Based on the technology trends and regulatory implications examined in the two previous sectionson technology implications, the present section puts forward and discusses a new regulatory paradigm and its constituent elements. While the section on ‘Market and Regulation’ analyzes the regulatory implications regarding traditional regulatory fields, the present section takes a more transversal view. The overall Executive summary purpose is to present a challenging new regulatory paradigm going beyond known regulatory models and aiming at facilitating the deployment of different technology solutions based on the establishment of an open and level playing field for all commercial companies as well as non-commercial, community-based and end-user-organized network initiatives. A new regulatory paradigm should not only reflect existing best practice regulation but should also build on an understanding of upcoming technology and market developments, which however have immediate implications for present regulatory practices.
Introduction
Based on the technology trends and regulatory implications examined in the two previous sections of this study, the present section discusses a new regulatory paradigm and its constituent elements. The basic point of departure is that regulatory activities and organizations must reflect the changing technology and market developments. The reason is that regulation is an important factor in technology and market developments. Good regulation can be a vital factor in supporting growth and increasing spread and use of technologies, while failing regulation can be a major barrier. This is why regulation continuously has to adapt to the changing technology and market environments in which it operates.
The study focuses on the relationships between technology changes and regulatory changes. These relationships are mediated by the actual and foreseen changes in the markets induced by technology developments, as it is these actual and foreseen market changes that necessitate changes in regulations. In a broader societal perspective, the relationships between technology, market and regulatory changes are co-evolutionary. However, to the individual policy making organization or regulatory agency, the issue presents itself as the regulatory changes made necessary by the introduction of new technologies and the challenge to develop a regulatory framework that enables the best possible use of new technological potentials.
The basic aims of regulation, to a large extent, remain the same as they have generally been since the beginning of the telecom reform process starting in the 1980s and 1990s, i.e. to facilitate competition in the markets primarily by means of access and interconnection regulation, to enhance the access to limited resources such as radio frequencies, and to implement the social aims instituted by policy decisions regarding, for example, universal access and service. In spite of the same basic aims, the specific content of these aims, however, changes considerably with technology and market developments. Interconnection in a packet switched environment is different from interconnection with regard to circuit switching; the vastly increasing number of new radio based access technologies makes it necessary to change frequency allocations and assignment procedures; and, universal access policies can take advantage of new access technologies such as mobile communications.
One of the basic aims, which has been important in all countries and especially important in developing countries with under-developed telecommunication infrastructures, has been to promote investments in order to extend and expand backbone and access networks. A crucial element in promoting investments, national and international, is to establish a stable regulatory framework so investors know the regulatory terms on which they make their investments. This includes predictability and due process. This, however, may also create problems in an environment of increasingly fast changing technology developments. If, for instance, radio frequencies have been assigned to an operator for 20 years, the operator will expect to have the right to exploit these frequencies for the period of time agreed using the agreed technology solution even though new and more efficient technologies are developed. Similarly, an operator which has been appointed as universal access provider using a specific technology, e.g. PSTN, with some exclusivity rights, will also expect to retain these rights for the period agreed even though access may be obtained more efficiently using mobile or other access technologies. This is a general problem that regulators have to address and it becomes more acute with the increasing speed of technology development. It requires the development of a regulatory framework which is, at the same time, stable and flexible.
Another important issue concerns the relationships between policy and regulation. A fundamental part of the regulatory reform process has been to separate operation, regulation and policy. However, the borderlines between policy and regulation may differ from country to country and may also change over time. There is no single way of defining these borderlines although the general aim of limiting political interference in day-to-day regulatory deliberations must be maintained. Furthermore, there is a general development in direction of diminishing direct policy interventions in the markets and instead relying more on the establishment of a general regulatory framework. This is a continuous process. In the monopoly period, policy intervention in network operation was very direct. With liberalization, most public administrations have maintained a direct influence on market players via licenses, but there is increasingly a movement towards regulating the telecom environment by means of framework regulation instead of regulating the players directly. There is, for instance, a movement away from strict and narrow licenses in direction of broader licenses, class licenses and even no licenses.
An important question in this connection is the extent to which regulation is necessary. The liberalization of telecom markets has in all countries been accompanied by regulation. However, during the past few years, the aim of diminishing regulatory market intervention has become increasingly explicit. The growth of operators competing with the incumbents and new technologies offering new market entry potentials for market players make it possible to rely more on general rules for market competition and less on sector specific telecom regulation. The necessity and degree of regulation, therefore, has to be evaluated in each specific case. In the present section of the study, regulation is discussed in light of such specific market and technology developments.
Furthermore, telecom regulation cannot be seen in isolation from general economic and social developments. Information and communication technologies (ICT) play an increasing role in the economic and general social life and conditions in societies with the result that policies for their implementation and use become increasingly important. Universal access, for instance, is a social policy as well as a precondition for improving the business development of countries. Regulations of communication, therefore, have to be seen in a broader ICT related policy framework. A comprehensive and coherent approach, consequently, has to be developed.
It is in this spirit regarding the necessity of a regulatory framework, which is at once stable, flexible and part of a larger policy framework, that the development of a new regulatory paradigm is put forward in this section. The overall purpose of the section is to present a challenging new regulatory paradigm going beyond known regulatory models and aiming at facilitating the deployment of different technology solutions based on the establishment of an open and level playing field for all commercial companies, as well as non-commercial, community-based and end-user-organized network initiatives. A new regulatory paradigm should not only reflect existing best practice regulation but should also build on an understanding of upcoming technology and market developments, which however have immediate implications for present regulatory practices.
Main pillars of the new paradigm
The main pillars on which such a new regulatory paradigm rests are the following:
- First, to open the communication area for as many different initiatives as possible and to diversify participation in order to establish a basis for the development of network access and communication services in the highest possible quality at the lowest possible price to as many people as possible, with the implication that an open market environment should be supported, as this is the best mechanism to facilitate the growth of markets and technology use. It also means an increased emphasis on universal access or service policies in developing countries, where the other regulatory fields should support the universal access or service aims, for instance in the field of frequency regulation where new and more open frequency management policies should be implemented.
- Second, it is important to develop a comprehensive and, at the same time, coherent national ICT policy of which communication regulation constitutes an essential part. Communication regulation encompasses the regulation of communication infrastructures and services, which play an essential role for all technology mediated communications and communication dependent processes in society, residential as well as business. Communication regulation must, consequently, be seen in the light of this broader societal context. Furthermore, the regulatory approach must reflect a greater degree of pro-activeness and facilitation including a broader view on systems failures instead of simple market or policy failures. A coherent analysis of the totality and intersection of market and policy developments must be the basis for the appropriate regulatory measures to be implemented.
- Third, an appropriate regulatory paradigm must take technology and market convergence into consideration. Where telecom formerly was a separate industry in relation to IT, broadcasting and other media industries, there is a growing degree of integration between these industries based, to a large extent, on technology developments with similar technology foundations in the whole ICT and media area. This leads to new competitive possibilities, as different infrastructures can be used for conveying the same kinds of services. It also leads to new services being developed and to new questions regarding the interrelationships between infrastructure and content regulation.
- Fourth, it is crucial to acknowledge that the national developments in ICTs take place in a wider international context with an increasing importance of global developments in the communication field. The influence on basic technology developments is rather limited in the case of most countries and it can be important to attract international investments. However, local and national initiatives also play a significant role, and national and regional policies are the foundations for developing these international, regional, national and local contributions to network and service expansion.
- Fifth, the organizational aspects of regulation must be adapted to the changing technology and market developments in terms of scope and regulatory practices. Even though the general technology trends have many similarities all over the world, it should be acknowledged that there is a wide range of regulatory and organizational responses and that specific technology developments may diverge. Convergence will lead to new technology solutions and the development of new market opportunities, and developing countries will have the possibility to leapfrog some technology solutions implemented in economically more developed countries. They will also have the opportunity to leapfrog organizational forms used in regulation in developed countries. Furthermore, the lack of regulatory resources can make it necessary to implement organizationally less demanding methods of market regulation.