16. Policy and regulatory issues
- Monopolies,competition and universal service
- Removing telecom tariff barriers
- The sequencing of regulation, privatisation and competition
- Regulatory flexibility
- Industry self regulation
- Regulatory independence
- Bringing Internet costs down – national and regional Internet exchange points
- Regional regulation
competition and universal service
most of the developed countries had achieved something close
to universal service within monopolistic systems, the same was
not true of developing countries. Users in urban areas experienced
long delays in accessing telephones, and networks penetrated
hardly at all into the rural hinterland. This gap in universal
service led to debate in developing countries on the pros and
cons of monopoly ownership, which was often resolved by granting
exclusive rights to the incumbent operator for a specified period
of time. This period before the introduction of competition was
designed in part to provide a window of opportunity to make progress
on universal service, and in part, to increase the capacity of
the incumbent to deal with competition.
Universal service (lines per household or number of lines per
100 inhabitants) can be achieved through monopoly (as in most
OECD countries) or through competition (as is recommended for
most countries reforming their telecommunications sectors today).
The commitment of the government to universal service as a policy
goal and the capacity of the regulator to implement it are more
important than the market regime itself.1 This
is particularly important in the developing world, where, despite
universal service objectives (expansion of the network and increased
number of subscriber lines), the trend is to focus on universal
access to ICT. Universal access focuses on ‘community access’ to
telecommunications facilities, particularly where it is not economically
feasible to provide lines per household.
telecom tariff barriers
creation of the World Trade Organisation in 1995 gave impetus
and renewed force to the negotiations that were underway on trade
in telecommunications. In 1997 they resulted in agreement on
a protocol and related documents setting out principles for competition,
interconnection, universal service, licensing processes and the
independence of the regulator. Countries that signed on to the
Agreement on Basic Telecommunications set out on a course that
will lead to the removal of trade barriers in the telecom sector
and require adherence to agreed regulatory principles that keep
the incumbent operator from taking advantage of its close relationship
with government, which is often still a major shareholder.
The WTO agreements opened the way for cash-rich telecommunications
operators to enter developing country markets in the second half
of the 1990s. Those same developing countries are struggling
to entice foreign investment in the weaker economic climate that
began in 2000.
sequencing of regulation, privatisation and competition
The introduction of privatisation, without at the same time
establishing regulation and opening markets to competition,
can increase the power of the monopoly provider and delay
network expansion. 2
early establishment of independent regulation increases investor
confidence; regulation can prevent the incumbent operator from
creating barriers to the entry of new competitors, for example
by limiting the transfer of numbers when people switch from one
service provider to another, or by delaying interconnection arrangements.
The creation of a regulatory authority before privatising increases
telecom investment and stimulates progress towards universal
Maintenance of a monopoly following privatisation – an
option many developing countries have chosen to allow the operator
a period of exclusivity to gear up for competition and make progress
on universal service – can in fact delay network expansion.
Privatisation is most effective when paired with the introduction
and growth of connectivity
that privatized by granting monopoly advantages have
seen connections grow at 1.5 times the rate under
state monopolies but only half as fast as the rate
in Chile where the government could issue competing
Lessons in Telecommunications Reform,
The fact that cell phones – often with text messaging capability – have
overtaken fixed telephone lines in many countries is evidence
of the speed and unpredictability of developments in telecommunications.
Even countries which limit rights to connect users to the network
to one or more national operators for a period of exclusivity
following privatisation, need to allow for experimental applications
at the local level to deliver the first mile of connectivity
and speed progress towards universal service. Innovation can
be organisational as well as technical. Cooperative local ownership
models, and the use of satellite and WiFi3 technologies
Secretary-General, Kofi Annan’s challenge to
the Silicon Valley Community on the 5th of November
“We need to think of ways to bring wireless fidelity
(Wi-Fi) applications to the developing world, so as
to make use of unlicensed radio spectrum to deliver
cheap and fast Internet access.”
Source: http://www.w2i.org/pages/wificonf0603/ manifesto.html
Industry self regulation
regulation by industry groups is an alternative to regulation.4 Industry
establishes a code of standards or guidelines and encourages voluntary
adherence to its implementation. Compliance with the code is expected to
increase consumer confidence in the product or service on offer. To be
effective self regulation needs to be monitored by industry and the codes
should be widely known to the public.
Self regulation often develops as a response to threats of regulation or
legislation – it is more prevalent in North America than in Europe.
The problem with it is that control of the regulation is transferred from
the government to private enterprise, but there is no guarantee that this
will protect users’ rights any more than before.
Self-regulation in Malaysia
The Malaysian Communications and Multimedia Commission (http://www.mcmc.gov.my/mcmc/)
is the regulator for the converging communications and multimedia industry.
The MCMC is also charged with overseeing the new economic, technical, consumer
protection and social regulatory framework for the converging industries of
telecommunications, broadcasting and on-line activities. The MCMC set up the
Communications and Multimedia Content Forum (http://www.cmcf.org.my/), with
representation from various different industry and consumer bodies to govern
content and address content related issues disseminated by way of electronic
networked medium. A self-regulatory body, CMCF will govern content by self-regulation
in line with a Content Code, drawn up after a long process of consultation.
But this consultation and proposed self-regulation did not stop the police
raid on independent news website Malaysiakini in January, 2003 because of a
letter published on the site. The police confiscated 15 computers and four
servers, and although they have returned most of the equipment, two computers
are still being held for possible use in court as evidence.
Privacy rights of Internet Users
In an effort to stave off Congressional action, the US web community
has devised a self regulatory regime including guidelines calling
for website operators to devise privacy protection policies and
post them on their websites.
Source: Trends in Telecommunications Reform 2002, pp. 27-28
in the telecom sector allows a whole new host of businesses to provide entertainment
and communication options direct to home and business. Rights of way and the
wires that connect long-distance carriers to homes and businesses have emerged
as expensive real estate. As long-distance telephone services face increasing
competition, access to consumers through these rights of way have become new
profit centres. This threatens community control over local resources and demonstrates
the unexpected risks that may be inherent in the tide towards deregulation.
ITU defines a separate regulator as one that is independent – in
terms of finance, structure and decision-making – from the operator
and the relevant government ministry.5
extent to which the regulator is perceived to be independent of political control – and
separate from other telecommunication bodies – is a key factor in the
confidence that industry and the public have in its decisionmaking and its
capacity to attract foreign investment. Statutory provisions governing the
appointment and removal of officials, reporting requirements and financial
autonomy provide some guarantee of independence. But the regulator needs to
be vigilant to achieve functional independence, particularly if the government
maintains a significant stake in the telecommunications operator.
Bringing Internet costs down – national and
regional Internet exchange points
traffic between users, particularly in the same country or region in Africa,
is often directed to international exchange points (backbone providers)
largely in G8 countries.6 The
local ISPs pay the cost of the physical link and of purchasing bandwidth
once they get there. This results in a reverse subsidy to the developed
country providers from the local ISPs, and has the effect of encouraging
the location of Southern websites in the North. This is the case, for example,
of the United Nations office in Kenya.
The creation of national and regional Internet Exchange Points is one way
of addressing this problem but it requires an organised ISP sector and
an environment of trust and collaboration which can be fostered by the
regulator – and by regional collaboration on regulatory issues.
trend towards regulation places a heavy burden on the limited ICT skills base
in many developing countries and puts the staffing and training of regulatory
institutions in developing countries high on the development agenda. A regional
approach may help mitigate this problem. A number of regional associations
of telecommunications regulators have been created (for example the Telecommunications
Regulatory Association of Southern Africa – TRASA). Caribbean countries
have gone one step further and established a regional regulatory authority.