Trends 2002

Trends 2002 is the fourth edition of Trends in Telecommunication Reform. This new edition provides a detailed insight into effective regulation. In keeping with the tradition established in earlier editions, Trends 2002 includes one chapter highlighting global trends in market reform. The other chapters explore why regulators are needed, the institutional framework of regulation, general and specific regulatory functions and powers, transparency and fairness, staffing and financing. This article highlights some of the ways to achieve effective and transparent regulation.

Why effective regulation?

In the last decade, the reform of the information and communication technologies (ICT) sector resulted in major changes at the regulatory and institutional levels. One of the most striking changes has been the rise of regulatory agencies for telecommunications and related industries. More than 110 governments around the world have created regulatory entities and many more are planning to do so in the near future. The rise in regulatory agencies is due to the fact that countries have recognized that the most fundamental task of ICT sector reform is to establish an effective and transparent regulatory authority.

In many ways regulators are like a lighthouse shining a path of light into a safe and prosperous harbour. They provide a signal that their market has the security of clear investment rules applied in a fair and transparent fashion. Although regulators themselves do not ply the waters of trade and commerce or operate the “shipping lanes” of ICT networks and services, or sell products or services to customers, they, like a lighthouse, create a climate conducive to enabling those that do to conduct their business. They enable networks to be rolled out, new services to be launched, create new job opportunities and ensure that customers are satisfied. It is for this reason that the image of a lighthouse was selected for the cover of Trends in Telecommunication Reform 2002: Effective Regulation.

Sector reform

Sector reform has become the norm for ITU Member States, a majority of which have at least initiated a sector reform programme, if not fully embarked on the path of sector reform. The momentum of the global sector reform movement that crystallized during the 1990s carried over into the new century, even as the economic boom of the 1990s in many countries plateaued and faltered. While the cooler economic outlook of 2001 clearly had an effect on sector restructuring — particularly on planned privatizations and spectrum auctions — governments continued their commitment to opening markets to competition in order to better meet their universal service goals.

As governments began to authorize competition for a growing array of services, they discovered that they could not simply declare markets open and walk away. Indeed, in many, if not most countries — particularly those with long histories of government ownership of telecommunication operators — functioning markets for telecommunication services could hardly be said to even exist. Telecommunications in those countries was a government utility, not a service subject to market forces. Simply declaring telecommunications “competitive” did not ensure that any new market entrants would, or could, actually begin competing.

It became apparent that government action and guidance was necessary in nearly every country — including developed ones — at least in order to nurture competition to the point where it could survive on its own. Moreover, the most pressing competitive issues, such as interconnection, licensing, and pricing, demanded a high level of regulatory expertise. Thus, the need for regulators became more acute, not less.

Since nearly every country in the world now allows competition for at least some telecommunication services and in a growing number of countries sector reform programmes are based on consumer needs, governments face three fundamental questions:

• What should “regulation” be in markets that are in various stages of transition to competition?

• What is the best institutional approach for each government to take in dealing with market conditions it finds within its own country?

• How should governments ensure that consumers’ needs are met?

New regulatory institutions

Increasingly, governments are finding the answers to these questions in legislation setting up new regulatory institutions, or reforming existing ones. Obviously, in a country only just emerging from the monopoly PTT model and spinning off a commercial operator, it may be necessary to create a regulatory authority for the first time. But even governments with existing regulatory bodies are re-examining the structures and mandates of those agencies, with an eye towards coping with perceived market changes, including the “convergence” of voice, data, and multimedia industries.

Governments are turning more and more to specialized, even technocratic, institutions. In many cases, these are separate agencies or offices, headed by commissioners or appointed chief executives. In a few cases, they remain semi-autonomous units within government ministries. In either case, the regulatory authorities are designed to house and mobilize the specialized talents that governments need to act as promoters and developers of growing, competitive telecommunication markets.

As the new report emphasizes, the whole point in creating these institutions is to establish effective, independent regulatory regimes that provide optimal conditions for private-sector investment in infrastructure and services. One of the most crucial of those conditions is regulatory stability. Investors seek clarity in policy-making, equity in policy implementation, and consistency in regulatory enforcement.

Competition and private investment, particularly in the developing world, is viewed as a tool for achieving social and economic goals such as providing for universal access or introducing new broadband technologies that will induce greater productivity in the overall economy. Regulators in most countries are expected to have these ultimate societal goals in mind as part of their public interest mandate.

How, then, can regulatory authorities be sufficiently effective and transparent to live up to their mandates?

The report explores this essential question. It also shows that there is a global trend towards retooling and establishing regulatory structures. Moreover, there are remarkable similarities in the issues that all governments face when they attempt to establish effective regulatory regimes. All governments must deal with resource issues, the delegation of powers to regulators, and defining the long list of regulatory tasks those regulators must perform. Many regulators around the world — in developing and developed countries alike — are dealing with these issues in constructive and innovative ways, for example, by establishing less-hierarchical organizations, by using training and employee benefit programmes, and by taking advantage of the Internet to provide public information as well as for public consultation processes.

It is to be hoped that in exploring these issues and creative responses, the report will be a catalyst for further innovation and experimentation through sharing of experiences and approaches among regulators and other telecommunication professionals worldwide.