International Regulatory Trends

• Sector specific independent regulators separate from line ministries

• Competition authorities have been given an enhanced role in the communication sector

• Some countries are beginning to look at integration of regulatory institutions because of convergence

Two ways to insure regulatory independence

• Full privatization of the incumbent• Establish a regulator that is separate from

industry and from the Ministry or other governmental department with ownership share in incumbent

• Driven by– WTO– EU directive

Competition authority

• Main responsibility to deal with anti-competitive behaviors like mergers, cartels, predatory pricing

• Not given major responsibility for telecom regulation– Takes action after the fact—need rules in place to

prevent anti-competitive actions

– Social features of regulation don’t fit with competition rules

– Lack of professional knowledge specific to the industry

Relationship between competition authority and regulatory body

• Authority to competition authority—NZ• Authority to regulatory body to apply competition

rules—rare; UK as an example (OFCOM)• Coordination mechanisms—Switzerland,

Germany, France, Portugal, Denmark, Sweden, Mexico, Spain have official rules in place for coordination and or consultation

• Nothing formal in US, Canada, Japan

Regulatory responses to competition

• Asymmetrical regulation of dominant carriers

• Forbearance for non-dominant carriers

• Self-regulation (Australia’s Communications Industry Forum sets technical standards, etc.); OFCOM in the UK able to allow self-regulation in any area

Convergence

• Cable operators allowed to provide full PSTN services in 21 OECD countries; allowed in EU since January 1998

• Move toward horizontal regulatory approach – US, Canada, Japan, Switzerland, UK, and Italy

have same regulator for telecom and broadcasting

Status of regulator in 29 OECD countries

• 22 countries with regulator structurally separate from Ministry

• Mexico and Czech Republic have functionally separate regulatory body within Ministry

• Japan, Korea, Turkey have regulatory body that is still part of Ministry

• New Zealand had no sector specific regulatory body—only the Kiwi Share Obligations on Telecom New Zealand—until April 2002—created a Telecom Commissioner within the Commerce Commission

Measures of regulatory independence

• Is it separate from Ministry?• Who appoints the head of the regulatory body?

Are terms guaranteed? What is structure of decision making within the regulatory body?

• To whom does regulator report• How is it financed• Can decisions be overturned, other than by the

courts?• How does the regulator recruit employees?

Reporting

• Most popular is reporting to Ministry

• Reporting to legislature (Austria, Germany, US)

• Some countries have no reporting requirements except issuance of annual report

Financing

• Fees used by 15 OECD countries

• Ireland, Spain, Luxembourg, and Sweden have a levy on operators

• Some countries use a combination of fees and government appropriations

• Australia and France have full financing by government appropriation

Appointment and make-up of regulator

• In most OECD countries, head(s) of regulatory body appointed by Minister or President

• Decision making authority in 22 OECD countries is either a single person, or collegiate body which decides by simple majority– Belgium, Czech Rep, Denmark, Germany, Hungary,

Iceland, Ireland, Luxembourg, Norway and UK have one person

Ability to overturn regulatory decisions (other than courts)

• Most OECD countries, none• Can be over-ruled in six countries:

– Canada, Hungary, Mexico given ministry or cabinet power to overturn decisions

– Denmark—Telecom Complains and Telecom Consumer Boards can overturn

– Norway—Telecom Appeals and Advisory Board and Ministry of Labour and Governmental Affairs

– UK—Monopolies and Mergers Commission

Regulatory responsibilities

• Approval of mergers—competition authority• Licensing—either ministry or regulator; growing

tendency for regulator to do so• Interconnection—mostly regulators• Spectrum management and allocation—seems to

be shared between ministry and regulator• Numbering—planning done by either ministries or

regulators; allocation done mostly be regulators

Trends in pricing and tariffing approval

• Increasing use of price cap regulation• Mostly applied to incumbent, or to carriers with

market power; mostly applied to basic voice services

• Finland, Iceland, Luxembourg have no specific telecom pricing regulation

• In Australia, the competition authority regulates the incumbent through price cap regulation

More Trends

• Universal Service– Framework in place through telecom law

• Not in Czech Republic, Finland, Hungary, New Zealand, Ireland

– Incumbent responsibility• UK, Norway, Spain, Iceland, Mexico, Sweden

– Shared responsibility—regulator determines cost and the cost allocation among telecom operators

• Service Quality– Monitoring done by regulator in most instances– No monitoring in Turkey and Japan