A.4 Digital policy and regulatory incentives for each area
Policy and regulatory incentives constitute non-financial mechanisms in the funding toolkit.
Even before the private sector makes an investment decision to commit capital, the policy and regulatory environment is a key tool to create stability, reduce risk and lower implementation costs for both supply-side projects related to infrastructure rollout and demand-side programmes that stimulate adoption and use. Policy-makers and regulators are also responsible for putting in place incentives to encourage private investment through sound policy and institutional frameworks. Policy-makers and regulators must also understand private financing frameworks and be familiar with public investment principles.
Depending on the programme being pursued and the desired outcomes, there are several regulatory and policy measures that can be taken to bridge funding gaps. These measures range from connectivity incentives that reduce network deployment costs or the risks of roll-out to adoption incentives that build consumer and business confidence and increase trust in digital technologies, applications and services. Adoption incentives also support innovation, research and development. The digital policy and regulatory incentive checklist enables policy-makers and regulators to consider the range of incentives that may be put in place.
Digital policy and regulatory incentive checklist
| Policy framework |
|---|
| ✅ National digital agenda/ broadband strategy, with supporting strategic plan / implementation plan / roadmap ✅ Sector specific digital plans ✅ Integrated universal access and service strategy |
| Institutional framework |
| ✅ Establishment of USAF 2.0 ✅ Independent, facilitative, and effective regulator ✅ Competition authority ✅ Other authorities and government departments such as those responsible for education, health and trade ✅ Collaboration between the above authorities and sector specific regulators, especially for cross cutting digital matters |
Connectivity incentives |
| ✅ Collocation / infrastructure sharing/ open access ✅ Streamlined processes, procedures, and approval processes (such as environmental impact assessments, national, regional, and municipal rights of way, collocation permissions) ✅ Rights of way – “dig once” and “dig smart” open trench notification policies ✅ Investment friendly assignment of spectrum ✅ Consumer education and awareness campaigns ✅ Infrastructure mapping and access to information (geographic information system (GIS) maps, surveys, and other data on location of schools, households, levels of connectivity, etc.) ✅ Cross sector collaboration across ministries, departments, and regulators (ICT, education, health, infrastructure, and any others) ✅ Provision of access to government rights of way, easing access to construction permits, easements and access to government vertical assets, such as buildings and towers. ✅ Requirement that all public infrastructure projects in the area of the project, such as water, bridges, roads and power grids make provision for broadband facilities ✅ Establishment of policies that promote open-access public network models at municipal levels |
Adoption Incentives |
| ✅ Privacy regulation instruments (e.g., EU General Data Protection Regulation (GDPR), South Africa Protection of Personal Information Act (POPIA), Thailand Personal Data Protection Act (PDPA) ✅ Electronic transaction framework ✅ Cybersecurity framework ✅ Consumer protection framework, specifically focused on the protection of children ✅ Investment enabling regulation (protection of content providers) ✅ Demand aggregation to guarantee traffic for operators |
Inclusion incentives |
| ✅ Consumer education and awareness campaigns ✅ Adoption and implementation of universal design policies, standards and principles ✅ Promotion of development and roll out of apps and services using local languages ✅ Policies which foster widespread availability of accessible ICTs ✅ Encouraging local research and development and innovation |
A.4.1 Regulatory incentives to facilitate connectivity
The regulatory environment is a key tool to create stability, reduce risk and lower implementation costs for supply-side projects related to infrastructure rollout, which tend to be long term in nature and capital intensive. In some cases, appropriate implementation of policy and regulatory measures alone will be sufficient to reduce risk and costs to spur investment; in other cases, they can be used to complement the application of financial incentives and the use of traditional funding mechanisms (guarantees, bonds, equity, etc). The figure below provides a decision tree that can assist policy-makers and regulators to decide which interventions might support investments in infrastructure and connectivity. It proposes interventions that will support the goals of (1) increasing capex investment; (2) increasing opex investment; and (3) reducing risk.
Non-finance mechanisms and regulatory interventions to facilitate connectivity
Regulatory incentives to facilitate connectivity
DESCRIPTION
QUESTIONS FOR REGULATOR AND POLICY-MAKER
REFERENCE MATERIAL
Open access
To reduce costs through facilitating third party access to networks decreasing duplication and increasing efficiency.
- Is open access mandated and has the approach started at the lowest network layers first?
- Are the principles of transparency and non-discrimination implemented?
- Are the supporting regulatory tools in place, e.g., cost accounting
- **Balancing Act – do not inadvertently deter / disincentivise existing network investment.
Infrastructure sharing
By reducing redundancy, infrastructure sharing spreads the cost of network expansion across multiple market participants and can generate significant capex savings.
Across sectors: The cost of broadband transmission and core network deployment can be reduced by relying on existing railway lines, power transmission grids, and pipelines, or by coordinating with road construction.
- Is infrastructure sharing mandated?
- Is co-location/ site-sharing mandated?
- Are the principles of transparency and non-discrimination implemented?
- Are the supporting regulatory tools in place, e.g. cost accounting, Reference Infrastructure Sharing agreement?
- **Balancing Act – do not inadvertently deter / disincentivise existing network investment.
Rights of way (dig once, dig smart)
The ‘Dig Once’ policy reduces the need for multiple excavations and in so doing reduces duplication, increases efficiency and lowers costs.
It also lowers barriers-to-entry for connectivity providers, including alternative network providers; achieves lower re-trenching and repair costs; and reduces road, utility, and other asset depreciation.
- Does the policy apply to new builds and developments as well as existing builds and other assets, enabling coordination between utility companies and connectivity providers during highways and street works, and other major infrastructure projects?
- Is it forward looking and technology neutral?
- Does it deliver multi-purpose connectivity: with next-generation wireless connectivity (including 5G, IoT and new WiFi technologies)?
Assign broadband spectrum
Focusing on spectrum allocation and pricing, licensing terms and conditions.
Assigning sufficient amounts of mobile spectrum to operators in a timely manner.
Providing access to unlicensed spectrum bands for use by communities and innovators
- Has a spectrum roadmap been issued to assist operators to plan and reduce investment risk?
- Have the trade-offs between spectrum fees, retail prices and coverage obligations been considered?
- **Balancing Act – need to note the costs of roll-out and to balance the needs of communities and established operators.
ITU GSR Discussion Paper: New Frontiers in Spectrum Licensing (2021)
GSR 2020 Best Practice Guidelines
Spectrum management (ITU-World Bank digital regulation platform)
Waive or reduce taxes and fees
Sector-specific taxes on handsets and airtime are a connectivity barrier which will increase affordability of mobile services; it is furthermore a deterrent on investment.
Establishing Special Economic Zones (SEZs) and science parks that provide tax incentives and other incentives, such as access to land and high-quality infrastructure, and streamline processes for new ICT businesses.
- Has the total cost of ownership of devices and services been mapped in your country? What portion is taxes?
- Are there special zones or incentives for attracting investment and innovations?
- Are incentives for local investment balanced against those for international investors?
- **Balancing Act – ensure that there is an investment friendly balance between localisation and promotion of other investment.
Rethinking mobile taxation to improve connectivity, GSMA (2019)
Rwanda: Designated, serviced land is provided for small and large- scale industrial development, in addition to reliable, high-quality infrastructure, competitive fiscal and non-fiscal regulations and streamlined administration procedures
People’s Republic of China: China had established 156 high-tech development zones (HTDZs) by the end of 2017. Patents granted to enterprises in HTDZs account for 46 per cent of all business patents granted nationwide
Turkey: Until December 2023 profits derived from software development, R&D and design activities are exempt from income and corporate taxes; sales of application software produced exclusively in TDZs are exempt from VAT
Infrastructure sharing explained
Infrastructure sharing is an important cross sectoral regulatory tool. There are types of infrastructure owned by telecommunication and digital operators (digital infrastructure including towers, ducts and poles), other non-ICT sector infrastructure (power grids, roads) and those owned by public and private owners such as buildings or rights of way. The ease of sharing differs based on the type of infrastructure. Furthermore, the cost of sharing, which must be reasonable and transparent, needs to be overseen by regulators, however in a manner that does not deter private investment or distort the market.
Source: IFC 2020
A.4.2 Regulatory incentives to facilitate adoption and inclusion
The figure below provides a decision tree that can assist policy-makers and regulators to decide which intervention might support investment in adoption programmes. It highlights possible policy and regulatory interventions that will support the goals of increasing adoption by (1) individuals; (2) strategic institutions, including schools and clinics; and (3) SMEs, start-ups and micro-enterprises.
Regulatory incentives to facilitate connectivity
Regulatory incentives to facilitate adoption
DESCRIPTION
QUESTIONS FOR REGULATOR AND POLICY-MAKER
REFERENCE MATERIAL
Privacy regulation
Policies and regulations can reduce investor risk by influencing user uptake and use and thereby expand the market for potential investors, while also protecting businesses and consumers.
- Is the institutional framework in place to support privacy regulation?
- Are citizens aware of the policies and laws? Has an awareness campaign been carried out?
- Do the regulations encourage users to adhere to global principles on the collection, use and destroying of data (see the EU General Data Protection Regulation (GDPR) case study)?
EU: General Data Protection Regulation (GDPR) – passed in 2016 and effective from mid-2018: https://gdpr.eu
South Africa: Protection of Personal Information Act (POPIA) https://popia.co.za
Brazil: General Data Protection Law (LGPD)
Thailand: Personal Data Protection Act (PDPA)
Electronic transaction, cybersecurity and consumer protection frameworks
Policies can reduce investor risk by influencing user uptake and use and thereby expand the market for potential investors, while also protecting businesses and consumers.
- Is the institutional framework in place to support cybersecurity?
- Are citizens aware of the policies and laws? Has an awareness campaign been carried out?
Chile: Cybersecurity Policy
Intellectual property and digital copyright protection rules
Policies can reduce investor risk by influencing user uptake and use and thereby expand the market for potential investors, while also protecting businesses and consumers. Encourage investment in platforms and content.
- Is digital copyright protected under current laws or do they need to be updated?
- Can platforms and applications be patented?
- Are new ideas protected?
United State: Digital Millennium Copyright Act
Canada: Copyright modernisation Act
GDPR: The five basic data privacy rules for data controllers and processors
Consent: Before disclosing any data, check if the proper consent is in place to do so. Depending on the type of data, you may need the consent of the individual concerned before passing it on.
Purpose: Only collect data from an individual that is necessary. Collect the exact amount of data needed and never more than is required for the purpose. Additionally, data should not be collected or used without approval (see “Consent” rule).
Security and access: Data should be stored anonymously using the latest security and de-anonymization methods. You have a responsibility to protect data from loss, theft, unauthorized use and modification. Data should not be accessed without permission or a specific, lawful purpose. An individual should have the means to view and correct the data held on them as provided by law.
Disclosure and accountability:Individuals will have a right to know that their data is being collected, why and how it will be used. Individuals can normally hold companies to account for the use of their data and keeping it safe and secure.
Destruction and disposal: Data should not be kept for any longer than is necessary (this aligns with the “Purpose” rule). Data that is not being used, out of use, or no longer required should be destroyed.
Source: Adapted from https://gdpr.eu and https://vinciworks.com/blog/the-five-basic-data-privacy-rules-for-us-compliance/
A.4.3 Regulatory incentives to facilitate innovation
The figure below is a decision tree that can assist policy-makers and regulators to decide which interventions might support investments in projects and programmes that drive innovation. It proposes interventions that will support the goals of (1) promoting innovation by SMEs; and (2) increasing local research and development.
Regulatory incentives to facilitate innovation
In addition to the incentives described in the figure above relating to electronic transactions and copyright protection that facilitate business and consumer trust and therefore increase adoption, the same regulatory and policy interventions also encourage investment in innovation and research and development. In addition, as highlighted in below, the regulatory sandbox is a specific incentive that facilitates innovation with reduced regulatory risk.
Regulatory incentives to facilitate innovation
DESCRIPTION
QUESTIONS FOR REGULATOR AND POLICY-MAKER
REFERENCE MATERIAL
Regulatory Sandbox
An Innovation safe space or “test-and-learn” environment that enables both start-ups and established businesses to develop new concepts and products in a controlled environment. The regulatory requirements in a sandbox are relaxed to facilitate innovation with significantly reduced regulatory risk.
- Is there a framework in place that encourages innovation?
- Are innovators encouraged to approach the regulator with their ideas?
- Is there space to explore innovations without attracting the regulatory fees and requirements of established projects?
How to Build a Regulatory Sandbox: A Practical Guide for Policy Makers is a step-by-step guide that leads regulators through the decision-making process, including the alternatives to first consider. It then examines the design and implementation factors for creating a successful sandbox environment. The guide is practical, specific, illustrated by country examples and complemented with work templates. It offers tips and recommendations supported by evidence and experience from in-country work from all around the world.
Canada: The CSA Regulatory Sandbox is an initiative of the Canadian Securities Administrators (CSA) to support fintech businesses seeking to offer innovative products, services and applications in Canada.
Colombia: In May 2020, Colombia’s Regulation Communications Commission (CRC) adopted a resolution introducing a regulatory sandbox as an alternative regulatory mechanism allowing the testing of new products, services and solutions in any aspect of the ICT sector. The maximum 12-month licence period allows for tests to be conducted within specified geographic areas under a flexible regulatory regime or with regulatory exemptions. Telecommunication network and service providers, whether multinational or community- based entities, may participate.