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 Monday, February 06, 2006

More regulation while competition is increasing? That does not sound right, according to the GSM Association. Instead, given the innovative nature of 3GSM, its embryonic status and the current lack of market and legal certainty, regulatory forbearance is advisable.

10 Regulatory Principles:

1. Regulators should continue to seek a balance between the benefits and costs of intervention, on the one hand, and regulatory forbearance, on the other.

An overly interventionist approach, which could lead to short-term benefits, could potentially stifle a dynamic market process with inevitable and adverse competitive, economic and even social consequences on the longer term. In general, competition is deemed to be a better approach to economic efficiency than regulation, and the regulators must encourage sustainable competition for the long term.

2. Regulation should be based on clearly defined goals and policy objectives and should be kept to the minimum necessary to meet these objectives.

Once effective competition is established or there is a reasonable prospect of a effectively competitive market in the near term, regulatory forbearance should prevail (with competition law providing appropriate safeguards).

3. Regulators should acknowledge that 'normal' competitive markets reflect a range of operator return and should not intervene in competitive markets where one or more operators' return appears to be above the 'norm'.

In the mobile market, the reality is that some operators have made good returns (on invested capital), while others have not. This situation is not of itself a cause to regulate away 'excess profits'. If a regulator judges from the highest standard, and regulates accordingly, then the less performing companies will unavoidably hit, thus further reducing already inadequate returns and threatening long term competitive development.

4. Regulation should fit (reflect) the market situation and balance the micro and macro views.

For example, when in certain cases mobile termination or roaming charges may appear high to regulators in certain countries, these cannot be judged in isolation.

5. Regulators should be publicly accountable and act in a transparent way.

Regulatory intervention should only be imposed after an appropriate public consultation process, which in most cases, will include market definition and assessment and a further assessment as to the appropriate regulatory remedy. A full right of appeal both on grounds of law (substance) and procedure (process) is an essential element of the checks and balances, which are necessary between operators and regulators.

6. Governments should adopt licensing practices that encourage new investments in telecommunication infrastructures and facilitate competition within the sector.

Un-harmonized license award procedures together with varying license conditions/obligations may lead to varying investment incentives in national markets and may eventually give rise to some discrepancy with respect to the levels of mobile service developments. Licensing policies and procedures must be applied judiciously] since not only they can influence market entry but also the post-entry conditions affecting competitiveness and market development. For auctions to contribute positively to economic welfare, they must meet a set of stringent preconditions (all potential bidders must be fully informed as to any Government imposed terms and conditions, including fees and changes to fees). When designing auctions, policy-makers should seek to achieve efficient resource allocation rather than primarily aiming to raise surplus government revenue. High license fees in some developed countries may constrain the ability of operators to invest in developing countries.

7. Spectrum should be allocated on the basis of achieving economically efficient, competitive and structurally desirable outcomes rather than to extract monopoly rents from the industry.

If the market is the best allocator of scarce resources, as most economists would argue, it is important that countries should be able to develop their own spectrum trading arrangements. In principle, regulators should allow for secondary trading of spectrum within planned internationally frequency allocations, after a thorough consultation process with the industry (i.e. mobile operators) evaluating the advantages and disadvantages of spectrum trading.

8. The feasibility and commercial desirability of sharing of facilities and infrastructure is a matter, which is operator and market specific.

In certain circumstances, sharing can be beneficial by, for instance, driving efficiencies through accelerated network rollout, the potential elimination of unnecessary cost duplication and the minimization of certain adverse environmental impacts. Accordingly, regulators should enable commercial negotiations on facility sharing among mobile operators to proceed subject however to license conditions not prohibiting the proposed form of sharing and competition not being materially and adversely impacted by the proposed form of sharing.

9. Restrictions on the deployment of mobile networks should be based on science and substantiated studies, and not in response to 'public concern' which is without scientific basis.

10. Adequate consumer safeguards against the inappropriate use of customer data are in place in most countries.

In overseeing the implementation of those safeguards, regulators should balance the interests of consumers to data privacy, on the one hand, and timely and easy access to services and information on the other. Further, regulators should look first to relevant self-regulatory industry initiatives to achieve those objectives.