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I Anhang

The Dimensions of Establishing an Independent Regulatory Authority

After almost three years of having entirely opened up the Austrian telecommunications markets dramatic changes have taken place. A huge number of interesting telecommunications services have been introduced, mobile communications and the internet market are booming. New services like WAP or the issue of broadband access to the internet have raised widespread public attention. UMTS/IMT 2000 frequencies have been allocated, new access technologies in the fixed network such as WLL , powerline and the more efficient use of the subscriber line will turn the access market into a more competitive field providing a variety of choice for the customer. 

Almost nobody doubts anymore that the ambitious program of the European Union to liberalise the telecommunications markets has turned into a great success. With respect to this Telekom Control (Ltd), the Austrian Telecommunications Regulatory Authority is pleased to present some insights and experience from a managerial viewpoint on how an independent regulator for telecommunications operates. 

To understand the Austrian case it is necessary to give a short introduction beforehand of the players in the field of telecommunications regulation, what their responsibilities are and how they co-operate. 

The major players in the field of telecommunications regulation in Austria

Telekom-Control-Kommission (TKK), Telecom-Control-Commission:

The responsibilities of the TKK are listed in § 111 TKG (Austrian Telecommunications Act). Among other things its most important tasks are:

§        Granting and revocation of licenses

§        Defining operators having significant market power

§        Approval of business conditions and tariffs

§        Deciding on the conditions of network interconnection in the event of disputes (i.e. interconnection tariffs)

Telekom-Control GmbH (TKC), Telecom Control (Ltd.)

TKC is a private limited not for profit company, wholly owned by the Republic of Austria with its shares being administered by the Federal Ministry for Transport, Innovation and Technology. The nominal capital of TKC is ATS 50 m (= EUR 3,63). The General Manager of TKC is Professor Heinrich Otruba, who leads a company of 60 employees with a turnover of approx. ATS 100 m (= EUR 7,27 mio). According to § 109 TKG TKC holds a so-called general competence in all matters concerning telecommunications regulation in Austria within the scope of the Telecommunications Act except those issues covered by the TKK and the OFB. Among other things its most important tasks are:

§        Supervision (monitoring) of the Austrian telecommunications market

§        Providing expertise for the decisions of the Telekom-Control-Commission

§        Management of the Telekom-Control-Commission´s business

§        Proceedings in cases of violations of the Open Network Provision

§        Administration and allocation of telephone number blocks according to the Austrian numbering scheme

§        Decisions in cases of arbitration (consumer bills)

Bundesministerium für Transport, Innovation und Technologie (bmvit) Federal Ministry for Transport, Innovation and Technology 

Generally speaking the Ministry is in charge of formulating and implementing the telecommunications policy in Austria. All responsibilities derived from that are borne by the so-called Oberste Fernmeldebehörde (OFB), Highest Telecommunications Authority, a section within the Ministry for Transport, Innovation and Technology. Among other things its most important tasks are:

§        Supervision of all “public sector players“ except the Telekom-Control-Commission

§        Drafting suggestions concerning amendments to the Telecommunications Act

§        Drafting and issuing of ordinances according to the Telecommunications Act

§        Frequency Management

How TKK and TKC collaborate

The TKK is the decision making body in all aspects touching property rights of legal entities. Its managerial body is Telecom Control (TKC). TKC prepares the proceedings, drafts the documents and manages the daily business of the Commission. TKC is the “think tank“ empowered and controlled by the TKK in its proceedings. In addition TKC is also the managerial body for the supervision of electronic signatures with the TKK being again the decision making body.

The flowchart below may help to understand how collaboration between the different players - with a focus on the key issues handled by the TKK - works.

Figure 1: The collaboration between TKK and TKC

I                      The Dimensions of Independence

According to the intentions of the telecommunications regulatory framework of the European Union the national regulatory authorities are to be established as independent bodies carrying out the respective European stipulations as transposed into national law. They are not only administrative bodies having a close look on whether or not the operators and especially the former incumbent act within the rules as laid down in their respective Telecommunication Acts; moreover they are supposed to play an active role in promoting and fostering competition on the relevant markets irrespective of interests articulated more or less accurately by operators and owners of operators. Telecom Control (Ltd) identifies three dimensions that define the level of independence a regulatory authority benefits from and respectively is able to achieve:
a) Independence from interests articulated by the owner(s) of the former incumbent operator,
b) Independence in terms of human resources and
c) Independence in financial terms. 

Figure 2: The Independence Triangle

Independence from the federal government in its role as administrator of the shares of the former incumbent

It is crucial for the success of an independent regulator to have no subordination in terms of regulatory work to any member of the federal government, especially to that ministry in charge of administrating the rights derived from holding a significant stake in the former incumbent if that is still the case. In Austria this is clear cut and has been laid down in the Telecommunications Act. The sole way to exercise preasure on the regulatory body by the government, i.e. the federal minister in charge of telecommunications policy is to give directives in writing that have to be published. This right is restricted to administrative issues only and cannot be extended to any regulatory matter. 

Independence in terms of human resources

If the regulatory authority fails to build up an unbiased expertise it may fail to make a clear point in case of criticism. If substantial know-how is derived from experts with an enduring working relationship in their past with the former incumbent the rumours of unbalanced perspectives may be hard to overcome. TelecomControl (Ltd) therefore was keen to gather human resources from other areas than the former incumbent operator. Preferred fields of recruitment have been universities, research institutions (e.g. Academy of Sciences), telecommunications equipment vendors, civil service, etc. All employees hold exclusively contracts of employment with Telecom Control (Ltd). TKC searched for young, excellent, it-prone experts with a high affinity towards “growing“ and good social skills (project teams, task forces, process driven thinking). 

Independence in financial terms

According to § 17 (2) Telecommunications Act, TKC is mainly funded through a financial contributions system based on the turnovers generated by operators offering license-based services in Austria. The basis of the funding system is TKC´s annual budget that has to be approved by Telecom Control (Ltd)´s supervisory board. Operators offering license-based services have to notify their planned turnover for the respective year. Their funding shares are computed based on these pieces of information and the individual funding requirements are then issued as decisions and delivered to the license holding companies. The licensees are requested to pay their funding contributions quarterly. At the end of the year the actual expenses of TKC and the actual turnovers generated from „licensed services“ of all operating licensees are matched and the actual funding requirements are closed mostly leading to refunds transferred to the operators. This funding system was accepted well by the operators and has been employed successfully from the first budget in 1998 until now. In addition to these funding sources (accounting for more than 90% of TKC´s budget) another source of revenue is upfront license fees for granting fixed line voice telephony and leased line services covering the expenses derived from the proceedings of license granting. 

II                   The Company Organisation Structure of TKC

Telecommunications regulation is a transdisciplinarian task. Technical, cost accounting, economics and legal know-how have to be brought together in order to find good solutions to problems arising when network industries are forced into competition. Telekom Control (Ltd) was established with the idea of creating a regulatory authority that relies on modern principles of management and leadership. It was intended to build up a lean organisation with as few levels of hierarchy as possible. At present there are just two levels with the General Manager and his division heads. The division heads are top telecom experts in their respective disciplines expected to lead their analysts as their division´s knowledge managers. The heads are in charge of procuring the skills, knowledge and experience necessary to deliver excellent regulatory expertise. The Management Division has to preserve the working environment for the specialists of the regulatory divisions. The staff units´ main task is to support the General Manager in his daily work and leadership responsibilities comprising international relations, public relations and accountability management. At present the organisation chart of TKC looks as follows:

Figure 3: Organisation Chart

III                 The Structuring of Operations at Telecom Control (Ltd)

As mentioned above Telekom Control (Ltd) was established with the idea of creating a regulatory authority that relies on „modern“ principles of management and leadership. That does not only apply to the way the organisation was designed but also to how the organisation works. Quite deliberately there was no intention of establishing highly specialised departments capable of delivering focused – or to be less polite, narrow minded – expertise but perform inefficiently when it gets down to answering general questions such as forecasted impacts of regulatory measures. In case of highly specialised departments one gets precise answers to precise questions. The overall picture often remains unclear and foggy. Hence it appeared to be necessary to create knowledge pools (the divisions) that serve as platforms for flexible and transdivisionally formed project teams or task forces that deal simultaneously with regulatory problems. E.g., for allocating a fourth national DCS-1800 license in mid 1999, TKC established a project team consisting of analysts from all four regulatory divisions that produced all the documents necessary for the proceedings led by the Telecom-Control-Commission. The same approach is applied in the case of task forces on regulatory issues requiring fewer resources than projects. The project organisation at TKC may be illustrated schematically as follows:

Figure 4: Project organisation at Telecom Control (Ltd)


Besides task forces and projects a substantial work load of repeatedly occurring regulatory or administrative matters are dealt with through processes. These processes are characterised as being eligible for (a certain degree) of standardisation and cross-functional lines of communication irrespective of divisional borders or gaps. The process of granting a license may serve as an example, schematically presented in figure 5:

Figure 5: Process orientation at Telecom Control (Ltd)

The key factors for TKC´s success so far could be summarised as follows:

§        Workable legal basis (Telecommunications Act and ordinances)

§        Appointment of a truly independent Telekom-Control-Commission

§        Appointment of a General Manager with an excellent reputation and standing on both sides, politics and industry

§        Good quality of regulatory decisions (formally and in respect of content)

§        Highly motivated group of excellent employees keen on advancing

§        Adequate principles of management and leadership (process- and team orientation)

§        Office concept including architecture and IT infrastructure fitting and fostering TKC´s corporate culture


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