The Committee is of the view that the open auction bid process was not suitable for auctioning of the frequencies and it did not yield the desired results. Various legal challenges were raised in connection with the open auction bid process followed in case of Phase I of the liberalisation of FM broadcasting. The Committee recommends that adoption of tender process for radio licenses is more suitable for the following reasons:

1. It is a standard and simple process followed by the Government in numerous sectors whereby sufficient experience has been garnered. The process is also judicially well recognised.

2. It is an internationally well-accepted process. 
3. It is the preferred process, specifically for broadcast licenses. It is one of the prescribed processes in case of auction of spectrum licenses in Australia and is also followed in the United Kingdom. The European Community recommendation on Independent Broadcast Regulator also envisages a tender process for broadcast licenses.

The License process shall consist of the following rounds:

a. The first round should be the pre-qualification round and only bidders complying with the financial and technical eligibility criteria specified in the tender documents and as certified through a viability/ sensitivity study by an Eligible Financial Institution/Bank should qualify for the next round. The security for participating in this stage should be the earnest money deposit as specified in the tender document. The security amount should be in line with phase I tender document.

b. After the pre-qualification stage, the financial bids of the qualified applicants should be opened at a notified time and place to determine the Entry Fees.

The bid license amount must be based on the business plan and the security for the same should be in the form of an irrevocable, unconditional and confirmed bank guarantee for the full amount of the quoted license fees. The bank guarantee shall be the security for the period from the date of application till the date of payment in full of the entry fees (i.e. the date of allocation of frequency).

In the tender process the entry fees could naturally be different for each bidder. The number of highest bidders that equal the number of frequencies available would automatically win the frequencies at each center (e.g. if there are seven frequencies available at a center, the seven highest bidders would be allotted the frequencies).

Immediately upon award of the bid, 25 per cent of the entry fees should be payable and the frequency should be allocated only upon payment of the balance amount of the entry fees.