A world dialogue on regulation for network economies

Citation

Melody, W.H. (2002), "A world dialogue on regulation for network economies", info, Vol. 4 No. 1. https://doi.org/10.1108/info.2002.27204aab.002

A world dialogue on regulation for network economies

William H. Melody

Introduction

Over the past decade, more than 100 countries have established telecom regulatory authorities to facilitate telecom reforms, and most other countries are in the process of doing so. The initial experiences with regulation have been characterized by a trial and error process that has yielded successes, failures, the discovery of several unanticipated, intractable problems, and heavy requirements for rapid learning on the job by the new regulatory authorities.

A decade ago, many experts and policy makers saw industry specific telecom regulation as a transitory step to facilitate the development of competition, after which such regulation could be terminated and the industry monitored by competition authorities. Experience has demonstrated these expectations to be unrealistic, if not naïve. The countries with the most developed telecom markets and the most experience with regulation – the USA and the UK – continue to strengthen their regulatory authorities for the future; and New Zealand, which acquired notoriety by attempting to implement its regulatory reform program without an industry specific regulator, recently has established one. National regulatory authorities will play a key role in implementing the next step in telecom reform.

Next generation regulation

The next challenge for telecom reform is to sweep away the remaining obsolete regulations protecting monopolies and restricting network access, and to establish new regulations that will provide a foundation for information infrastructure rollout, electronic services innovation and their productive applications everywhere. But the pace of policy and regulatory reform is lagging behind that of technological advance and the restructuring of markets. This is a major constraint on growth and development opportunities. Implementation of the US Telecommunications Act of 1996 is proceeding at a snail's pace, and the new EU "Telecommunications Package" of Directives is widely seen as catching up to the present rather than preparing the ground for the future. Despite initial telecom reforms and significant network growth in a number of developing countries, most people still do not have access to electronic communication services of any kind. The vast majority of the population in all countries does not have access to broadband connections for next generation Internet services, and are not likely to have them anytime soon.

The World Dialogue on Regulation for Network Economies (WDR) project was established to facilitate the transformation of regulation, so that it will be able to provide both a foundation of support and a catalyst for the development of network economies in both developing and developed countries[1]. This will require research, an extensive international dialogue on the major issues of regulatory reform, discussions among experts, and widespread distribution of papers, reports and other relevant information. The Web site, http://www.regulateonline.org, is the centerpiece of the international dialogue. The first issue being addressed by WDR is the design of next generation regulation.

ICT convergence regulation?

During the past decade the telecom sector has begun to change dramatically because of new technologies (e.g. mobile and Internet), national and international policies (e.g. WTO agreements), and markets (e.g. electronic commerce). The convergence of information and communication technologies (ICT) is expanding the communication capabilities of the telecom network – from voice to data to digitalized content of all kinds. Content-related issues ranging from privacy, security and intellectual property, to consumer protection and pornography have been raised. As the media are becoming more integrated into the new telecom networks, questions are being asked about the advisability of merging telecom and media regulation, as a few countries are trying to do. Moreover, competition for network services is far more complex than simple economic models would suggest, and the public interest issue of universal access to telephone service is being transformed into a "digital divide" issue confronting all countries.

Convergence regulation could be defined in relation to technologies, services, markets or other criteria. It could exclude as many content-related issues as possible from telecom regulation, or include them. Regulation could be assigned a passive or a proactive implementation role.

Multi-sector utility regulation?

Over the past decade telecom has not been the only infrastructure sector to undergo major reforms in many countries. Electricity, gas, water, transport and other utilities have been going through a similar process of attracting private capital and commercial management through the privatisation of incumbents and the licensing of new operators, and the establishment of industry specific regulatory authorities to facilitate network rollout, improved efficiency and consumer access to services. Although generally not as advanced as telecom in their sector reforms, the experience with regulation in the other utility sectors has been generally comparable. As liberalized markets in the utility sectors have developed, the traditional boundaries between them have begun to erode as firms in one utility sector have seen economies in creating multi-utility combinations across two or more sectors. The parallel requirements for rights of way, universal public billing systems, and management skills are some of the reasons for the growing interest in multi-utilities. The ability to pull fibre optic lines through gas and water pipes economically, and the promising research on the potential of power line communication provide additional attractions to telecom centred multi-utilities.

Regulating only one part (say telecom) of a multi-utility operator can be an extremely difficult and often impossible task. Moreover, having several industry specific regulators for multi-utilities that are not industry specific operators could be highly inefficient, especially when one considers the shortage of skilled human resources for regulation that exists in many countries. Might it not be better to establish multi-sector regulators to ensure more effective regulation of multi-utilities, and to achieve economies in the development and use of the limited regulatory resources? Or might this simply create a regulatory bureaucracy?

Conclusion

One might note that ICT convergence regulation and multi-sector utility regulation are not mutually exclusive alternatives. Why not create a super-regulator? This is highly unlikely as each country must respond to the particular conditions in that country, its specific needs and priorities for the foreseeable future. Whatever the ultimate structures adopted, the WDR will provide for greater participation in the shaping of next generation regulation.

Note

1. 1.

   The World Dialogue on Regulation for Network Economies (WDR) project was initiated by infoDev, World Bank, which provides foundation funding (Grant Agreement # 546-011501). It is managed by LIRNE.NET, www.lirne.net a collaboration between the Center for Tele-information (CTI), Technical University of Denmark, and Economics of Infrastructures, Delft University of Technology, NL. Foundation partnership support is provided by the ITU Telecommunication Development Bureau. Research support is provided by the Ford Foundation and the Delft Interfaculty "Design and management of infrastructures" program.