This lecture provides an overview to the trend of telecom regulation over the years

1. Introduction to Regulation
Idongesit Williams, PhD Student
CMI, Aalborg University
idong@plan.aau.dk
Centre for Communication Media and Information Technology

2. Outline
• General overview
What is regulation
Why regulate
What can be regulated
• ICT regulations
What must be regulated
Why, what and how
Driver of change from monopoly to competition
Implication of technology change
Principal objective of telecom regulation
Types of telecom regulations
• Regulatory Frameworks
Regulator
Types of regulators
Regulatory organization structure
Best practice for setting up a regulator
Characteristics of a good regulator
Government’s responsibility
International frameworks
Assessing a country’s regulatory framework
Summary
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3. 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]
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4. 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 country
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5. 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)
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6. 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
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7. 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
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8. What must be regulated?
Monopoly Competition
Tariffs
Quality of service
Universal service
obligation
Scarce resources
Interconnection
Transparency
(Cross subsidisation)
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9. 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
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10. Drivers of change in telecom policies from monopoly to competition
Economic Politics
Technology
1st stage
1990
-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
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11. 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;
Liberalization
Privatization
Commercialization
Deregulation
Corperatization
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
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12. 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
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13. 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
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14. 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.
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15. 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.
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16. 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
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17. 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)
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18. 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
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19. 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.
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20. 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
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21. 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.
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22. 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 etc
The 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.
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23. 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
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24. 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
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