Options for Contracting out Services
Acknowledging that regulatory authorities may sometimes be best served by contracting certain functions to outside experts, many regulators are empowered to enter into contracts with outside organizations for specific functions. It should be noted that such outside experts may be private sector individuals or companies, but may also be assigned to the regulator by other branches of government. A typical formulation of the authority granted to the regulator is found in Bahrain’s Telecommunications Law, which authorizes the Telecommunications Regulatory Authority’s General Director (the head of the TRA’s staff) to employ such consultants as will enable the TRA to meet its obligations under the Law, while also taking budget considerations into account.1 Another arrangement is for the outside expertise to be provided by a regional regulatory authority, as is the case in the eastern Caribbean states. In that case, the Eastern Caribbean Telecommunications Authority (ECTEL) serves its members as a shared regulatory body and provides specific expertise, such as tariff reviews or impact assessment studies.2
In addition to hiring outside experts, many regulators are also empowered to delegate their powers not only to particular divisions within the authority, but also to outside experts. In Singapore, the IDA is empowered to create committees for purposes which the IDA feels would be better managed or regulated by a committee. Such committees may be comprised of personnel from either within or outside the IDA, and the regulator may delegate any of its authority to such committees, with the exception of the power of delegation.3 The Australian Communications and Media Authority (ACMA) may also delegate powers, but to a more limited pool of experts, namely those within the ACMA or those made available to the ACMA by other government authorities.4 Other examples of regulators who may delegate some or all of their authority are found in Bahrain,5 Hong Kong (SAR),6 India,7 and Tanzania,8 among others. The power to delegate provides the regulator with additional flexibility to determine the most effective or efficient method for regulation of any particular aspect of the telecommunications sector.
In addition to hiring outside consultants and delegating authority, another method of outsourcing is the establishment of advisory or consultative committees. Advisory committees are generally comprised of interested parties or key stakeholders as identified by the regulator. The advisory committee structure provides regulatory authorities with outside expertise that can be drawn upon in the course of normal business, but which are not employed to carry out a particular regulatory task or empowered with any delegated authority role. Regulators empowered to employ such advisory committees include Australia,9 Bahrain,10 Hong Kong (SAR),11 and the United States.12
Consultative committees generally do not have the power to carry out actions on behalf of regulatory authorities. However, they may provide valuable input to the regulators in devising positions and strategies on domestic and international issues. In Hong Kong (SAR), for example, the Office of the Telecommunications Authority (OFTA) currently has advisory committees addressing radio spectrum, numbering, standards and consumer issues.13 All four Hong Kong (SAR) committees provide advice on domestic issues, while the spectrum and standards committees also assist OFTA in the formation of positions and inputs to international fora. Similarly, the U.S. FCC currently has eight advisory committees, including committees on consumer issues, diversity, media security and reliability, network reliability and interoperability, and numbering.14 The Australian ACMA provides a standard formulation of the authority to establish advisory committees, in which it states, “[t]he ACMA may, by writing, establish advisory committees to assist in performing any of its functions,” and furthermore the ACMA holds the authority to appoint the committee members as well as revoke membership, and provide the committee with specific instructions.15
The ACMA Act also notes that committee appointments are not appointments to public office under the terms of Australian law governing remuneration, which brings about another common feature of advisory committees: members are not paid by the regulatory authority for their service. Instead, they provide input to the regulator in order to shape regulatory decision-making, whether for the good of the telecommunications market as a whole or for the good of the stakeholder(s) that they represent.
Reasons for Outsourcing
As more regulatory authorities have been established or reorganized in recent years, outsourcing certain regulatory functions has served as a means for the regulators to perform their duties while building internal capacity and ultimately minimizing the need of outside experts. In the cases of Bahrain and Uganda, a consulting firm was contracted to carry out many of the functions of the regulators as they developed their own internal competencies, which helped to get the regulators quickly functioning after their establishment. In other cases, it may be that a particular staff competency is currently lacking and the regulator determines such a role is better filled by an outside consultant. For example, in the Cayman Islands, an outside consultant was hired to serve as general counsel.
In both of these cases, the deployment of external resources in a regulatory authority can be coordinated so as to maximize opportunities for knowledge transfer. In particular, consultants and regulatory authority personnel can be integrated into teams that address weaknesses in the authority’s capabilities. Such arrangements provide opportunities for the regulatory authority personnel to become more familiar with the relevant issues and stakeholders, and to learn from the consultants how best to address such issues. In order to maximize the potential for knowledge transfer, regulators employing external resources should consider three primary factors, and at different phases of the integration:16
- Traits of the consultant or expert, such as perceived reliability and motivation, which are important to ensuring successful transfer of knowledge at the initiation of any such collaboration;
- Traits of the recipient, such as ability to absorb knowledge, which affects how well the authority personnel will employ the knowledge gained;
- Level of understanding of subject matter, which can affect the effectiveness and difficulty of knowledge transfer at all times.
As the knowledge transfer process continues and regulatory authority personnel are better able to take on the roles initially assigned to consultants, the authority gains the freedom to redeploy the consultants in other areas in which their skills may be needed.
Regulators, both established and new, may also choose to outsource certain functions not because they lack the internal capacity, but because such functions may be best provided by outside experts. In this respect, outsourcing regulatory functions is similar to the outsourcing of business functions: focused on functions and processes that have been problematic and have led to dissatisfaction.17
It is also not uncommon for regulators to contract outside experts on an ad hoc basis for specific short-term needs. For example, regulatory authorities commonly outsource parts of tender processes, such as the development of terms of reference, feasibility studies or evaluation of bids. In Botswana, the regulator employed consultants in 2004 to assist in the evaluation of bids to procure an automated frequency management and monitoring system. Similarly, regulators have engaged the services of consultants to assist in bid evaluation for mobile licence tenders in many countries, including Jordan and the Maldives.
In addition to providing a competency that the regulator may lack, the employment of impartial external analysts for tasks such as bid evaluations may help to avoid conflict of interest issues in environments where the regulator is populated by individuals with close ties to or histories with bidders. This concern extends beyond bid evaluation to any issue for which there is reason to suspect that the regulator may not be able to make an impartial decision, or to cases in which the regulator’s actions would be further legitimized by being based on external analysis and evaluation.
While not quite on an ad hoc basis, outside experts can also be contracted to address short term needs in conjunction with a particular project. For example, a concession contract may include a provision requiring outside consultants to monitor adherence to the terms of the contract or to ensure the quality of the service being offered by the concessionaire. Furthermore, outside experts often have established networks of expert contacts that enable them to gather relevant information and best practices in a more effective and efficient manner than a regulator, particularly a new independent regulator.
On an operational level, it is also not uncommon for regulatory authorities to outsource certain other functions, such as security, maintenance and cleaning, as well as employing outside contractors to fill temporary staff vacancies or to recruit support personnel.
Outsourcing can also involve different types of deliverables from the outside experts. In some cases, consultants provide a set of key issues and potential options for the regulator to take, but leave the ultimate decision up to the regulator. In other cases, the consultant may be offered the opportunity to provide binding recommendations that the regulator has no choice but to implement.
Outsourcing can be a useful tool, allowing regulators to act more independently and efficiently, providing impartial analysis of key issues or processes, and augmenting the regulator’s own capacities (or lack thereof). Seeking advice from concerned stakeholders provides the regulator with important insights into the current state of the telecommunications sector as well as the possibilities for its future.
ENDNOTES
1 Bahrain, Legislative Decree No. 48 of 2002 Promulgating the Telecommunications Law, Chap. 4, Sec. 14.
2 Lorenzo Bertolini, World Bank Group Private Sector Development Vice Presidency, Contracting Out Regulatory Functions, April 2004, at 3.
3 Infocomm Development Authority of Singapore Act (Cap. 137A), Act. 41 of 1999, Sec. 8.
4 Australian Communications and Media Authority Act, 2005, Section 51.
5 Legislative Decree No. 48 of 2002 Promulgating the Telecommunications Law, Chap. 2, Sec. 3 (d) (2).
6 Hong Kong (SAR) Telecommunications Ordinance (2000), Cap. 106, Sec. 6.
7 The Telecom Regulatory Authority of India Act, 1997 (No. 24 of 1997), Chap. VI, Section 33.
8 Tanzania Communications Regulatory Authority Act No. 12 of 2003, Section 21.
9 See http://www.acma.gov.au/ACMAINTER.10289722:STANDARD:1475878828:pc=PC_1514.
10 Legislative Decree No. 48 of 2002 Promulgating the Telecommunications Law, Chap. 2, Sec. 3 (d) (2).
11 See http://www.ofta.gov.hk/en/ad-comm/main.html.
12 FCC Advisory Committees are listed on the FCC’s web site at http://www.fcc.gov.
13 OFTA Advisory Committees, available at http://www.ofta.gov.hk/en/ad-comm/main.html.
14 Federal Communications Commission, at http://www.fcc.gov.
15 Australian Communications and Media Authority Act, 2005, Section 58.
16 Adapted from Gabriel Szulanski, “The process of knowledge transfer: A diachronic analysis of stickiness,” Organizational Behaviour and Human Decision Processes, Vol. 82, Issue 1, May 2000, at 9-27.
17Michael Sinclair, Telecommunications Contracts: Outsourcing, in Telecommunications Law and Regulation, (Ian Walden and John Angel, eds., 2005), at 268.