Effective regulators are normally associated with being to some degree independent. The rationale for establishing independent, often sector-specific, regulatory institutions is based on ensuring non-discriminatory treatment of all players in the liberalized market. At the outset of the transformation process the pre-existing monopoly structure allows for discriminatory behavior. The emphasis on non-discrimination arose from four sources which, in part, reflect different constituencies in the market. These four broad necessities are to ensure that:
- cooperation is enabled in a competitive environment where the old structures may be unwilling to cooperate and where prospective cooperation is between unequal cooperators/partners;
- all equipment suppliers are treated equally where the market is dominated by a single buyer with strong pre-existing relationships with suppliers;
- all new entrants and investors in the telecommunications service sector are treated equally by the dominant competitor, who will be a supplier of inputs (e.g., interconnection) to the businesses of the new entrants; and
- all customers have a “voice” and their complaints and interests receive an adequate response.
Addressing non-discrimination involves building confidence in and the legitimacy of an “independent” regulatory institution. The central issue is establishing a functioning, enabling environment (regulator(s) and regulations) that will attract sufficient and sustainable investment to satisfy existing demand, expand supply, and introduce new services. Independence stimulates investor confidence and reduces regulatory risk. The UN Task Force on Financing ICT stated: “The explosion of ICT sector investment in most developing countries correlates closely with an improved environment for private investment to take place and the transformation of formerly closed, monopoly ICT markets to allow competitive entry. Where Governments have actively pursued an open, equitable market environment, investors have generally welcomed the opportunity to compete.”[1] The Task Force further observed: “The introduction and strengthening of independent, neutral sector regulation has helped to reinforce investor confidence and market performance, while enhancing consumer benefits.”
The success of competition and private investment is demonstrated in mobile markets in Africa and is illustrated in the following Figure 1.[2]
Figure 1: Mobile Teledensity of 42 African Countries
By the end of 2006, the total number of mobile subscribers in 48 Sub-Saharan African countries was just under 125 million, up from almost 88 million at the end of 2005. Of these, 123.5 million customers resided in jurisdictions where competition prevailed in the provision of mobile services, up from 86.9 million at the end of 2005.
ENDNOTES
[1] http://www.itu.int/wsis/tffm/final-report.pdf
[2] CONict “Assessment of the Economic Impact of Additional Mobile Licenses in Ethiopia,” Report for the World Bank, August 2005.