Table of contents
Part 1
What are ICT and internet policies?
Part 2
The internet, markets and access
Part 3
National ICT and internet policy and regulation
Part 4
Specific issues in internet policy and regulation
Part 5
Appendices
Organisations active in ICT
Glossary
Bibliography


  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
- Deregulation
- Regulatory independence
- Bringing Internet costs down national and regional Internet exchange points
- Regional regulation

Monopolies, competition and universal service

While 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.


Removing telecom tariff barriers

The 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.

 

The 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

The 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 service.

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 of competition.

Monopoly and growth of connectivity

Countries 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 licenses.

Source: Farajian, Key Lessons in Telecommunications Reform, p5

Regulatory flexibility

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 are examples.

UN Secretary-General, Kofi Annan’s challenge to the Silicon Valley Community on the 5th of November 2002

“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

Self 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.

Source: http://www.hrw.org/wr2k2/asia8.html,
http:// www.malaysiakini.com/news/200301200018962.php, http://www.seapabkk.org/


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

 

Deregulation

Deregulation 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.

 

Regulatory independence

The 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

The 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

Internet 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.

Regional regulation

The 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.

1 Sean O’Siochru, Universal Service, Policy and Regulation – A Review of Experience Internationally, IDRC, 1996

2 Farajian, p 2

3 Short for wireless fidelity – the popular term for high frequency wireless local area networks.

4 Trends in Telecommunications Reform 2002 (Geneva: International Telecommunications Union, 2002), Chapter 2, page 27,28

5 ibid, p 28

6 The Halfway Proposition: Background Paper on Reverse Subsidy of G8 countries by African ISPs, African Internet Service Providers Association, October 2002 http://afrispa.org

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