Introduction to telecom regulation

Introduction to Regulation

Idongesit Williams, PhD Student

CMI, Aalborg University

[email protected]

Centre for Communication Media and Information Technology

Outline• General overview What is regulation Why regulate What can be regulated • ICT regulations

What must be regulatedWhy, what and howDriver of change from monopoly to competitionImplication of technology changePrincipal objective of telecom regulationTypes of telecom regulations

• Regulatory FrameworksRegulatorTypes of regulatorsRegulatory organization structureBest practice for setting up a regulatorCharacteristics of a good regulatorGovernment’s responsibilityInternational frameworksAssessing a country’s regulatory framework

SummaryCentre for Communication Media and Information Technology

What is Regulation?

• Regulations can be seen as implementation artefacts of policy statements. They make up policy statements

1. Levi-Faur, David, Regulation and Regulatory Governance, Jerusalem Papers in Regulation and Governance, No.1, 20101

Regulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation (by Parliament or elected legislative body) on the one hand and judicial decisions on the other hand [1]


What is usually regulated

A good of public / national interest

A good, where the demand for a good or service is considered a common

necessity for the public at large, and the supply conditions are such that the public may

not be provided with reasonable service at reasonable prices, the government may

regulate to ensure that the service is available to all

telecoms water

transport

electricity

***The general need to regulate varies from country to countryCentre for Communication Media and Information Technology

Why Regulate?

Regulation mandated by a state attempts to: 1. Produce outcomes which might not otherwise occur, (eg. Facilitate competition)2. Produce or prevent outcomes in different

places to what might otherwise occur, ( constructive or destructive outcomes)

3. Produce or prevent outcomes in different timescales than would otherwise occur (market failures)


What can be regulated?

• controls on market entries • prices• wages • Development approvals • Pollution effects, employment for certain

people in certain industries • Standards of production for certain goods• The military forces and services


ICT/Telecoms Regulations

Traditionally it was a regulation of monopolies, (mainly Post and Telecoms

(P&Ts))

Now it regulation of both monopolies, duopolies and

competitive markets

Monopoly Competition

Economies of scale Technical efficiency Low interconnection costs Public interest objectives

Organisational efficiency Pressure on tariffs Innovativeness New service development


What must be regulated?

Monopoly Competition

Tariffs Quality of service Universal service obligation

Scarce resources Interconnection Transparency (Cross subsidisation)


Why What How

Monopoly Protect monopoly Technical Efficiency Social and Industrial policy

Tariffs Quality of service Universal service obligation

Direct: Ownership Informal guidance

Competition Effective competition Coherent Infrastructure

Scarce resources Interconnection Transparency (Cross subsidisation)

Indirect: Legislation Market incentives


Drivers of change in telecom policies from monopoly to competition

Economic Politics

Technology

1st stage1990-Liberalization policy broke up public monopolies into private monopolies-- Separation of Post from telecoms- Establishing a separate regulator

2nd stage-Privatization of monopolies- Opening up markets- New licensing framework

3rd stage- Exclusivity of incumbent ends- Full competition begins- Regulation of competition

Fixed: PSTN (Using Analogue switches)--- ISDN (digitzation)---DSL---- ADSL---- future broadband

Wireless- Radio transmission---GSM--- UMTS--- LTE– WiMAX---- future broadband

.

Globalization has led to New unbundled markets, new international policy framework that has produced new best practices


Implications: new regulatory policies

Market/ Policy Technology Services Application

Monopoly Analogue technologies (circuit switching)

Voice telephony Voice calls

Monopoly, Duopolies

Packet switching and Digitization(x.25, ISDN, analogue mobile)

Voice + Data service SMS, Voice calls, Fax

Competition; LiberalizationPrivatizationCommercializationDeregulationCorperatization

Digitization has led to Broadband, Internet protocol(GSM, UMTS, LTE, WiMAX, WiFi, DSL, ADSL, HSPA, etc)

Voice + Data service + Multimedia services + lots more

Voice, MMS, SMS, VOIP, IPTV, DVBH, Streaming etc

Policy trend


Types of Telecom regulation

• Public ownership– A part of the public administration– Public owned corporation

• Legislation– Licensing– Rights and obligations– Competition laws

• Market incentives– Taxes and subsidies– Tradable permits

• Self Regulation


Regulatory Framework

• Government: Decide on the regulatory framework, structure and implementation. Creates the regulator.

• Regulator: Executes the regulation• Market players: Network operators, equipment

manufacturers, content providers, content aggregators, equipment retailers/suppliers, etc

• Public


Implications of Technology Change

• Unbundling of the PSTN to several horizontal and vertical disintegrations.

• More players, Network providers, content providers, content aggregators, application providers, equipment manufacturers, equipment suppliers etc.

• Movement for diverged service platforms to a converged service platforms.


Principal objective of telecom regulation

The service should be made available to everyone on reasonable terms, sometimes whether or not it is profitable to do so.

The services should satisfy the full range of consumer demand and be supplied under conditions of optimal efficiency

Social/Political interest: Availability of service and continuity.

Economic interest: Prevention of monopolistic behaviour to avoid failure, Promotion of competition through incentive regulations , Use of scarce resources in an efficient way.


Regulator• Management of scare resources (spectrum, numbering, right of

way)• Responds to the challenges made possible by new technologies that

will raise the need for a new regulation, eg privacy concerns IPR etc.• Manages the evolving markets made possible by convergence• Tackles how to deal with disruptive technologies and how to protect

public interest when they discover that the market for the new technology can't take off because of the impediments in former regulations that prevent it. (eg voip and IPTV)

• It is advisable for the regulator to inform the public on the limitations that comes with new technologies. This isn't very practical


Types of Regulators

• Single sector regulator (Oversee only one sector, eg only telecoms)

• Converged sector regulator (Oversee several inter-relating sectors eg, Telecoms, broadcast, electronic payment)

• Multi sector regulator (Oversee sectors with common economic and legal xteristics eg, telecoms, water, energy, transportation. Under one umbrella)

• A competition authority (no regulator as such but apply competition and anti trust rules)


Regulatory organization structure

• The collegial body: A board or commission composed of multiple members. Here individuals are with different expertise, more independent, but development of regulation may be slower due to internal wrangling

• The single regulator: Often led by a chairperson or president. single regulator has benefit of consistent approach to regulation and decision making. They can act quickly but can be influenced by external actors. he/she may not be able to match the expertise of the collegial body


Best practice for setting up a regulator

• Regulators must be independent to be seen as transparent and accountable.

• Regulators should have the expertise to assess and make sound judgements on both technical and industry specific issues.

• Regulators must take into account various view points and interests, including economic, social and political objectives. there should be checks and balances.

• The institutional design, internal structure and administration must be sufficiently flexible to allow the regulator to respond to market realities.


Characteristic of a good regulator

• Accountability• Transparency• Predictability

Some areas to regulate competition• Local services• Domestic long distance service• International long distance services• Mobile• Internet services• Leased lines


Government’s responsibility

Must grant the regulator structural, financial and functionality independence• Structural: Free from political and industry capture to ensure

transparency and objectivity.• Financial: Funding should be free from private and political

interests. The regulator should manage its funds and also have multiple ways of sourcing for funds

• Functionality: The regulator should be independent in making and enforcing authority, dispute resolution powers, clear rule involving appointment , removal and mandate of regulatory authority, incentives to promote professional expertise of staff, adequate provisions to address ethical and conflict-of-interest-concerns.


International frameworks

• Countries make global and regional commitments to open the telecommunication market to foreign investment

• They also make commitments to harmonize legislation with that of other countries in similar geographic or economic situations

Eg EU framework, WTO, NEPAD etcThe advantage of this could be the development of global or regional regulatory best practices. It can also grant the telecoms investor a level of certainty and predictability of the regulatory regime in the country he or she wants to be a part of.


Assessing a country’s regulatory framework

• Greater economic growth• Increased investment in the sector• Lower prices• Better quality of service• Higher penetration and a more rapid

innovation in the sector


Summary• Regulation is an important tool to ensure public interest in the

telecoms market• Technology, Economics and politics are the driving force for new

regulations and the initial movement from monopoly to competition markets

• Tariffs, interconnectivity, scarce resources, transparency, Quality of service, Universal Access and Services are some of the areas regulated in telecommunications

• Telecommunication is regulated to promote its social and economic benefits to citizens of a country

• A regulator must be independent to function properly• Countries do sign up with international regulatory frameworks to

enable them develop best practices


Education

Introduction to telecom regulation