Harmonizing idealism with solvency

The basic challenge of the modern telecommunication regulator

Luíz Francisco Perrone
Member of the Board of Directors
Agencia Nacional de Telecomunicações (ANATEL)
Brazil

The role of telecommunications in modern society

The telecommunication sector witnessed an unprecedented growth rate during the last decade. In some countries such as Brazil, network expansion in the last three years alone (1999, 2000 and 2001) has surpassed the plant that had been in place until 1998. In other words, in literally three years, the Brazilian society was offered far more services than all services ever provided since the start of telecommunications more than a century ago.

This growth, if considered at its face value, is formidable. But much more than the quantity of services available is their improved quality and their distribution among the less favoured members of society.

Telecommunications is no longer a second-class actor in the global development of a country. It is an indispensable tool for economic growth and better distribution of wealth. This democratization of wealth is a factor that has become more evident as information has become more and more valuable and as the telecommunication network itself has come to transport information. Unlike material goods, information can be shared, distributed, stored, processed and reused without losing its original value. These characteristics highlight the importance of telecommunications as the tool that can transport and distribute information at low cost. Furthermore, telecommunications is, naturally, a non-polluting, employment-generating industry.

From all of these factors, the level of priority that many countries attach to this “politically correct” sector today should not be surprising.

Regulatory agencies and the role of the regulator

In this environment of explosive growth, responsible governments cannot disregard telecommunication penetration (teledensity). Rather, they should ensure that the offer of telecommunication services is widespread and available to all classes of the population, irrespective of their purchasing power, economic activity or geographic location. This preoccupation is generally known as universal access to telecommunications.

At the same time, services built on the latest technology must be of high quality and must be offered at a fair cost to users. In order to achieve such conditions, there must be stimulation to provide services under a competitive environment.

Universal access and competition should be the pillars upon which each country should build its telecommunication model, stimulating infrastructure development and the use of new technologies. This model is normally developed by the regulatory agency taking into account the particular characteristics of a country; and should be subject to congressional review.

Regulatory agencies are entities created with the basic responsibilities of stimulating investments in telecommunications, protecting the interests and rights of consumers and promoting fair competition among service providers. Harmonizing idealism with solvency is a very difficult task.

What conditions are necessary for a regulatory agency to be able to discharge its responsibilities? The first condition is the political will of the highest authorities of the country. This political and unequivocal determination, coupled with the characteristics listed below, constitute the basic foundations of a successful regulatory agency.

• Independence and authority: Regulatory agencies should be seen as State entities, and need to keep administrative continuity during governmental changes. They should also have the power to implement their decisions, which, in principle, could only be challenged in Court.

• Transparency and public information: Decisions and actions of regulatory agencies should be published after a transparent decision-making process. The intention of all decisions and actions should be made clear.

• Predictability: There should be no surprises regarding actions and decisions. The model for telecommunication exploitation should be clear, and decisions should always conform to that model. The regulatory agency’s working plan and schedule of main decisions should be made public.

• Budgetary autonomy: Agencies should operate with their own budget, which should be adequate to cover their needs.

• Capable and stable staff: Employees of the agency should be selected from among capable individuals and should work under stable conditions. The most senior officers should have a fixed-term appointment and should not be removed from office for political reasons.

Regulators should be fully aware of their responsibilities and functions vis-à-vis the society. They should, for example:

• Create and develop rules and procedures in conformity with the telecommunication model adopted in their countries.

• Authorize and license the provision of services in accordance with those rules and procedures.

• Protect the interests and rights of consumers, preventing poor service quality and the abuse of economic power of telecommunication operators.

• Inspect service operations, taking the necessary enforcement actions so that rules and regulations are followed.

• Keep abreast of the main national policies that may have implications for the agency’s activities and interact and work within those policies.

Should there be more regulation or less regulation? Should we regulate or deregulate?

The creation of an agency with its rules and procedures might be perceived as “more regulation”, going against the need to attract investments from telecommunication service providers. Indeed, attracting investments might be easier when service providers have more freedom and creativity.

This false paradox is based on the erroneous assumption that deregulation means no regulation. But in actual fact, deregulation does not mean that there is no regulation at all. Rather, it means reducing selectively the fields and amount of State regulation on private economic activities — widening private activities in a country’s economy.

In this sense, deregulation should evolve along two lines:

• Firstly, an evolution in the sense of reducing “technical” rules, with more concentration on the rules pertaining to the “rights of consumers” and “competition”.

• Secondly, an evolution in the sense of reducing those rules as fair and healthy competition increases.

The future scenario of telecommunication regulation

If one wishes to imagine telecommunications in the future, and the role of the regulatory agencies, a simplified vision would lead to a scenario where services would converge continuously (reducing the differences between them). And these services would be available to all classes of consumers (democratization). Regulatory agencies would have the function of ensuring that the services provided respect the rights of consumers in a fair and competitive environment. We are working towards this “telecommunication utopia”.