Chairman's
Report of
the Sixth
Regulatory Colloquium
11
-13 December
1996, Geneva
INTERNATIONAL TELECOMMUNICATION
UNION
Preface by the Secretary-General - Dr. Pekka Tarjanne
Report of the Colloquium Chairman - David M. Leive
Executive Summary of Briefing
Report - David N. Townsend
I am extremely pleased to introduce the Report of the Sixth Colloquium on the Changing Role of Government in an Era of Telecom Deregulation (known in short as the Regulatory Colloquium), which was held at ITU Headquarters in Geneva on 1113 December 1996.
The Colloquium represents an important continuing initiative to consider, in an informal, expert and practical way, some of the fundamental issues of telecommunications regulation that arise from today's fast-changing telecommunications environment. The Colloquium is non-governmental in nature, privately financed, and brings together, in their individual capacities, high level telecom officials and experts from a diverse range of countries. The participants meet in Geneva for three days to formulate practical advice designed to be of immediate benefit to policy makers, regulators and business communities in developed and developing countries alike.
The Sixth Colloquium addressed the impact that the much heralded "convergence" of conduit and content will have on telecom policy makers and regulators, and the options available to deal with those impacts. Part of the effort lay in attempting to divine what is meant by such "convergence". The Colloquium's purpose is essentially educational: to inform the telecom community as precisely as possible of the consequences and opportunities presented by these new developments.
The funding for the meeting was provided on a collaborative basis by The World Bank, through its infoDev program, and the Friedrich Ebert Foundation of Germany (FES). Both organizations had separately funded earlier Colloquia. For their critical help, I am most appreciative to James Bond, Bjorn Wellenius and Carlos Braga of The World Bank, and Eric Vogt of the FES.
As noted in my Introduction to the Report of the First Colloquium, the concept of the Colloquia originated with David Leive when he was Chairman of the ITU's TELECOM '91 Regulatory Symposium in Geneva in October 1991. An extensive round of informal consultations with experts from many countries led Mr. Leive, Ambassador Gerald Helman, who provided critical assistance, and me to conclude that the Colloquium would meet a significant need and be of great practical value to many countries. This forecast has been more than borne out by the success of the six Colloquia and the widespread use of its Reports.
In view of his outstanding leadership of the Colloquia, I asked David Leive after the Second Colloquium to continue as permanent Chairman.
The results of the Sixth Colloquium are reflected in the following Chairman's Report by Mr. Leive. Together with several of my senior colleagues, I participated throughout the three day session, just as I had at the first five Colloquia.
The Report describes the consensus of the participants on the principal issues discussed, but does not represent individual participants' views.
This publication also includes the executive summary of the Briefing Report prepared by an independent consultant, David Townsend, which was presented to the Colloquium in draft from to serve as a basis of the discussions. The full Briefing Report will be translated and distributed to all administrations this spring. Both the executive summary and the Briefing Report reflect Mr. Townsend's own research and views, and are not products of the Colloquium discussions themselves.
Planning is now underway for subsequent meetings. The Seventh Colloquium is scheduled for the last quarter of 1997, on a topic to be selected; the Eighth Colloquium will take place in the second quarter of 1998.
At its prior meetings, the Colloquia increasingly had focused on the critical need to more widely disseminate its Reports to the global community of telecom policy makers, regulators and private sector participants. In this respect, the World Bank had commissioned, for initial consideration at the Sixth Colloquium, an effort to develop an overall dissemination program. That project is now underway, and we hope to be able to implement such a program within the coming months.
Finally, I want to reiterate
the importance I place on innovative methods such as the Colloquia that
can provide practical help to the telecommunications community throughout
the world which must deal with the complex challenges that arise from changing
industry structures, evolving economic policies and new technologies.
Pekka TARJANNE
Secretary-General
Geneva, March 1997
INTRODUCTION
PART-I- FRAMEWORK FOR DISCUSSION
A. What is Convergence?
B. The Regulatory Imperative (Why are we here?)
C. Alternative Perspectives and Concerns
PART-II- POLICY PERSPECTIVE:
MARKET-BASED INFRASTRUCTURE DEVELOPMENT
A. Presumption of the Market
B. Regulation of Competition
C. Market Structure and Evolution
D. Regulatory Challenges
PART-III- THE IMPACT OF IMPENDING
CONVERGENCE TRENDS
A. Convergence of Telephone and Broadcasting/Television
B. The Internet
C. Globalization and Trade
PART-IV-PRACTICAL POLITICAL
AND INSTITUTIONAL CONCERNS
A. Regulatory Issues Concerning Content
B. Structure and Processes of Regulatory Institutions
EXECUTIVE SUMMARY OF BRIEFING REPORT
This Report summarizes the highlights of the Sixth Colloquium on the Changing Role of Government in an Era of Telecom Deregulation, held at the headquarters of the International Telecommunication Union (ITU), in Geneva, Switzerland on 1113 December 1996, under the auspices of the Secretary General of the ITU.
As noted in the Secretary General's Preface, the Colloquia are privately financed meetings bringing together, in their individual capacities, high level officials from both the public and private sectors, to examine, in an informal setting, some of the principal issues facing telecom policy makers and regulators. The Sixth Colloquium brought together 24 persons from 13 countries and 4 international organizations. (See Attachment 1 for a list of participants). Also in attendance were the Secretary General and other elected officers of the ITU.
As an aid to its discussion, the Colloquium was guided by an outline raising a series of questions, prepared by the Chairman, and reproduced in Attachment 2.
The Report highlights those issues which the Colloquium participants believed to be of general interest and applicability. It makes no effort to fully reflect all of the wide ranging and detailed discussion that took place, nor does it purport to describe the views of individual participants. In some instances, and in order to provide the reader with a complete description of the principal issues, the Report may go beyond the discussion and reflect some material from the Briefing Report that, due to the exigencies of time, got little attention during the Colloquium.
The Sixth ITU Regulatory Colloquium considered the consequences of a diverse set of trends across the range of broadly defined communications fields, known collectively as "convergence". These trends involve the breakdown of familiar distinctions between what have traditionally been considered separate services, markets, or technologies, and which are often regulated by separate institutions, under separate legislation; for example, telecommunications and broadcasting.
The Colloquium reviewed,
and this report discusses, the implications of convergence from the point
of view of the overall theme of all the ITU Regulatory Colloquia: the changing
role of government in the sphere of communications, and the changing role
of regulation in particular. This perspective, as developed in the previous
five Colloquia, focuses on the rapid transformation of telecommunications
markets and regulation, toward market-based, competitive environments and
an increasing globalization of all markets and services.
The complexity and scope of the chosen topic for the Sixth Colloquium first required an attempt to define, and refine, a basic analytical framework for considering the meaning and implications of convergence. A common understanding of the concept, its importance for regulators, and the perspective with which to assess its impact are among the most important threshold issues to address, before it is possible to consider specific regulatory responses. Despite the variety of views on these first-order questions, the Colloquium established a general sense of the scope of the subject, and of the alternative ways to approach it.
There are many ways to describe what is meant by convergence in communications. Convergence can refer to the provision of new services over existing infrastructure, development of new types of infrastructure, and the enhancement of existing services and technologies to provide new capabilities. Convergence can also be defined as technological, market or legal/regulatory capability to integrate across previously separated technologies, markets or politically defined industry structures. Convergence also involves an important international component, as many services and information sources that were traditionally controlled on a domestic level are being provided on a global basis.
More specifically, the discussions throughout the Colloquium brought out several notable elements and characteristics of convergence, which can form the basis for further analysis of the underlying issues. These include:
Conduit vs. content: Although it is often said that convergence means the overlapping of communications conduit systems (transmission, networks) and content (information, programming), this is an over simplification. There is a convergence of different types of conduit technologies, such as wireline-based and wireless or broadcasting based networks, and of the services that have traditionally been provided using these different technologies. This convergence of conduit, however, allows for new services to be provided over existing infrastructure, and new infrastructure to be developed that provides combined services, including both content-based and common carrier services. At the same time, the proliferation of multiple conduits, and improvements in the performance and cost of technologies, leads to a dramatic expansion in the scope, nature, and cost of delivery of communications content. It is this expansion of delivery capabilities that gives rise to new concerns about governments' ability to control content dissemination.
Converging industry segments: The practical effect of technological and market convergence is that traditionally defined industry segments are less and less distinguishable. The telephone industry and the broadcasting or television industries are moving toward entering each other's markets both at the technical and the service level: telephone operators can potentially provide broadcast type services, cable TV operators are beginning to introduce telephone services. Both types of communication take place over wired and wireless media, in both a one-to-one and one-to-many format. In the end, arbitrary definitions of services according to the nature of information transmitted (voice, data, video) are becoming irrelevant: "bits are bits."
One useful construct identifies six different major industries, that have in the past been largely distinct from one another:
In the broadest sense, all of these industries are now converging, both in technology and in the marketplace. That is, elements traditionally thought to be in one industry now are increasingly found as well in other industries; e.g., computing over the telecommunications network, and voice communication using computer hardware and software. The Colloquium concentrated primarily upon the convergence of three of the sectors: Telecommunications Services, Multimedia Distribution, and Multimedia Content. At the same time, the evolution of the Internet, also a central Colloquium topic, actually represents one manifestation of the convergence of all six of these industries.
Paradigm shift: In the most dramatic sense, developments now underway in the broad communications field represent a fundamental "paradigm shift" away from conventional modes of operation, commerce, and interaction. This phenomenon is most fully represented by the immeasurable and wholly unanticipated growth of the Internet as a new communications medium, even a new society. The pace and scope of change that is underway parallels similar paradigm shifts in the past that resulted from the introduction of radio broadcasting, television, and personal computers, among others. Moreover, the effects are being felt globally, affecting virtually every corner of international commerce. We are not yet, however, in a position to understand or predict the ultimate direction or impact of these changes, as the wave is only just beginning to build.
At the same time, there is an equally fundamental evolution occurring in attitudes and assumptions concerning the role of regulation and the definition of the public interest in communications. That evolution is being driven largely by the globalization of trade, and the economic and social benefits being fostered by convergence.
Beyond identifying and defining a series of phenomena loosely classified as convergence, the Colloquium considered the implications of these trends for regulators in particular. Even where there may be different viewpoints on the meaning and scope of the term itself, there is broad consensus that, whatever it is, convergence will have an important and inevitable impact upon the policies, regulatory frameworks, and structures of the telecommunications field and ultimately upon society itself.
Regulation of telecommunications in the broadest sense is determined at three separate levels of policy: (i) national competition/market policy; (ii) international commitments made in the framework of multilateral trade agreements such as under the WTO, and (iii) sector specific (and sometimes company-specific) regulatory implementation actions within a given country. Telecommunications convergence across multiple industry segments, as well as across national boundaries, implies that regulation will be increasingly driven at the first two levels, rather than at the third.
There is considerable evidence that the regulatory status quo is already becoming outdated. For example:
Despite the blurring of industry segments, many regulators continue to license and regulate discrete services for certain carriers, while equivalent functions provided over other types of systems may be less regulated, or not licensed at all. This discrimination is not sustainable, as is evidenced by growing arbitrage of services;
Sources and alternative means of delivering information are becoming increasingly abundant and ubiquitous, while certain operations such as traditional press and broadcasting are still subject to close content regulation, and others (the Internet, satellite broadcasting) either are not or cannot be as easily controlled. Technology, of course, knows no regulatory or legal limits;
Competitive principles are coming to dominate the market worldwide, but there remains regulatory segmentation and even monopoly control of major industry elements on the national level in many countries.
Because the trends that are occurring are largely beyond the direct control of governments, and market forces are increasingly determining industry evolution, it is apparent that the impact of convergence upon regulation will be greater than the impact of regulation upon convergence. The operative question for much of the Colloquium was thus not how to regulate convergence, but how regulation should (and must) change in light of convergence. Some of the fundamental areas in which these changes are occurring include the increased reliance upon, and support for, competitive market forces to shape the evolution of the national telecommunications sector, and structural changes in the organization and functions of regulatory institutions themselves. Both of these trends were central topics of the Colloquium, as discussed below.
There are several specific areas in which government's role remains central, and is even more critical, as a consequence of convergence. These include management of the radio spectrum, to assure equitable allocation of frequencies among competing services, and limit interference; promotion of minimal technical standards if needed to ensure universal compatibility of systems; and (for many countries) promotion of national social objectives for information content. Even some of these governmental functions are being viewed in economic terms (e.g., government spectrum auctions), and government policies are viewed as having a direct impact upon the economic value of the sector.
At the same time, convergence
implies opportunities for regulators, especially in developing countries,
to pursue some of their most basic objectives even more assertively. By
promoting development of integrated (convergent) telephone and television
services, for example, or widespread Internet access, countries with less
developed infrastructures can be in a position to "leap-frog"
development stages, taking advantage of scope economies and recent market
and technological trends to achieve advanced networks sooner, and more
efficiently. Regulators can play a constructive role in encouraging the
development of infrastructure, while seeking to maintain a balance of social
and economic interests, and equitable use of public resources. This can
be accomplished, in part, by a commensurate leap-frog of regulatory stages,
moving beyond sector micro-management to widescale market opening.
It is important in developing a framework for considering communications convergence to recognize that there need not, and perhaps should not, be a common perspective on all of the pertinent issues that will apply to regulators in all countries. Convergence affects different countries in different ways, depending upon the state of development, national objectives, and political and economic realities. It is less important to choose among these different perspectives than to acknowledge the differences, and address with equal sensitivity the concerns that arise in different circumstances.
The Colloquium identified certain different concerns arising from convergence that differed by region and degree of development, for example:
Sub-Saharan Africa. In those countries with the least developed networks (and economies) in the world, telecommunications convergence and regulation are most relevant in terms of their impact upon goals of national infrastructure expansion, economic growth, and promotion of social and cultural values. Policies of market opening and expansion of communications alternatives should be tailored to assure that they contribute to pursuing these primary objectives. In most developing countries, the infrastructure necessary for seamless integration of converging industries is not yet in place, and policies are being designed to attract and support infrastructure investment.
European Union. The countries of the EU, under the guidance of the European Commission, have already moved well down the path of addressing the impact of telecommunications convergence. The broader goals of the EU toward regional integration, expansion of trade, and common policies will largely dictate the response to convergence trends, although individual country governments will still play a key role in determining national priorities. At the same time, the EU countries share some concerns of the developing world toward promoting and preserving national culture through communications.
The Colloquium also noted, however, that regional differences will increasingly tend to be mitigated by the increasing globalization of communications and convergence, which may compel a greater and faster degree of harmonization of industries and practices across all regions of the world. While the speed and direction of global forces may be mitigated by an individual government, this can only occur at an economic cost.
The Colloquium's discussions of the many issues raised by convergence tended to proceed along several different tracks, reflecting the range of priorities, goals, market conditions, and institutional constraints that exist across various countries. These alternative perspectives tended to reflect differences in emphasis, and to some extent in timing, rather than basic disagreements concerning specific policy directions or regulatory practices that should be pursued in the context of convergence. The viewpoints emphasized by Colloquium participants can be categorized in three general groups:
Overriding policy concerning communications sector evolution: This perspective is concerned with establishing comprehensive policy goals to guide the creation and implementation of regulatory decisions under convergence. It chiefly advocates a broad philosophy of promoting market-based industry development, while examining the opportunities and constraints inherent in this approach under different circumstances. The emphasis is on ideal, long-run market structure goals, which can be the foundation of short-run regulatory and policy directions. A market driven industry structure is not inconsistent with universal service, and in fact may accelerate it.
The impact of impending and emerging trends on existing industry structures and relationships: This perspective focuses upon the dramatic shifts in industry conditions that are underway and certain to accelerate, and examines the ways in which regulators should anticipate and prepare for these changes as effectively as possible. It is concerned with specific technological and market developments, such as the introduction of telephone video services, and the rapid emergence of the Internet. The emphasis in this perspective is to consider potential regulatory responses and actions that will address the near-term impacts of these convergence trends, consistent with broader policy objectives and institutional constraints.
Practical political and institutional concerns and responsibilities arising from convergence: This perspective is based on the recognition that regulators are faced with real-world constraints and responsibilities, and must act now to implement policies with the resources available to them. Questions of content regulation, for example, are typically driven by political considerations that are frequently in conflict with economic forces. And the manner in which regulators are able to respond and adjust to changing industry conditions will be constrained by the structure and functions of the regulatory institutions themselves, as well as the practical, day-to-day decisions that industry developments require them to make. These types of constraints may limit or alter, in many cases, the scope and pace of regulatory responses to the challenges of convergence.
Because these different perspectives
tend to underlie, in some sense, almost all of the specific deliberations
of the Colloquium, the following sections of the report are organized to
describe issues as they generally relate to each perspective.
To the extent there is agreement concerning the desired direction of evolution for communications worldwide under convergence, it is that market forces should ultimately determine the pace and scope of development of communications infrastructure or conduit, to the extent possible, and therefore that regulation should seek to promote market-based outcomes. The Colloquium addressed several key aspects of this philosophy, in the context of a variety of general and specific regulatory issues. The main themes of this discussion are summarized below.
First of all, it is important to approach communications policy and regulatory issues with a presumption that market-based solutions will be preferable to responses imposed by government. Put another way, we should establish a goal of minimal regulation: no more regulatory intervention than is essential to achieve legitimate public objectives (and to ensure the market works well) in a largely market-driven environment. For the most part, regulation will tend to diminish market efficiencies, and this is a cost which should be weighed against the legitimate public interest purposes that are being pursued. In an increasing number of cases, specifically because of convergence, it may not even be possible to regulate, in any meaningful sense, a particular activity. The hierarchy of questions to be asked in relation to any given issue is as follows:
1. Should it be regulated (is there a legitimate public interest goal, and would the benefits of regulation outweigh its costs relative to market-based options)?
2. Can it be regulated (can regulation meaningfully achieve the desired goals)?
3. How can regulation
achieve the desired result, in a targeted, minimalist and resource-efficient
way?
Market-based policies imply, fundamentally, that the discipline of competition will achieve more efficiently the same basic objectives that government regulation was established to pursue: growth, responsiveness, innovation, efficiency. The growth of competition, however, requires that regulators actively promote market opening and equitable participation, given the historic presence of monopoly providers. Thus, the goal of market-based, de-regulated development is in fact dependent upon effective activist, pro-competitive regulatory policies, for at least a transition period. There are, however, many potential features of regulation of competition, which need not rely entirely upon direct control over business practices by regulatory agencies. In some cases, issues of competitive equity may be better left to anti-trust law and courts to enforce (where they are capable), and even effective industry self-regulation may be a realistic prospect in some market segments.
The success of competition policy in a particular industry segment may depend upon the state of the overall market structure at the present time. For example, where competitive opening of basic telephony markets is still in the early stages (and thus incumbent telephone operators retain near-monopoly power), permitting the telephone operator to enter new, convergent markets such as cable television or Internet services may result in less competition in those markets, as the dominant operator may be able to leverage its position to take over both markets. Markets must be properly defined so that effective competition within a given segment can be accurately identified: true market convergence implies both supply-side substitutability and convergence of price levels on the demand side. The mere fact that there are alternative means of communication, such as cellular versus basic telephony, is not itself sufficient evidence of effective economic competition in a given segment. There must be indications that investors are willing to invest in alternative supply sources and risk entering the market, and that customers are willing and able to choose among suppliers.
Similarly, in countries where market forces have not been substantially introduced to any segment of the industry, moving directly to open entry in all segments could lead to integrated dominance, rather than integrated competition. Competition policy should thus be seen as evolutionary, building upon existing conditions as the market structure changes. The role of the regulator should be to promote competitive development by actively encouraging and supporting the creation of new, competing carriers offering a wide scope of services, and restraining the tendency of monopolies to inhibit this development.
The objective and presumption of open competition and market-based development must be tempered, in many respects, by a variety of potential barriers to competitive development, which present practical challenges to regulators. One ironic feature of telecommunications convergence is that, without a clear policy towards a market driven industry structure, and an open, transparent, efficient and adequately funded regulatory body, it may re-introduce anti-competitive elements to the industry, just as pro-competitive initiatives have begun to spread widely. Among the possible new barriers to competition arising from convergence are:
Potential leveraging of dominance in one market to achieve dominance in multiple markets. This could occur, for example, if dominant telephone operators were to obtain unrestricted entry and control opportunities in new service areas such as television/video programming, and related markets traditionally controlled by broadcasters. The potential for dominance is especially serious where telephone carriers are allowed to own or control directly both conduit infrastructure and content sources (such as TV programming) at the same time, an option which the Colloquium generally agreed is undesirable in most countries, especially in the early stages of competitive development.
New technologies have led to new forms of bundling of service elements, sometimes with regulatory encouragement: e.g., pay TV and cellular telephony conditional access, which offer services bundled with proprietary terminal equipment, giving operators competitive advantages. Such bundling may be necessary to create incentives for innovation, but it may be in conflict with competition policies.
The existence of bottleneck facilities such as support structures (e.g., poles and underground ducts) which are prohibitively expensive for competitors to replicate, and owned by incumbent operators that must share these facilities with their competition. Public lands and rights-of-way that may be controlled by local governments can also present a similar form of barrier. Regulatory authority may be required to assure equitable access to these types of essential facilities.
The need to create market incentives for private investment to extend service to high cost, low income groups unlikely to be served adequately on a purely business basis. Convergence may present an opportunity to foster such incentives, by encouraging investment in integrated services. Creative regulatory responses can support this.
These examples underscore the fact that market-based goals and practices do not imply the elimination of regulation, but rather a transformation of the regulatory role to one that supports and encourages market solutions, and intervenes only where those solutions cannot adequately prevail. The combined goals of promoting the market and encouraging convergence suggest that such regulatory responsibilities may be substantial for some time to come, notwithstanding the minimalist regulatory principle. Where such intervention occurs, however, it is always important to recognize that regulation itself involves costs, and potential losses of efficiency, and these should be weighed against goals and benefits when determining appropriate responses.
A preponderance of the Colloquium's focus was upon large-scale impending developments that are fundamentally changing the character of the communications industry, and the impact that those trends will have upon regulatory practices and institutions in the near future. These are combined technological and market developments which are producing the paradigm shift in the definition and role of communications. The Colloquium considered the magnitude and significance of these trends in three major areas, and addressed the appropriate responses that governments should consider, from promoting to restricting to leaving alone altogether the disparate forces of dramatic change.
The broadest, and potentially most lucrative, integration of market segments involves the convergence, and expansion, of previously separate common carrier (i.e., telephone) services and content-based broadcasting (primarily television) market segments. The technical directions of this convergence are many, including prospects for telephone companies offering consumer video services, the development of various multichannel delivery alternatives (cable TV, direct broadcast satellite, multichannel microwave or "wireless cable" systems), and the advent of competitive telephone services provided by cable TV and other new operators. The Colloquium addressed several key regulatory issues arising from the various market developments, and also offered options for responding to the different concerns.
The following issues should be considered in connection with the impact of converging telephone and television services upon regulatory priorities and objectives:
What is the regulator's role, if any, in determining entry restrictions or requirements for telephone companies in the TV market?
Should independent cable television operators be allowed to develop with minimal or no licensing and regulatory requirements?
Is cable TV primarily an industry of concern to developed countries, or does it have important potential as a new market segment in developing countries as well?
Should cable operators be allowed or encouraged to provide integrated, competitive telephone services?
To what extent do combined telephone and video services risk conferring new market power on dominant operators, as opposed to enhancing new entry and market competition?
What regulatory or other safeguards (if any) should be adopted to ensure that the potential economies of scope arising from convergence (and specifically the use of the same local facilities and rights of way by multiple services) are fully exploited while competition is not yet fully established?
Should telephone operators be restricted from owning or controlling programming? How and to what extent?
What forms of obligations or requirements should be considered to promote competitive access to telephone video services and network capacity?
To the extent that operational considerations or economies of scope result in continued bottleneck conditions, should this be counter-balanced by restrictions on vertical integration, or by requiring network operators to provide access to non-affiliated content providers on equitable terms? Which is preferable?
What degree of reciprocal access requirements, if any, should be placed upon cable TV system operators to promote video service competition?
The Colloquium did not attempt to determine definitive answers to these questions, but rather identified the range of possible regulatory responses. In keeping with the philosophy of minimalist regulation focusing on promoting legitimate public interest objectives, the Colloquium generally reaffirmed the goal of avoiding excessive restriction on market entry or development, while seeking to assure equitable (non-discriminatory) treatment of all industry sectors and participants. Among the specific regulatory actions and policies that should be considered are the following:
Prohibit, or severely restrict, dominant telephone companies from directly owning or controlling sources of programming content, to avoid re-monopolization of the larger, integrated voice and video communication industry, at least until such time as multiple sources of vertically integrated information suppliers are active.
Regulate telephone operators as broadcasters when they seek to offer video services, subject to the same licensing and content requirements, separate from the regulation applied to their telephone services.
Telephone company entry into television services could await the development of sufficiently competitive actual conditions in the telephone service market structure, to avoid imbalanced dominance in both markets.
Regulators in developing countries may have an opportunity to promote integrated telephone/television infrastructure as a simultaneous development, through liberal licensing practices.
Separate the regulation of signal-transport (common carrier) activities from regulation of content, ensuring that all signal-transport operations (whether called telephone companies, cable TV companies, cellular operators, or something else) are treated similarly and equitably.
A minimal level of common regulatory principles should be established to ensure unrestricted access to network capacity, and to prevent anti-competitive behavior. Additional requirements may be included depending upon each country's specific concerns, such as socially-based content regulation.
Leased access or common carrier principles can be required for a portion of cable TV system capacity, to permit independent program providers to transmit content without having to construct conduit facilities. Cable TV services themselves may not require direct regulation, especially in the presence of competition from broadcasting, other multichannel services, and potentially telephone based video services.
The Colloquium considered at length the many dynamic and important structural changes and market impacts potentially deriving from the dramatic development of the Internet as a new medium of global communication. Convergence of virtually all aspects of the industry can take place in some form through Internet-based technology and functions (e.g., e-mail, file transfer, information broadcasting, voice and video services).
The Colloquium discussed several important issues arising from the Internet's emerging and changing role in communications worldwide. There was broad agreement that the convergence of markets and technologies that represents the Internet is bringing positive benefits in many forms, and that the minimalist regulatory principle should be followed wherever possible, but that there may be significant concerns resulting from these developments that should be examined in a regulatory context.
How can public policy in a diverse range of countries reconcile the advantages of global connectivity to highly diverse information and communications resources via the Internet, with policy concerns about socially objectionable information content?
In what ways can regulators encourage the development of technology-based self-regulation facilities that can be employed by Internet users and providers?
How will the deployment of (mainly software-based) technology for the implementation of telephone service via the Internet affect national telecommunications policy?
Will Internet telephony accelerate the transition to competition, especially in international telecommunications? How will it contribute to the reform of the system of international accounting rates?
How should regulatory rules for telephony be applied, if at all: for example, should Internet service providers (ISPs) be allowed to interconnect Internet telephone traffic to the public switched telephone network?
How should ISPs be regulated, if at all? For example, should they be treated as Value Added Network Service (VANS) providers, and hence usually subject to fairly liberal, if any, regulation?
To what extent will the provision of broadcast-like content via the Internet fall within the scope of existing broadcast law and regulation? Is it in fact practical to try to apply such existing rules? If not, what rules, if any, should apply to entry, market behavior, and content provision?
Among the range of specific regulatory responses to the challenges presented by the Internet are the following:
Benign neglect: Continue to view the Internet and the activities of ISPs as part of the (minimally regulated) VANS environment, notwithstanding the emergence of Internet telephony and (prospectively) of large-scale broadcast-like activities via the Internet.
Telephone company diversification: Permit and encourage established telecommunications operators to become ISPs. An important sub-option is to accompany such a policy with safeguards (either through general competition policy or sector-specific regulation) against cross-subsidization of the dominant operator's ISP business from other revenue streams, in order to ensure that independent ISPs are not unfairly disadvantaged.
Actively promote Internet telephony: Such a policy would seek to maximize the opportunities for Internet-based services to increase the overall degree of competition in the telecommunications marketplace. It might, for example, include rights for independent ISPs to interconnect Internet telephony services to the public network.
Limit or control Internet access and applications: Such a policy might be adopted to attempt to control the pace of the transition to full competition, or in response to concerns about information content. The feasibility of such a policy in the face of rapidly changing technology is doubtful, however. It may be preferable to seek a very limited but potentially effective set of controls (for example, requiring non-discriminatory treatment of ISPs' customers, or requiring ISPs to seek to filter and prohibit objectionable content).
The Colloquium also considered certain important developments involving the prospective impact of a global trade agreement on telecommunications reached through current negotiations in the World Trade Organizations Group on Basic Telecommunications (GBT). It is becoming increasingly apparent that telecommunications should be seen as a good or service that can be traded, and can also directly affect all other forms of international economic activity. As discussed above, the Internet in particular is fostering a new wave of global commerce without borders, potentially forcing changes in national and bilateral policies, including telecommunications settlements, that are becoming beyond the control of governments anywhere. See the Report of the Fifth Regulatory Colloquium ("Trade Agreements on Telecommunications: Regulatory Implications") for detailed information on these issues.
The most immediate and practical
perspective confronting regulators in virtually all countries, notwithstanding
general philosophies and emerging industry trends, is the need to act within
the obligations and limitations driven by the political and institutional
constraints of their government. These constraints manifest themselves
most prominently in two main areas in the context of telecommunications
convergence issues. Content regulation objectives are dictated by political
and social imperatives largely beyond the sphere of market-oriented influences.
And the adaptation of institutional structures to changing industry trends
is constrained, at least in the short term, by existing arrangements and
established relationships.
It was apparent to the Colloquium that one of the most challenging developments arising from convergence in communications is the dramatic changes in the nature, sources, and scope of the delivery of communication content, especially the content of public, widely available information and entertainment, and the impact upon governments' ability to influence or control such content.
For most countries, regulation of broadcasting in particular, as well as other forms of media, is an important component of public policy, for a variety of reasons, ranging from political control to protecting the public from allegedly undesirable and harmful types of communication, to actively promoting socially and culturally beneficial content. This priority has derived from the historic scarcity of the radio spectrum, and the notion that the airwaves are a public resource, as well as the fact that by nature radio and television broadcasts can be received by virtually anyone within transmission range. With the advent of new and converging technologies, there are many new means by which information can be transmitted and received, which do not necessarily involve scarce radio spectrum, but which may be equally ubiquitous. The Colloquium noted that most governments will seek to find ways to extend their historic interest in regulating the content of broadcast transmissions to some of these other technologies, and raised a variety of questions as to how this might be achieved.
The first area in which governments have exercised regulatory control over communication content is to place various restrictions and prohibitions on certain types of information or entertainment. These can include, for example, limitations on material that may be considered obscene, pornographic, or otherwise offensive; restrictions on dangerous or threatening communication and information; controls on political communication, including propaganda and seditious content, as well as libel; and, in some cultures, censorship of content for religious and moral purposes. In addition, there are often a variety of types of legal restrictions associated with commercial content, including prohibitions on false advertising, illegal use of copyright, protection of consumer privacy, and similar laws.
The Colloquium identified the following main issues and concerns relating to the issue of being able to regulate converging communication to restrict certain types of content:
Direct broadcast satellites and the Internet represent new technologies that carry information across national boundaries, which cannot easily be monitored or restricted. There is considerable potential for types of content to be introduced into countries that have traditionally maintained restrictions on what content can be so introduced.
Internet service providers, in particular, may not realistically be able to place technical restrictions on the type of information that their subscribers send and receive, regardless of laws that may require them to do so.
With the proliferation of digital data transmission and storage, protection of copyright ownership and consumer privacy are becoming extremely difficult to police, with potentially adverse economic and social consequences.
The market for expanded communication systems and services may be driven to a large extent by demand for, and supply of, previously unavailable content, especially international sources that might have been restricted, as well as otherwise objectionable material. The economics of convergence, and infrastructure investment, inevitably depend to a large extent upon free flow of information.
In response to these concerns, the Colloquium recognized that the options available to governments may be limited, and that the types of rules applied in the past, for example state ownership, licensing, or censorship of broadcasting, may not be workable for many new media. However, there may be means available to retain some control over objectionable communication content. Some of the ideas that have been raised include the following:
Both traditional broadcasting and telephone or cable-based video and information services may be subject to content regulation at the source, that is the program producer or owner, as well as potentially at the carrier level as well. Whoever has both knowledge of and ability to choose among communication content can potentially be held responsible for that content. There is, however, a cost to imposing restrictions on the content market, which can include economic inefficiencies and reduced investment incentives.
There may be options for indirectly regulating direct broadcast satellite services, by imposing requirements and liability upon local distributors and subscription services, as well as through international agreements. Satellite transmissions still originate from identifiable sources, and typically involve specific financial transactions between content providers and consumers.
Regulation of Internet content by governments may be less realistic (as well as less desirable), because the providers of information are globally diverse and often anonymous and impossible to trace, and the financial relationship between ISPs and subscribers seldom relates to any specific content. Nevertheless, there are emerging software-based mechanisms that permit a considerable degree of monitoring and filtering of Internet-based content, both by ISPs and by end-users themselves (individuals and networks). Self-regulation of the Internet by these means can be encouraged, and possibly required to some extent, by governments through new standards and technical tools, especially through international cooperation.
The second category of content regulation concerns involves not restricting, but promoting certain types of information by means of traditional and new communication media. There are several potentially important public interests that governments frequently seek to support through various direct or indirect means. These can include educational and civic programming and information; promotion and preservation of ethnic and cultural heritage and diversity; and support for local and regional based communication within a society. These types of goals may not always be as commercially attractive as other forms of programming and information, and so may not readily be sustained by market-based services alone. Where governments have tended to create requirements for traditional broadcasters to ensure sufficient diversity of content, the newer technologies may not lend themselves to comparable intervention, and more creative responses may be called for.
The following key issues can be identified in connection with the goals of promoting specific types of communications content under convergence:
Where purely market-based information and entertainment services are introduced, content is likely to concentrate primarily in areas that appeal to the widest audience, as these would tend to generate the greatest revenues from either advertising or subscriptions. Present experience has shown that mass market films and television programs, primarily originating with U.S.-based production studios, are the most popular among mass audiences, and also least costly to transmit, as compared with domestically-produced original programming. This makes it difficult to generate income or investment interest for more localized, or culturally specialized programming, especially with higher production quality.
At the same time, in countries where multichannel technologies such as cable TV have become well established, there has been a proliferation of specialized and local programming, and the Internet has also exhibited a vast diversity of information sources, indicating that expansion of system capacity and transmission media will tend to help support content diversity.
The traditional practices of issuing licenses to broadcasters partly based upon requirements of diversity or public service programming, as well as publicly owned and operated broadcasting stations, do not adapt as well to new technologies (such as telephone TV, satellite broadcasting, cable TV) where information-based services may be integrated with other forms of communication. Mandatory content requirements or specialized licenses may not be possible in some cases, although access requirements could help pursue the same goals.
The following range of options are available for regulators to respond to these issues through various direct and indirect means:
Foremost, a commitment to opening communications markets and fostering competition across converging industry segments should be seen as a key strategic method to promote diversity of content. Despite the fact that mass market demand will favor certain standard types of content, the expansion of communications options for both suppliers and users will also help assure that more specialized and narrow interest content will have increased opportunities to be shared among interested parties.
The process of opening up markets to competition can also provide opportunities to promote and support public interest programming or by new carriers. To the extent competitive entry by telephone companies, cable TV operators, and others into new markets may involve licensing or franchising requirements, these can bring with them certain basic incentives or obligations to directly support content diversity or public interest programming in one form or another (e.g., educational television, government institutional networks, funding for non-profit productions).
In addition to specific requirements or incentives to directly support public interest content, regulators can establish requirements for new and expanding communication carriers to allow non-affiliated programmers or information providers to obtain access to network transmission capacity (e.g., video channels) on an equitable basis. This can both enhance market competition for multiple content sources, as well as permit additional opportunities for publicly sponsored communication, such as free public access or government access channels.
To a considerable degree,
government goals for public interest communication and diversity of information
will continue to depend, as they always have, on non-commercial sources
of financial support. This support may come in the form of direct national
funding of programming, retention of some public broadcasting and equivalent
media, and potentially even financing from international institutions in
conjunction with other types of economic and cultural development projects.
The final category of exploration for the Colloquium concerning the impact of convergence upon regulation had to do with the structure and processes of regulation itself, and how these fundamental institutional factors might, or should, evolve to respond to the changing structures and relationships within the industries traditionally subject to government regulation. This discussion established several general considerations and recommendations in these areas, with a high degree of consensus among the Colloquium members relative to the most appropriate directions for regulatory responses to convergence. Among the highlights of these views were the following:
Broadcasting vs. telephone regulation: The institutions traditionally responsible for regulating broadcasting and telephone (telecommunications) in most countries have been separate from one another. With the convergence of these two communications media, it is increasingly arbitrary to designate individual operators and even services as falling into one category or another. Nevertheless, the historical distinctions between the two types of services, and hence between the two regulatory bodies for most countries, are rather resilient for political reasons if nothing else. Hence, it may not be practical to seek the immediate integration of the separate regulatory institutions. At a minimum, however, convergence calls for cooperation between distinct regulators, and sharing of information and resources, in pursuit of common policy goals.
Conduit vs. content regulation: As regulatory institutions evolve, the trends of convergence may be best met by distinguishing not between traditional types of media, such as broadcasting (wireless) and wire-based services, but between conduit in general and content. The Colloquium recognized that it is preferable that institutions for regulating communications content should be separate from those dealing with signal transmission (conduit), whether content is regulated by courts or other mechanisms. Eventual integrated conduit regulation is desirable in the long run, to the extent possible.
Global vs. national regulation: Institutions and policies relating to telecommunications that are determined at the global level (e.g., international trade agreements, spectrum allocation, standards, regional and bilateral treaties) are coming to supersede national policies and regulatory practices, just as global technological and market trends are beyond the control of national regulators. International tendencies toward open markets and global competition for converging telecommunications services are compelling national authorities to move in the same direction, in order to encourage domestic investment and growth in all areas of the communications field.
Independence and strength of the regulator: It is especially important, in view of the scope of convergence, for the national regulatory authorities to be strong and independent enough to implement policies effectively. Independence implies the authority to make decisions according to the best long-term interests of the society, reasonably free from day to day pressures from commercial or political interests, while still being responsive and contributing to formulating government policy. Strength means sufficient resources, both human and financial, as well as meaningful legal authority to enforce regulatory decisions. Regulators must also be able to know when not to regulate, and be subject themselves to independent review of their role and actions.
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The Colloquium Chairman wishes
to thank the World Bank and its infoDEV program, and the Friedrich Ebert
Foundation for the joint funding which made the Sixth Colloquium possible.
In particular, great appreciation is due to James Bond, Carlos Braga and
Bjorn Wellenius of the Bank, and Erich Vogt, of the Foundation for their
personal efforts in organizing the event, to Secretary General Pekka Tarjanne,
the other ITU elected officials, and most of all to the Colloquium participants
themselves for their generous commitment of time and effort.
Attachment 1
(to Chairman's Report)
SIXTH REGULATORY COLLOQUIUM
11-13 December 1996, Geneva
LIST OF PARTICIPANTS
Mr. Sukarno ABDULRACHMAN
Asia Cellular Satellite
Indonesia
Mr. Richard BEAIRD
Senior U.S. Coordinator
Bureau of International Communications
and Information Policy
Department of State
U.S.A
Mr. Abderrazak BERRADA
Counsellor
Morocco
Dr. Colin R. BLACKMAN
The Camford Group
United Kingdom
Mr. James BOND
Chief of Telecommunications
and Informatics Division
Industry and Energy Department
The World Bank
Mr. Bernard CLEMENTS
European Commission
Mr. Raoul Antonio del FIOL
Director
Promon Electrónica Ltda
Brazil
Ambassador Gerald B. HELMAN
Vice President
Mobile Communications Holdings, Inc.
U.S.A.
Mr. Kalev KUKK
Ministry of Transport and Communications
Estonia
Mr. Bruno LANVIN
Head, SME Trade Competitiveness
UNCTAD
Mr. David LEIVE
Chairman
Latham & Watkins
U.S.A
Mr. Kenneth LINDHORST
Vice President,
International Public Affairs
AT & T
U.S.A
Mr. Philip OKUNDI
Managing Director
Kenya Broadcasting Corporation
Kenya
Mr. E.N. OLEKAMBAINEI
Director General
Tanzania Communications Commission
Tanzania
Mr. Roderick SANATAN
Secretary General
Caribbean Telecommunications Union
Trinidad & Tobago
Ms. Lyndall F. SHOPE-MAFOLE
Councillor
Independent Broadcasting
Authority (IBA)
South Africa
Mr. Alexander SZWARC
Vice President
Polish Chamber of Information
Technology and Telecommunications
Poland
Mr. Valery V. TIMOFEEV
Deputy Chairman
State Commission on Frequency Management
Russian Federation
Mr. David TOWNSEND
Telecommunications Consultant
David Townsend & Associates
U.S.A
Mr. Michael TYLER
Chairman
Spectrum Strategy Consultants
United Kingdom
Dr. Herbert UNGERER
Head of Division
DG IV
European Commission
Mr. Honoré VIGNON
Special Adviser
Posts and Telecommunications
Benin
Dr. Erich VOGT
Media and Communication Department
Friedrich-Ebert-Stiftung
Mr. Bjorn WELLENIUS
Telecommunications Adviser
The World Bank
ITU PARTICIPANTS
Dr. Pekka TARJANNE
Secretary-General
Dr. Henry CHASIA
Deputy Secretary-General
Mr. Theodor IRMER
Director
Telecommunication Standardization Bureau (TSB)
Mr. Robert JONES
Director
Radiocommunication Bureau (BR)
Mr. Ahmed LAOUYANE
Director
Telecommunication Development
Bureau (BDT)
Mr. Don MACLEAN
Head
Strategic Planning and
Operational Analysis Unit (SPU)
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Attachment 2
SIXTH REGULATORY COLLOQUIUM
DISCUSSION OUTLINE (December 2, 1996)
1. As technology breaks down traditional markets and market segments, what forms of convergence in telecommunications will require governmental attention?
2. In addressing convergence issues, what goals should governments aim for?
Does the convergence inevitably lead to reliance on competition across all market segments? (Should it?)
3. What ways are open for governments and regulators to achieve these goals?
Does government have a role to "balance" the interests of different players?
What role should (can) regulation play in the process of convergence?
Should government act to affirmatively encourage convergence? If so, how?
4. Is convergence only an issue for developing countries?
What are the regulatory options for addressing the issue of telephone company control of television content? For example, what are the pros and cons of regulatory restrictions on cross ownership between traditional conduit and content segments?
What are the regulatory options for addressing access issues?
What are the various ways in which regulators could encourage the independent development of the cable TV industry if a country chose to do so?
What are the options, and the trade-offs, for different degrees of regulatory intervention concerning cable TV entry, operation, content, control and access?
What are the regulatory options that are available concerning the provision of Internet access and services?
What content-related regulatory issues should be addressed, and how?
What content regulation concerns arise from expanding TV alternatives? What are the various regulatory options for addressing those concerns?
Given all these issues, how does a government and its regulators
organize to address them? By merging the separate regulatory regimes for
conduit and content, or by keeping them separate, in whole or in part?
David N. Townsend
The term "convergence" has recently gained prominence within
the global telecommunications field as a shorthand label to characterize
the many changing trends in technology, market conditions, and government
policies affecting this vast and broadly defined industry. Among other
things, the concept of convergence implies an increasing overlap between
the two primary components of the communication process, which have traditionally
been segregated within the industry: common carrier "conduit"
systems and networks that transmit signals anonymously, and "content"-based
information sources and technologies. These two segments have historically
been represented by telephony on the one hand, and broadcasting on the
other, two dominant technological and organizational models that have also
been subject to largely separate regulatory regimes.
The focus of this report is how the converging forces that are blurring
the distinctions between communications conduit-based segments and content-based
segments are at the same time creating new challenges, and opportunities,
for telecommunications regulators to influence the evolution of the industry
as a whole, for the benefit of their societies. A fundamental premise of
this study is that the scope of issues addressed herein is of importance
to regulators in all countries - from established bodies such as the FCC,
the CRTC, and Oftel, dealing with immediate pressures from their expanding
casts of multinational, multi-faceted carriers to cross into new lines
of business, to newly created commissions and offices charged with managing
the transformation of state-owned monopoly telephone operators, while watching
the approaching waves of new multimedia markets on the horizon. Although
each country's concerns and conditions will be unique in many ways, this
report addresses the numerous overriding issues that will inevitably confront
any national telecommunications policy forum in this age of interconnected
global networks.
Technological convergence is the primary source of changes in the
telecommunications industry, as numerous trends that have been underway
for a long time have begun to gain momentum. Whereas television (video)
signals have historically been transmitted through broadcasting systems
over airwaves, advances in fiber optics, cable television, and data compression
have made it possible for wireline-based carriers to deliver broadband
video (content) services over their networks. At the same time, radio-based
technologies such as cellular and fixed wireless are becoming entrenched
as important options for basic telephony. The evolution of cable TV technology
has in many countries created the prospect for cable operators to provide
competing basic telephone services as well as video services. Cable TV
and also satellite and microwave-based television systems present the prospect
of widespread competition for traditional broadcast television operators.
Finally and perhaps most dramatically, the Internet has emerged as a profound
new medium for global communication of messages, data, images, and potentially
voice and video.
Market convergence is coming about largely as a consequence of technological
convergence, as well as parallel trends in both supply and demand patterns.
Consumer demand for new telecommunications capabilities is growing and
evolving worldwide. In addition to basic telephony growth, there has been
steady expansion of demand for cellular telephony, for cable television
and equivalent video services, and for Internet access. The business opportunities
created by these trends have led to a relentless pattern of merging, expansion,
and diversification by national and international telecommunications carriers,
especially those based in industrialized countries, which have been pursuing
partnerships not only to enter basic telephone markets, but to establish
themselves in the emerging market for wireless, video, and data communication
services.
Regulation of telecommunications has traditionally, in most countries, involved relatively independent treatment of, and goals for, the telephone and broadcasting sectors, even where both components have been state-owned and controlled. Telephone regulation has focused upon expanding access to voice and data services, controlling prices for consumers and businesses, and, more recently, introducing market forces and competition to the industry. Broadcast regulation has concentrated upon spectrum assignment and related technical issues, and upon varying degrees of content control, from limitations on certain types of programs to complete government ownership and production. Different degrees of regulation have also applied to cable TV services, and to other types of Information-based services. Under the converging technical and market trends that are occurring, these traditional roles will inevitably have to change, as the functions of the systems that have been regulated expand and evolve to leave behind the distinctions that regulators have placed upon them.
At the outset, telecommunications regulation should be based upon a consistently defined set of objectives, which typically include:
- infrastructure development,
- efficiency improvements,
- quality and functionality improvements,
- diversity and competition in the telecommunications sector, and
- promoting social and cultural values.
To pursue these objectives, regulators can consider options in four general areas:
1) entry regulation options, to determine which types of operators may participate in which service markets;
2) service and pricing regulation options for carriers providing various services;
3) content regulation options; and
4) the fundamental form and structure of the regulatory system itself.
The following sections describe the principal issues raised by, and
regulatory options for, the most prominent convergence trends in telecommunications.
These sections do not promote particular answers to these questions, but
attempt to frame the range of concerns and available options, including
advantages and disadvantages, that regulators will face in each area.
Regulatory issues raised by the potential provision of content-based video services by monopoly or dominant telephone companies. The technological capability for this form of convergence is virtually at hand, and regulators must soon decide a range of important questions as to how this development will affect the traditional separation of telephony and broadcasting/cable TV services. The key issues that regulators must address in this area include:
1) Infrastructure, technology development
To what extent should telephone operators be encouraged to expand the telephone infrastructure to allow transmission of video grade services?
2) Ownership, control of content (vertical integration)
Should telephone network operators offering video services be permitted to obtain ownership interest and control over programming content?
3) Access for non-affiliated programmers
What regulations should apply to independent programmers seeking to utilize telephone-based video systems to transmit their programs?
4) Supporting competitive television markets
What regulatory steps can be taken to assure fair competition for video services between telephone operators and other providers?
5) Regulation of integrated services, pricing, marketing
How should the video services offered by telephone operators be regulated,
and what should be their relationship with traditional telephone services?
Regulatory issues related to the development of cable television systems, and the potential for cable-based telephone services. As the cable TV industry rapidly grows around the world, regulators in many countries must confront new questions about how this technology fits in their infrastructure and service competition goals. Among the main issues to be addressed are the following:
1) Infrastructure priorities
Where resources are scarce to support telecommunications infrastructure development, how much attention should be paid to cable TV development, as opposed to traditional telephony?
2) Cable-telephony development
To what extent should regulators promote the development of competitive telephone services by independent cable TV operators?
3) Cable-telephone competition issues
What steps can regulators take, where cable telephony is offered, to assure fair competition?
4) Regulation of cable TV, telephony services
How should cable TV and telephony services be regulated, including
pricing, service integration, and content concerns?
Regulatory issues raised by the provision of Internet and on-line access and information services by telephone and cable carriers, and by the emergence of Internet-based telecommunications alternatives. The explosive growth of the Internet has created a broad range of new opportunities and questions for telecommunications providers and regulators. Other types of on-line services as well as content-based Information services also raise important regulatory issues. These include the following:
1) Regulation of Internet Access services
What type of regulatory treatment should apply to the types of data transmission services provided by telecommunications carriers that allow Internet Service Providers and end users to obtain access to the Internet?
2) Integrated Internet Services and Access
Should telephone carriers that provide data lines for Internet Access also be allowed to be Internet Service Providers? What restrictions should apply?
3) Regulation of Information services
What regulatory treatment should apply to Information services, including restrictions on entry (e.g., by dominant telephone companies) and on content?
4) Internet Phone and related issues
What are the new regulatory concerns raised by technologies that can allow real-time voice telephone communication over Internet connections, and how should they be addressed?
Regulatory issues associated with the impact of convergence upon broadcasting and other radio-based technologies and services. Developments in this category cut across several types of issues, with the common thread that all radio-based systems depend upon regulatory decisions concerning allocation of the electromagnetic spectrum. Regulatory choices and priorities for different types of services will ultimately be reflected in frequency allocation decisions, as well as other forms of regulation. The main areas of interest include the following:
1) Broadcasting regulation
How should broadcasting regulation change in the environment of convergence between television and telephone infrastructure and services?
2) Cellular/mobile and wireless telephony
To what extent should traditional and newer mobile services be provided by telephone, cable, or other integrated carriers? What regulatory treatment should apply to wireless data and information services?
3) Satellite and microwave-based video services
What types of regulations or restrictions should apply to satellite
and microwave-based video services?
Regulatory issues tied to objectives of utilizing advanced telecommunications technology for public service purposes. Governments have their own inherent telecommunications needs, and can benefit from the process of convergence and market expansion by integrating public service obligations with market opening policies.
1) Government services, infrastructure
How can regulators support government and public service communication objectives through requirements and incentives tied to the process of opening and regulating markets due to converging trends?
PART III - INTEGRATED POLICIES AND STRATEGIES
Finally, regulators should ultimately approach issues of convergence
strategically, seeking to integrate regulatory decisions across the many
different industry segments and issues discussed above, to create to the
extent possible, a unified and coherent national telecommunications policy.
An important priority for the regulator, or other national policy
makers, is to view separate regulatory decisions in the context of an overall
model for telecommunications sector evolution. Such a model should generally
provide a framework for defining an objective approach to promoting a market-based
industry structure and a path for evolving toward that end. Specific regulatory
elements of the model might include entry restrictions between conduit
system ownership and content control, and the processes and criteria for
opening markets to competition in each area.
It is also important to establish, on a national level, an overall sector policy and regulatory structure, including the roles, relationships, and responsibilities among branches of government, and agencies and departments of regulation. Regulators need to navigate through a complex and interconnected matrix of real-world issues tied to communications convergence, and decisions ideally should be made according to a reasoned hierarchy of choices affecting different market segments, carriers, and services. The "primary decision stages" in this hierarchy, each of which involves multiple levels of secondary decisions, are as follows:
1) Establish/modify policy and regulatory organizational structure;
2) Define national objectives for telecommunications development;
3) Define model/vision for telecommunications sector development;
4) Define market entry policy, procedures;
5) Develop service pricing regulation policy, procedures; and
6) Develop content regulation standards, rules.
It is important to note, however, that not all levels of the hierarchy
will necessarily involve direct action by the regulator. For example, pricing
regulation may not be required at all in many segments, if sector development
and market entry policies are successfully implemented. The regulator's
ultimate role is not to impose a result upon the industry, but to permit
and encourage the broadest and most efficient development of the market.
Regulators should also recognize that they make their decisions based upon current, and often even outdated conditions and data, and that most prescriptions for industry evolution are inherently guesswork, and they should be prepared to make regular midcourse corrections when the unexpected occurs. The emphasis of regulatory organization and processes, therefore, should be upon flexibility in implementation of policies, and monitoring of industry conditions on an ongoing basis. As opposed to crisis management or reactive regulation, review and revision of basic decisions, from entry restrictions to pricing regulations to competition policy, should be a recurring, institutionalized function of the telecommunications regulatory authority.
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