Transcript “Strategies for Effective Regulation”.

Strategies for Effective Regulation
APT Regulation Forum
Phuket, Thailand, May 15-17, 2001
Peter Smith
The World Bank
Overview
I.
Context for Telecom Regulation
II.
Strategies for Success
•
Regulatory Agency Agenda
IV. Concluding Remarks
I.
Context for Telecom
Regulation
• Part of larger package of sector reform to
improve performance of sector
• Monopoly vs. competition
• Transformation of communications markets
• New technologies
Section I : Context for Telecom Regulation
Regulatory Framework consists
of several elements…
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•
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•
Communications legislation
Other laws and regulations
Licences
Regulatory Agency
* Processes
* Decisions
Section I : Context for Telecom Regulation
Elements of Telecom Sector Reform
in Thailand
Concession
Conversion
TOT / CAT
Restructuring
Regulatory
Framework
Foreign
Ownership
Universal
Service
Strategy
NEW TELECOM MARKET STRUCTURE
Section I : Context for Telecom Regulation
Transition to new market structure
Existing
Market
Structure
TRANSITION
New Competitive
Market Structure
Design, implementation,
management, of transition
Section I : Context for Telecom Regulation
Managing the transition requires…
• Consensus on objectives
• Knowledge of national factors and
international best practice
• Agreement on policy guidelines
• Effective co-ordination
• Effective quality assurance
• Timely implementation
Section I : Context for Telecom Regulation
Improve Sector Performance
(Public Interest Perspective)
•
•
•
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Lower costs / improved quality
More telephone lines to meet demand
Improved geographic access
Improved access for low income users
Improved access to Internet
More new services / Applications
Improve competitiveness of economy
Section I : Context for Telecom Regulation
Monopoly vs. Competition
• Fundamental justification for regulation is
existence of some monopoly
• Leaves regulators with 3 basic choices:
1. Protect customers and new entrants from
monopoly
2. Reduce scope of monopoly
3. Both (1) and (2). Manage transition to
increased competition
Section I : Context for Telecom Regulation
Transformation of
Communications Markets (1)
• Large declines in transmission costs
• Large growth in mobile telephony
• Large declines in the cost of computing
power
• Huge growth in Internet
• Increased potential for competition
Section I : Context for Telecom Regulation
Transformation of
Communications Markets (2)
• Changing demand structure
• Convergence of services
* Between telecom and broadcasting
* Between telecom and computing
* Within telecom
• Changing industry structure
* New entrants, and existing operators
providing additional services
Section I: Context for Telecom Regulation
Decreased Costs
Cost of a three-minute telephone call
(1990 dollars)
New York - London
250
200
150
100
50
0
1930
1950
1970
Section I : Context for Telecom Regulation
1990
2000
Huge increases in
information processing
Millions of transistors
per microprocessor
100
Pentium III
10
1
80486
Pentium
Pentium II
80386
0.1
80286
8086
0.01
0.001
1970
8080
8008
1975
1980
1985
1990
1995
Section I : Context for Telecom Regulation
2000
Rapid Growth of Internet
Internet Hosts (millions)
70
60
50
49 m (69.7%)
40
18 m (25.7%)
30
3.3 m (4.6%)
20
(the first ten countries
amount for about 2.3 m)
10
0
Jan. Jan. Jan. Jan. Jan. Jan.
95 96 97 98 99 00
Source: Network Wizards, World Bank, 1999
US
Other industrialized countries
Developing countries
Section I : Context for Telecom Regulation
Role of Regulation in Transition
to Competitive Market
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Contain abuse of market power
Promote competition
Create favorable investment climate
Promote improved access to services
Promote introduction of new services
Section I : Context for Telecom Regulation
II. Strategies for Success
Need to avoid regulatory failure, e.g.
• Prices too low or distorted for investment
• Interconnection disputes prevent new
investment
• Radio frequency allocations prevent new
investment
• Lack of credibility leads to uncertainty and
discourages new investment.
Section II : Strategies for Success
Strategies for Success
• Group A: Basic
• Group B: Optional
Strategies for Success
(Group A: Basic )
• Establish agency with firm legal foundation
• Limit opportunity for Government intervention
• Launch agency before privatization
• Ensure financial and administrative autonomy
• Appoint credible leadership …
Section II : Strategies for Success
Strategies for Success
(Group A: Basic Steps contd.)
• Hire competent staff...
• Establish effective appeal process
• Empower agency to enforce decisions
• Set clear boundaries and links with other
agencies/ministries
Section II : Strategies for Success
Strategies for Success
(Group B: Optional)
(1)
Reduce need for agency decisions
(2)
Enhance regulatory credibility
(3)
Use resources effectively
Section II : Strategies for Success
(1) Reduce need for agency
decisions
• Prepackage regulatory rules (licence)
including rules for interconnection
• Reduce regulation in competitive markets
• Focus on main operators
• Keep operators obligations reasonable
• Re-balance prices early
Section II : Strategies for Success
Pre-packaged regulatory rules
(Elements of a licence for
a main operator)
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Network roll-out obligations
Price control
Interconnection
Prohibition of anti-competitive conduct
Requirement to permit re-sale for pay
phones
Section II : Strategies for Success
(2) Enhance regulatory credibility
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Give customers a voice
Adopt transparent processes
Harness public support
Consider international commitments (WTO)
Section II : Strategies for Success
(3) Use Resources Effectively
• Put the operators to work
• Outsource some functions
• Adopt alternative dispute resolution
mechanisms
Section II : Strategies for Success
Strategies for success – Summary
Primary impact
Measures
Accelerate Competition
Pre-package Regulatory Rules
Establish Rules for Interconnection
Keep operators’ obligations reasonable
Focus licensing on the main operators
Rebalance prices early
Reduce regulation as competition develops
Adopt transparent process
Harness public support
Lock in principles through int’l commitments
Outsource regulatory functions
Adopt dispute resolution mechanism
Put the operators to work
Consider multisector agencies
Create regional capacity
Reduce Need for
Agency Decision
Secondary impact
Enhance
Regulatory
Credibility
Use
Resources
Effectively
III Regulatory Agency Agenda
(Possible agenda items -- External)
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Interconnection
Numbering plan and number portability
Extending universal access
Price structure / control
Billing accuracy
Anti-competitive conduct
Internet
Section III : Regulatory Agency Agenda
Regulatory Agency Organization
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Functions / powers
Agenda
Processes
Resources
Outsourcing
Organization
Structure
Internet: Regulatory Issues
• Fair competition for Internet Service Providers vs.
incumbent
• Access and pricing for international links for ISPs
• Internet access for the public
• Internet content: national language and content;
convergence with broadcasting
• Electronic commerce
Section III : Regulatory Agency Agenda
IV. Concluding Remarks
1.
Transformation of the sector
2.
Mistakes to avoid
Section IV : Concluding Remarks
Transformation of the sector
• Telecom regulation is no longer only about
telephone service
• Also about the platform and policies for
information infrastructure
Section IV : Concluding Remarks
Mistakes to avoid (1)
• Under-estimating the possibility of
regulatory failure
• Failure to adjust prices to provide incentive
for investment
• Relying too much on the incumbent
operator for advice
• Focusing too much on privatization rather
than a complete package of reforms
Section IV : Concluding Remarks
Mistakes to Avoid (2)
• Failure to develop modern telecom
legislation
• Relying too much on investment bankers
for advice on market structure
• Failure to give voice to customers
Section IV : Concluding Remarks
Mistakes to Avoid (3)
• Failure to address interconnection issues
effectively and early
• Failure to ensure adequate regulatory
capacity -- including for radiospectrum
management
Section IV : Concluding Remarks
Strategies for Effective Regulation
APT Regulation Forum
Phuket, Thailand, May 15-17, 2001
Peter Smith
The World Bank