6.1.1 Overview and Comparison of Different Institutional Designs

There are four main institutional designs for telecommunications regulatory entities. First is the single-sector regulator whose sole function is to oversee the telecommunications sector (designated as Model 1 in this Section). The term single-sector is somewhat misleading as these entities, which in most cases originated from the separation of the operational and regulatory activities of state-owned post and telecommunications companies (PTTs), often include the postal and telecommunications industry as well as radiocommunications. The second design is known as the “converged” regulator, meaning those regulatory entities that oversee a broader range of services which, in addition to telecommunications, also include information and communications technologies, including broadcasting (designated as Model 2 in this Section). The multi-sector regulatory authority (Model 3) usually encompasses various industry sectors that are considered public utilities, e.g., telecommunications, water, electricity, and transportation. The fourth category is not a regulatory authority per se, but an approach in which general competition policy is the main method of overseeing the telecommunications sector (designated as Model 4 in this Section).

Characteristics of these models of institutional entities for telecommunications regulatory agencies are as follows.

Model 1 – Single sector regulators

This organizational structure focuses mainly on the telecommunications (and sometimes postal) sector, with other government entities responsible for broadcasting and information technology issues. Many countries around the world still use the single-sector regulatory authority approach,1 including Algeria (Regulatory Authority for Post and Telecommunications), the Comoros (National Society of Postal Services and Telecommunications), Jordan (Telecommunications Regulatory Commission, which includes postal oversight), Egypt (National Telecommunications Regulatory Authority), and Oman (Telecommunications Regulatory Authority).2 The single-sector regulator also includes organizational structures where the ministry is a regulator, such as the Ministry of Internal Affairs and Communications in Japan.

Prior to liberalization it was common for a state-owned operator to be responsible for regulating the post and telecommunications industries as well as for radiocommunications issues, and in some cases, even serving as international representatives of their respective countries with regard to their operations. After liberalization, this structure was no longer possible under most countries’ legislation.3 Thus, the operation and regulation functions were separated and independent regulators were established. In many countries, when telecommunications regulators were initially established, they simply took over the “regulatory function” from government-owned PTTs and therefore their mandate almost automatically included the administration of radiocommunications and postal services in addition to telecommunications.

In Europe, once the PTTs were separated and privatized, the regulation of telecommunications, radio and the postal sector often was assigned to one agency.4 Telecommunications regulators in Europe were established by combining certain units within the public administration (or from the state-owned operator) or by transferring employees or units from the ministry to the new organization. The units that were transferred often remained the same and were integrated into the structure of the new organization, which was based on fields of activity and communications technologies. Within this context, regulators in Europe were generally organized in a technology/field-oriented regulatory structure and emphasis was placed on the recruitment of technologically-oriented staff (e.g., engineers).

A key advantage of a single-sector regulatory authority is that it can be focused on the complex technical challenges of the telecommunications sector, including network and service development. The telecommunications sector tends to be more dynamic than other utilities and a single-sector regulator can often adapt to this more easily. One disadvantage of sector-specific regulators is that sufficient resources may not be available to staff the different regulator agencies and there may be duplication for regulatory activities that are common to different industries.

A justification for a single-sector regulator is based on the perception that the telecommunications sector includes specific technical issues, such as numbering, that are unique to the telecommunications sector and exhibits specific characteristics that differentiate it from other industries. Decision-making within communications policy is based on the expertise of the regulators. As experts, they participate in drafting laws and act as advisors to the appropriate ministry or other authorities when necessary. Regulators require not only need expertise in the technical, financial, and legal aspects of communications, they also need to systematically analyse present and future developments, and be able to cooperate with other countries on sector issues at the international level. Therefore, it is vital that staff is sufficient in number and suitably qualified to be able to face such a task. The perceived need for a specialized skill-set led the Cape Verde Government to establish a separate ICT specific regulator in 2004 (Institute of Communications and Information Technology – ICTI) in parallel with and despite the existence of a multi-sector (economic) regulator (Autoridade de Regulamentação Economica – ARE) which also has a mandate to regulate telecommunications. Since becoming operational, ICTI has in practice undertaken both the technical and economic tasks in the ICT sector, with ARE focusing on the other sectors. This has been in part because ICTI has the staff and desire to review a wide range of telecommunications issues, including tariffs, that would normally be within the purview of ARE, and because the two institutions have come to an agreement allowing ICTI to take the lead role on telecommunications issues.5

Another advantage of single-sector regulators relates to the origin of their staffing. In many cases, single-sector regulators tend to inherit staff from the former PTT and therefore have a core of specialized professionals from the start with a thorough understanding of the technical issues and strong engineering skills, a key advantage when dealing with complex network issues. Opponents of the single-sector regulatory structure argue that the origin of this specific skill set is, in fact, one of the key disadvantages of establishing a single-sector regulator. These critics argue that staff could be biased in favour of the incumbent, and thus more subject to capture by dominant forces. While this is an issue to be considered, it is not unique to the single-sector regulator. Whatever the option chosen, there must be a series of “checks and balances” to ensure that the regulator can perform its mandate independently.

One major concern within the single-sector model is the possibility of institutional rigidity. Since a single-sector regulator is restricted to telecommunications, this type of structure can limit the effectiveness of the agency and its staff members as it faces the issues raised by convergence. Given that regulatory authority has historically focused on a narrow sector, the regulatory authority may become nearly frozen in time in terms of defining the sector it is regulating. As a consequence, it may not necessarily draw the appropriate staff from across the broader communications sector necessary to be flexible and, therefore, is unable to adapt to the continuous changes in the communications sector. A practical example of such difficulties has been the case of single-sector telecommunications regulators having difficulties when incorporating next generation technologies and services into the regulatory framework.

In recent years, and especially with convergence in the communications sector blurring the boundaries between industries, overlapping responsibilities between sectoral regulators has also become an issue, leading sometimes to duplication of regulations and required authorizations for what are essentially similar services being offered to the public. This can cause conflicting decisions across sectors, or indeed lack of decisions where overlap between mandates cannot be resolved on a political level. The challenges of convergence have led several countries, including South Africa and the United Kingdom, to move away from single-sector regulators and evolve towards a converged regulator, thus merging agencies in charge of the various aspects of the communications sector.

Model 2 – Converged regulator

With a converged institutional design, all communications services i.e., telecommunications including radiocommunications, broadcasting and media (and in some instances postal services), are under the umbrella of one agency.

Several countries have followed the route of converging their institutions dealing with the communications sector, typically combining formerly discrete agencies responsible for telecommunications, broadcasting or information technology into one entity:

• In December 1999, the Info-Communications Development Authority of Singapore Act of 1999 disbanded the former telecommunications regulator (Telecommunications Authority of Singapore, TAS) and the information technology agency (National Computer Board, NCB), to create one new statutory board, the Infocomm Development Authority (IDA).6

• The Independent Communications Authority of South Africa (ICASA) is the regulator of telecommunications and the broadcasting sectors. It was established in July 2000 as a result of the Independent Communications Authority of South Africa Act No.13 of 2000. It took over the functions of two previous regulators, the South African Telecommunications Regulatory Authority (SATRA) and the Independent Broadcasting Authority (IBA).

• In 2001, the Saudi Arabian Council of Ministers issued a decision changing the name of the Saudi Communications Commission to the Communications and Information Technology Commission in light of new tasks it assumed in information technology.

• Several EU member states, including Finland and the Netherlands, are also moving to converged regulators that regulate the licensing of infrastructure across the telecommunications and broadcasting sectors through a single regulatory body. In 1997, Italy created a single regulatory body with responsibility for all telecommunications and broadcasting matters. Austria also established such a regulatory authority in 2001.

• A similar approach was also taken by the United Kingdom. The Office of Communications (Ofcom) was established in the United Kingdom in December 2003 as a result of the Communications Act 20007 and became the regulator for television, radio, and telecommunications. Ofcom combines five former agencies: the Broadcasting Standards Commission (BSC), the Independent Television Commission (ITC), the Office of Telecommunications (Oftel), the Radiocommunications Agency (RA), and the Radio Authority.

• Even the European Commission’s Information Society Directorate was granted new responsibilities for audiovisual and media policies. The new Information Society and Media Directorate General brings together all three aspects of modern day electronic communications: broadcasting; computer networks; and electronic communication services.8

Like the single-sector telecommunications regulator, the converged communications regulator tends to be strong in specialized engineering skills in the communications sector, which is an important core expertise in dealing with complex network issues. In addition, the converged communications regulator also meets the challenges posed by service convergence by bringing in related skills, and therefore overcomes what is generally viewed as being one of the main disadvantages of a single-sector regulator (e.g., a telecommunications regulator overly focused on the telecommunications sector).

This model also better meets the need for flexibility in terms of its internal administration’s ability to meet market realities. It gives the regulatory authority and its staff the flexibility to better handle the continuous technological and regulatory changes and developments within the ICT sector. By having all services – which are increasingly provided over a single network – under one regulator, the staff responsible for specific services can work with other parts of the regulator that are dealing with related issues, and therefore the regulator can take a more consistent approach when considering changing technologies and their effect on legacy regulations.

In addition, the converged model tends to resolve some of the overlap between telecommunications and broadcasting that has tended to become one of the regulatory issues regarding convergence. As was clearly shown in the EU’s 1997 Green Paper on the Convergence of the Telecommunications, Media and Information Technology Sectors,9 and in its “99 Review,”10 convergence in communications has called into question the service-based vertical regulatory system, with industry increasingly demanding a reorganization of the regulatory institutions in order to address the challenges posed by convergence.

As further stated by David Currie:11

“Ofcom believes that convergence is a reality and that a converged regulator is best placed to nurse that convergence. When the Internet can deliver what looks to all intents and purposes like television broadcasting in a few years’ time, then Ofcom and the Government will face awkward choices. Should, in the interests of fairness, the content regulation of terrestrial, cable and satellite broadcasting be rolled out to Internet broadcasters? Or should the content regulation of terrestrial, cable and satellite broadcasters be significantly rolled back, passing the baton to smart navigational devices that allow people to find the content that they want (subject to the law) and avoid the content that they do not want to see or hear? A converged regulator like Ofcom will I hope be able to bring wisdom to that debate.”

Model 3 – Multi-sector regulator

Multi-sector regulators oversee not only the telecommunications sector, but other industry sectors with common economic and legal characteristics (e.g., telecommunications, water, energy, and transportation). Costa Rica, the Gambia, Jamaica, Latvia, Luxembourg, Niger and Panama, as well as state public utility commissions in individual states in the United States, have chosen this type of organizational structure.12

The advantages and disadvantages of multi-sector regulators have been discussed in various fora, and opinions vary. One of the main arguments generally raised in favour of a multi-sector regulator is based on the perceived lack of resources and the need for economies of scale to effectively regulate the different infrastructure industries and sectors. It is often argued that with this type of structural organization, one set of staff can be used to oversee a variety of industries. The rationale is that telecommunications is considered to form part of the overall infrastructure sector along with other utilities, such as electricity and water, and that infrastructure services share certain aspects: they are aimed at providing basic needs to the public; they often use similar rights-of-way; and they typically involve the economic regulation of large monopolies with network economic characteristics (i.e., high sunk and fixed costs). However, experience in some countries, such as Latvia, has shown that existing multi-sector regulators are performing poorly.

The answer to the staffing question is straightforward on the one hand and more complex on the other. Looking at the question in the strictest sense, single-sector regulators will look for highly technical staff focused on the telecommunications sector and generally organize their staff in industry-based units (e.g., post, telecommunications, radiocommunications). Converged regulators will look for staff that can bring in the expertise and know-how from the different sectors they are regulating. Generally these regulators are organized in functional units or indeed in horizontal, project-based units (See section 6.1.2.3. for details on administrative structures regarding functions of regulatory authorities). Multi-sector regulators will recruit staff specialized in the different sectors, and are generally organized in terms of the sectors within their mandate although some pool legal and economic resources to deal with, for example, tariffing issues that may be common across the different sectors.

An important question within this context, however, is to what extent staff can actually be used across the sectors. Our experience shows that staff within this model is generally recruited in terms of the sector they are regulating and only legal and occasionally economic staff is pooled to deal with specific issues that occur across the sectors. Luxembourg, for example, has organized its agency according to industries/services: telecommunications, electricity, gas, postal and spectrum management issues – these are then divided into smaller issue-specific units.13 This can also be seen in Belize and Niger. An interesting discussion of this issue is presented in the WDR Discussion Paper # 0204 of March 2002 which claims that:

“Examination of the actual organization of U.S. state-level multi-sector regulatory agencies, the Public Utility Commissions (PUCs), does not provide much evidence of economies of regulation, except at the level of the decision-makers, or Commissioners. Generally, staff members specialize in a particular sector such as telecommunications or water and work within distinct divisions that are devoted to sector-specific regulation. Resources are shared at the levels of commissioners, who hear cases pertaining to all sectors, the senior staff who manage the agency as a whole, and the legal staff responsible for hearings and related procedural matters. Generally, the different divisions are located in common facilities and use common amenities such as libraries, which may yield certain savings. … It must also be noted that U.S. PUCs do not have jurisdiction over frequency management, cable and broadcasting. … The U.S. PUC experience shows that there may be significant economies in areas such as use of buildings, libraries, and training facilities in common. This does not, however, justify multi-sector regulation as such, only close collaboration among sectoral regulatory agencies.”14

It is also often the case that a multi-sector regulatory authority is not created from scratch, but is the result of merging several existing agencies. In most countries it is not possible to dismiss employees in the course of such a merger, negating the realization of the hoped-for economies of regulation. In addition, a merger of two going concerns often creates significant morale problems and results in increased expenditures.15

Another disadvantage of this model is that often the telecommunications sector is the most liberalized sector under the auspices of the multi-sector regulator and therefore can be negatively affected if the telecommunications regulator is merged with other more highly regulated and less agile industries. Indeed, it may make matters worse by having telecommunications regulated in an environment with utilities that are progressing at a different pace where the needs and priorities are different, or where resources are practically non-existent. Moreover, by adding sectors, such as electricity and gas, that do not always produce revenues for the regulator, the telecommunications sector may bear a disproportionate share of the costs of regulation, potentially driving up regulatory costs for telecommunications providers.

Supporters of this model argue that having a multi-sector regulator can reduce political and other influences regarding the decision-making process as opposed to, for example, the single-sector regulator. Despite such claims concerning “capture” (meaning undue influence by politicians and/or dominant players), this does not necessarily seem linked to the institutional design option per se but is more a product of whether a clear set of “checks and balances” is incorporated in the design of the regulator. Indeed, a risk of the multi-sector regulator could even be that “capture” by a dominant ministry or entity not only affects a single sector but all sectors regulated by the multi-sector regulator. In addition, there may be greater complexity in establishing the legal framework for the multi-sector regulator, including the level of independence and allocation of functions as between the minister and the regulator.16 Furthermore, potential delays in instituting necessary reforms may result due to the disadvantages mentioned above.

Some argue that using cross-sector institutions to regulate telecommunications is justified in light of the growing convergence between telecommunications and other sectors. Ensuring that cross-sector rules and institutions are used to regulate telecommunications as well as other similar (utility) sectors may bring benefits, such as greater regulatory certainty (as operators may better forecast what to expect by observing how the regulatory framework is applied in other sectors) and lower risks of distortion between different activities. A counterargument is that the rationale behind establishing a multi-sector regulator is more a question of regulatory efficiency than of dealing with convergence in the communications sector. Even within this model it really depends on the mandate of the multi-sector regulator (i.e., whether it deals with just telecommunications or with communications as well as water, electricity, and transport) to determine whether a utilities-based regulator has the staff and internal administration that allows it to effectively cope with the challenges posed by ICT convergence.

As the market develops, and convergence affects the way in which communications is offered to the people, regulators not only are expected to possess high technical expertise, but to have an understanding of the structure and development trends of the communications market. Furthermore, regulators should be able to anticipate potential situations that could threaten or interfere with the development of the electronic communications industry. The concern that staff in a single-sector telecommunications regulator may face difficulties when incorporating next generation technologies and services into the regulatory framework is heightened with a multi-sector regulator since the staff of a multi-sector regulator would not necessarily be as technically focused on the communications sector. Obviously, a multi-sector regulator could recruit staff suited to the task of regulating the communications market, but the risk, especially where economists and legal experts are shared across the utilities sector, is that the pool of expertise becomes more diluted, thus compromising the capability and ultimately the credibility of the regulator.

A clear discussion of the advantages and disadvantages of multi-sector regulators is presented by Schwartz and Satola in the Table 6-3.17

Model 4 – No specific telecommunications regulatory authority

An alternative approach is to rely on the application of competition and antitrust rules rather than on detailed sector-specific rules and institutional designs. Until the passage of the Telecommunications Act of 2001, New Zealand, for example, had chosen to entrust antitrust authorities with the task of administering all rules controlling market power in telecommunications.18 There was no sector specific regulatory requirement except for special obligations on Telecom New Zealand, called the Kiwi Share Obligations, which in effect regulate the price and availability of residential telephone service. Instead of sector specific regulation, the regulatory regime for telecommunications in New Zealand relied primarily upon general competition law, the Commerce Act 1986, to prevent anticompetitive behaviour. Thus, the primary constraint on the conduct of telecommunications firms in New Zealand was the same competition law that applied to all economic enterprises in New Zealand.19

However, in late 2000, the Minister of Communications determined that New Zealand’s reliance on the Commerce Act and general competition authority was inadequate in some respects to regulate the telecommunications sector.20 As a result, the Telecommunications Act 2001, which contained sector-specific provisions, was passed in December 2001 to complement the generic competition provisions of the Commerce Act. Furthermore, the position of a Telecommunications Commissioner, a specialist stand-alone commissioner within the Commerce Commission, was established, inter alia, to regulate the telecommunications sector, and in particular to resolve disputes over regulated services, to report to the Minister on further designations or specifications of additional services, and to monitor and enforce the Kiwi Share obligations.21 Additionally, the Telecommunications Commissioner has statutory responsibility for decisions made under the Telecommunications Act.

Table 6-4: Model 4 – No Specific Telecommunications Regulatory Authority

ENDNOTES

1 An analysis of names suggests that out of 131 regulators, 112 are single-sector regulators (e.g., “Telecommunications Authority,” “Communications Commission”).

2 See ARPT (Algeria) www.arpt.dz; TRC (Jordan) www.trc.gov.jo; NTRA (Egypt) www.tra.gov.eg; SNPT (Comoros) www.snpt.km; and TRA (Oman) http://www.tra.gov.om/test1/index.htm.

3 In Europe, for example, Article 5a of the 1990 ONP Framework Directive, as revised (Council Directive 90/387/EEC of 28 June 1990, as revised) states that:
“In order to guarantee the independence of national regulatory authorities:

• National regulatory authorities shall be legally distinct from and functionally independent of all organizations providing telecommunications networks, equipment or services.
• Member states that retain ownership or a significant degree of control of organizations providing telecommunications networks and/or services shall ensure effective structural separation of the regulatory function from activities associated with ownership or control.”

4 This was the case in Portugal, where ICP was mandated to regulate the telecommunications, radiocommunications and the postal sector. Similarly, the Belgian Institute for Postal Service and Telecommunications (BIPT) deals with both sectors. In the Netherlands, a separate organization (RDR) was set up for radio administration, and another responsible for telecommunication and postal administration (OPTA). In Sweden, PTS, which was set up in 1993, was assigned several of the tasks previously handled by the operator, Televerket.

5Created by Cape Verde Government Resolution 1/2004 of 19 January 2004, available at http://www.icti.cv.

6 “Originally, the proposal to create a merged agency would have included SBA, as a reflection of the determination that multimedia services, including audio and video content, would be delivered via converged platforms such as the Internet or other packet-switched networks. But SBA retained its status as a separate agency, largely because its defenders argued that it had a unique function, as a content regulator, that was not shared with any of the other agencies, which were concerned with content neutral issues of network build-out and operation. Because of prevailing social norms in Singapore, the regulation of pornography and racial “hate” content remained a politically sensitive issue, and there was insufficient support within the government to complete SBA’s merger with other communications related industries.” ITU Effective Regulation Case Study: Singapore (2001), at 11, footnote 27.
See http://www.itu.int/itudoc/itu-d/publicat/sgp_c_st.pdf.

7 http://www.ofcom.org.uk.

8 http://www.europa.eu.int/comm/dgs/information_society/index_en.htm.

9 European Commission, Green Paper on the Convergence of the Telecommunications, Media and Information Technology Sectors, and the Implications for Regulation towards an Information Society Approach, Document COM (97) 623, at http://ec.europa.eu/archives/ISPO/convergencegp/97623.html.

10 Due to rapidly changing technologies, convergence and the new challenges of the liberalized markets, EU member states carried out a review in 1999 of legislative measures (the “99 Review”) and adopted a single, coherent new framework, consisting of six Directives (the “New Regulatory Framework”) that covers the whole range of electronic communications has been agreed and applied from July 2003 (with the exception of data protection applied from end October 2003).
See http://europa.eu.int/information_society/policy/ecomm/history/index_en.htm.

11 David Currie, Presentation at the 4th ECTA Regulatory Conference, 10 December 2003, available at http://www.ofcom.org.uk/media/speeches/2003/12/currie_20031210.

12See ARESEP (Costa Rica) http://www.aresep.go.cr/cgi-bin/menu.fwx; OUR (Jamaica) http://www.our.org.jm/; Ente Regulador de los Servicios Publicos (Panama) http://www.ersp.gob.pa/default.asp. Links to U.S. State PUC’s can be found at http://www.dps.state.ny.us/stateweb.htm.

13 Institut Luxembourgeois de Régulation (ILR), Annual Report 2003, at 18.

14 Rohan Samarajiva and Anders Henten, Rationales for Convergence and Multisector Regulation, World Dialogue on Regulation for Network Economies, WDR Discussion Paper 0204, March 2002, at 13-14, available at http://www.regulateonline.org/2003/2002/dp/dp0204.htm.

15 The merger of the U.K. regulatory authority Office of Gas and Electricity Markets (Ofgem), which combined the former Office of Electricity Regulation (Offer) and the Office of Gas Regulation, resulted in significant expenditures for the United Kingdom. WS Atkins Management Consultants, External Efficiency Review of Utility Regulators: Final report, February 2001, available at http://archive.treasury.gov.uk/pdf/2001/regulators_1902.pdf.

16 Tim Schwartz and David Satola, Telecommunications legislation in transitional and developing economies, World Bank Technical Paper No. 489, The World Bank Group, 2000, at http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2000/11/17/000094946_00110406110171/Rendered/PDF/multi_page.pdf.

17 Id.

18 Michel Kerf and Damien Geradin, Controlling Market Power in Telecommunications: Anti-Trust vs. Sector-Specific Regulation: An Assessment of the United States, New Zealand and Australian Experiences, Berkeley Technology Law Journal, Issue 14:3 (Fall 1999).

19 The system worked as follows: The Minister of Commerce advised the Government on establishing telecommunications regulation, and the competition authority, the Commerce Commission, was responsible for the supervision of the telecommunications market based on the Commerce Act. The courts played a greater role in the supervision of telecommunications regulation than in other countries that have sector specific regulations.

20 New Zealand, Ministerial Inquiry into Telecommunications: Final Report, 27 September 2000, available at http://www.teleinquiry.govt.nz/reports/final/final.pdf. In particular, New Zealand experienced major problems under the old “light-handed” regulatory regime with the length, cost and clarity of relying on courts to resolve access disputes, which hindered competition in the sector. Id. Section 3.7.1.

21 Hon. Paul Swain, Minister of Communications, Government announces ‘world-leading’ telecommunications reform, Media Release, 20 December 2000, available at http://www.med.govt.nz/pbt/telecom/response/index.html.

22 Damien Geradin, Controlling Market Power in Telecommunications: Anti-Trust vs. Sector-Specific Regulation, Mediterranean Telecommunications Forum on Regulatory Policies and Investment, 18-19 September, 2003.