Before further discussing the different organizational options, it is important to realize that one should not go directly from the fact that there is technology and market convergence, and hence that regulations should take these developments into consideration to the conclusion that regulatory organizations also have to convergence. Technology and market convergence developments, indeed, constitute an important basis for organizational changes. However, organizational issues also have a relative autonomy and must also be dealt with on the basis of specific questions related to organizational development.
The types of specific questions relating to organizational development examined in this sub-section are the following[1]:
- Economies of regulation
- Capture
- Competition between agencies
- Risk
- One-stop-shopping
- Transfer of regulatory practices
With respect to all four dimensions discussed (industry vs. convergence regulator, etc.), the issue of economies of regulation has relevance, more specifically with regard to economies of scope and even economies of scale if the regulatory issues are identical across industries or sectors. Economies of scope and scale in regulation are relevant for regulatory organizations when the regulatory issues are similar as, for instance, in the case of access rules and rules for universal service and the calculation of retail prices, e.g. the RPI-x formula (retail price index minus the politically decided price reduction). An important argument, on the other hand, against the existence of scope and scale advantages in common regulatory organizations is the specificity of the regulatory assignments in the different fields, and the need for a sufficient level of special competences to understand and regulate the different markets. However, in a number of especially smaller developing countries the arguments in favor of scope and scale advantages are strong, as the human resources with the necessary specific qualifications are scarce. This calls for regulatory organizations of either a convergent, multi-sector, joint infrastructure and content, or joint competition and sector-specific character, or a combination of two or more of these. However, the general arguments for and against the different models still apply and must be weighed against the scope and scale advantages.
Capture is another important issue to be considered. Regulatory organizations can either be captured by policy-making entities or by dominant market players, or by both. This is the reason why not only formal, but also real, independence is needed in order to ensure the highest degree of transparency and accountability possible. However, it cannot in any abstract manner be determined whether a single industry regulator, a convergent regulator, or any of the other regulatory models best ensure independence. In relation to policy authorities, it cannot in general be determined whether it is better to be related to one, two or more ministries. This very much depends on the specific circumstances.
A third issue concerns the advantages and disadvantages of a competition between regulatory agencies. As in the case of market players, competition between different agencies may have beneficial effects hindering regulatory complacency. It cannot, of course, be a direct competitive relationship, as the different agencies cover different regulatory areas. However, a kind of yard-stick competition is possible with indirect competition between agencies. Again, it is difficult in general to determine whether the forces of creative competition will be bigger than the forces of destructive competition[2]. This depends on the circumstances in the specific cases.
Yet another factor is diversification of risk vs. better coordination[3]. This factor is closely related to the abovementioned point on competition between regulatory agencies. If there are different regulatory entities, there may be more experimentation in the regulatory practices and a greater diversification of risks. Furthermore, the specific regulatory organizations can be closer to the market realities in the different market segments. On the other hand, joint regulatory organizations will lead to better coordination and a higher level of certainty in decisions across market segments.
One-stop-shopping is an often heard and good argument for joint regulatory organizations. Market players will not have to go from regulator to regulator, either not knowing where to approach the system of regulatory organizations or needing to approach more than one organization to settle a matter. However, there is a counter-argument, which is that joint regulators may seem more opaque to market players because of the diversity of the issues they deal with.
The last point listed deals with the possible transfer of regulatory practices if different regulatory organizations are merged. This is a concern often aired, namely that if merging a regulatory area with little regulation with an area with more heavy regulation, the outcome may be that both areas will be regulated more stringently, even if the intention was to decrease the level of regulation. An example would be the transfer of existing telecoms regulations to the Internet area.
Finally, two issues relating to the functional assignments of regulators and their independence deserve mentioning. Regarding functional assignments, a great number of issues are raised in connection with new ICT technologies and convergence developments such as network security, protection of privacy, protection of intellectual property right etc. The question is whether some of these issues should be part of the assignments of ICT convergence regulators. Again, a definite answer cannot be given, but to the extent that content issues and infrastructure issues are dealt with by different regulatory agencies, a content related question like intellectual property right should also be left out of the regulatory assignments of an ICT regulator. With respect to the independence issue, the only question to be mentioned here is that if ICT infrastructure regulation should be seen in the broader perspective of the general information technology and society policies of a country, it could be argued that close ties between the policy-making entities and the regulatory agency would be beneficial. However, close organizational ties are in no way necessary to ensure the overall goal of situating the ICT regulations in a broader policy context. This can be ensured at the policy level when developing the overall ICT related policies.
ENDNOTES
[1] More information on these issues can be found in, e.g., Jean-Jacques Laffont: ‘Regulation and Development’, Cambridge University Press, 2005 and Anders Henten, Rohan Samarajiva and William H. Melody: ‘Designing Next Generation Telecom Regulation: ICT Convergence or Multisector Utility?’, WDR, 2003, from which most of these points and the subsequent discussions are inspired.
[2] These are the terms used by Jean-Jacques Laffont, ibid, page 222.
[3] This point is directly inspired by Jean-Jacques Laffont, ibid, page 223.