As the telecommunications sector continues to undergo changes caused by privatization, liberalization, and convergence, it becomes increasingly important for countries and regulators to have an effective and efficient dispute resolution system1. The failure to resolve disputes quickly can limit competition, cause delays in the introduction of new services and infrastructures, block or reduce investment in the sector, and impede liberalization and development of the sector.2 The appropriate dispute resolution mechanisms, however, vary depending on the stage of a country’s telecommunications market and regulatory development, regulatory framework and approaches, as well as general business culture.
The following sections review the various dispute resolutions mechanisms employed in the telecommunications sector, with particular emphasis on regulatory adjudications and the various mechanisms of alternative dispute resolution. In addition, Section 7.4.1.3 tracks the systems of dispute resolution available to foreign telecommunications operators, mainly international investment disputes and trade dispute arbitrations.
Overview of the main types of disputes in the telecommunications sector
Disputes in the telecommunications sector generally arise out of various circumstances. However, disputes with the greatest impact on telecommunications investment and growth typically relate to: (i) interconnection; (ii) relations between service providers and with consumers; (iii) liberalization; (iv) foreign investment and trade; and (v) radio frequency use.
Interconnection disputes are the most prevalent type of disputes between service providers, as operators of all different types of access networks (e.g., fixed-mobile, wire line-wireless) must be able to interconnect with each another. (See Box 7-8.) Many aspects of the interconnection relationship involve key policy considerations for the telecommunications sector; therefore, most regulators consider it important to maintain some form of regulatory oversight of the negotiation and implementation of interconnection arrangements In recent years, for example, an increasing issue regarding mobile interconnection has been the often high rates charged by mobile providers to terminate traffic on their networks. As a result, many regulators have made determinations that mobile providers have a monopoly over their networks and should be regulated. Regulators have opted between various mechanisms in order to strike an appropriate balance between the need to protect the interests of new market entrants while also leaving room for parties to negotiate agreements on their own. Among such approaches are: (i) prescribing interconnection arrangements on an ex ante basis; (ii) establishing interconnection guidelines; (iii) approving reference interconnection offers (RIOs) or model interconnection agreements; (iv) policing operators with significant market power; and (v) generally overseeing the interconnection process.
Disputes between service providers and consumers are also common and occur in every jurisdiction. These conflicts principally stem from the consumer’s lack of bargaining power or the absence of competitive options to the incumbent operator. The main type of disputes arising between consumers and service providers derive from the following causes: (i) service charges; (ii) billing; (iii) payment of charges; (iv) “slamming”;3 (v) quality and terms of service; (vi) violation of privacy; and (vii) false or deceptive advertising.4 To ensure effective resolution of consumer disputes, regulators are using a variety of mechanisms, ranging from requiring service providers and consumers to initially resolve disputes themselves (the case of the United States and Botswana); using ombudsmen type institutions (as the telecommunications industry Ombudsman in Australia); and even employing the broadcast media (as is the case of the Nigerian “Consumer Parliament” evidences). For a further description of these consumer protection mechanisms see section 7.3.2.
In addition, disputes also may arise as a consequence of introducing competition into the telecommunications market. The liberalization process often undermines the established financial and business interests of incumbent network operators. These liberalization-related disputes generally derive from the incumbent’s desire to protect and maintain its dominant position in the market. Similarly, investment and trade disputes often occur where regulatory reforms or actions diminish the value of private-sector interests. These types of disputes have the potential to internationalize disputes arising between regulators and foreign investors in the telecommunications sector. Investment disputes typically stem from complaints by investors, operators, and service providers about early termination of exclusive rights, licensing of new competitors, new rate-setting structures and changes to licences. Current trends indicate a recent rise in international investment disputes within the telecommunications sector, based primarily on provisions of bilateral investment treaties. Trade disputes in the context of the WTO, on the other hand, are instituted by member states against other member states primarily due to lack of compliance with obligations assumed under the GATS and related documents.
Finally, radio frequency allocation and assignment disputes are dealt with internationally through mechanisms available through the ITU, particularly the Radiocommunications Bureau (ITU-R). Domestically, disputes may arise from interference, licence conditions, and pricing.
Approaches towards dispute resolution
Dispute resolution can be addressed from two separate approaches, namely through official and non-official mechanisms. Governmental authorities, statutory bodies and courts commonly discharge official functions in dispute resolution, their authority deriving principally from the constitutional, legislative and regulatory framework applicable to the telecommunications sector. Non-official dispute resolution – or alternative dispute resolution (ADR) – consists of mechanisms such as arbitration, mediation, and negotiation, where the individuals associated with these processes do not discharge any executive or judicial duties.
A well-resourced “official” sector, utilizing regulatory adjudication and the courts, is crucial to a successful dispute resolution environment. Alternative approaches, however, are often useful to deal with the lack of available regulatory or judicial resources, or where less formal techniques offer particular advantages.5 Therefore, it is important to identify those circumstances in which the use of each mechanism is more appropriate.
ADR mechanisms, such as arbitration and mediation, traditionally have been associated with solving private and commercial disputes, while regulatory adjudication has been understood as best suited for public policy issues. This compartmentalization may be too strict. As the case of interconnection disputes in the United States and Jordan evidence, regulators are increasingly using arbitration tools, either informally or formally. Moreover, in light of the rapid changes in the telecommunications sector, countries such as Saudi Arabia have instituted highly flexible approaches to determine which mechanisms (i.e., mediation, arbitration, or regulatory adjudication) to adopt for resolving specific disputes.6
From a different perspective, other countries, as is the case of the United Kingdom, take the position that ADR techniques can be employed where disputing parties have similar levels of market power, since in that case parties are more likely to negotiate solutions that meet their mutual or on-going needs.7 In such cases, regulatory intervention is more often considered necessary where disparities of market power mean that one party effectively requires the protection of the official sector from abuse of process by the other.8
Thus, when designing and evaluating the role of the official sector in dispute resolution processes, the concern should be:
- Less about rigid lines between official and non-official sectors, and
- More about seeking the roles in which the official sector can best use its efforts and presence to assist in the speedy resolution of disputes – and in a manner consistent with regulatory policy, the rule of law, and due process.9
As will be seen in the Sections 7.4.1.1 and 7.4.1.2, due to differences in social, legal, and commercial traditions the approach for selecting a method of dispute resolution varies considerably between jurisdictions; even with regard to similar types of disputes. The following are certain elements to consider when making such a determination:10
- Drawing on "non-official” resources
The commercial world’s extensive experience with arbitration and other ADR techniques can help policy-makers and regulators encourage the use of non-official dispute resolution approaches in a regulated industry. Commercial arbitration illustrates how regulators can keep control over important policy issues and also ensure the usefulness of their dispute resolution systems – while easing their workload burdens.
- Quality control over official and non-official processes
The type of dispute resolution process that is chosen influences what role regulators and courts will play in dispute resolution. Regulatory adjudication and arbitration require court oversight of procedures, because the parties have relinquished control over the outcome to the adjudicator or arbitrator. Regulatory adjudication also may be subject to various levels of “internal” agency and “external” court review for substantive appeal. It is important, however, not to undermine the credibility or timeliness of regulatory adjudication through over-use of review procedures.
The success of voluntary negotiated processes, including mediation, depends on their freedom from official review. Even where doubts exist about the efficacy of voluntary negotiations, regulators may be able to provide incentives for good faith engagement in negotiations instead of imposing substantive decisions.
- Confidence factors in relying on non-official approaches
There are several important factors in gauging whether non-official dispute resolution approaches are as mature and suitable as regulatory adjudication or court action in any given setting. These factors include how professional the arbitration and mediation boards are, how well developed the arbitration and mediation institutions are, and the effective use of the oversight procedures.
Regulatory Adjudication
Regulatory adjudication refers to the legal powers exercised by regulators pursuant to the resolution of the disputes brought before them. Currently, regulatory adjudication is recognized as the cornerstone of dispute resolution in telecommunications sector. However, regulatory adjudication is a relatively new mechanism since until recently, with the exception of a few countries, regulatory and policy-making responsibilities were concentrated in a single governmental structure. With liberalization and the introduction of competition in the telecommunications market, these functions were separated and regulatory authorities were created and charged with responsibility for overseeing and regulating the telecommunications sector.
In the United States, a country with long-developed administrative tradition, the FCC interprets, coordinates, and adjudicates policy issues, as well as disputes arising out of them. The FCC’s internal processes for dispute resolution include a final decision handed out by a Commissioner or a panel of Commissioners. Such decisions may be subject to internal review by the agency within a prescribed period, and can also be appealed before the U.S. Court of Appeals. In Canada, the CRTC follows court-like dispute settlement procedures. An Industry Committee consisting of parties and experts also has been established to resolve most telecommunications issues. Recourse to the CRTC is taken only when consensus cannot be reached by the Committee. In the United Kingdom, Ofcom follows a methodology for dispute settlement that involves the placing of evidence into a complaint before initiating a formal investigation. Investigation into the complaint involves clear identification of a relevant obligation or abuse under the Competition Act and deadlines are given for settlement of a complaint or dispute.
Many countries with newer regulatory authorities also have empowered such agencies to consider and adjudicate disputes among telecommunications market players. In Morocco, for example, the regulator has been given broad power over interconnection dispute resolution (Box 7-9).
Advantages and disadvantages of regulatory adjudication
When effectively and efficiently applied, regulatory adjudication has certain distinct advantages.
- It can draw upon the legitimacy of the official sector, as well as the benefits of its enforcement mechanisms;
- A well-staffed regulatory agency can access staff resources with different expertise (e.g., technical, economic, and legal) to provide input into decisions;11
- The adjudication process can give the public a channel to provide input into the decision-making process.
However, the potential drawbacks to regulatory adjudication can be significant, and thus warrant paying close attention to the alternative approaches of dispute resolution. Some of these disadvantages are the following:
- It can result in lengthy and cumbersome procedures;
- Possibility of misuse of regulatory intervention by market-players, particularly incumbent operators, as part of a strategic response in order to hinder competitive conditions;
- Legislative mandates dealing with issues of sector development, such as convergence, can reduce the regulator’s flexibility in confronting significant disputes and sector issues; and
- A tendency of regulatory bodies to fragment or compartmentalize decisions into separate proceedings, as regulatory adjudication is the response of a single regulatory body, based on a narrow jurisdictional mandate and limited enforcement powers, to individual claims defined by parties on specific legal grounds.
Alternative Dispute Resolution
Alternative Dispute Resolution (ADR) encompasses different processes and procedures directed at settling disputes by means other than litigation and administrative adjudication. ADR methods include arbitration and mediation, and several other hybrids and variations.12
ADR is based on the general premise that, where possible, it is more beneficial for private parties to settle disputes by private process and negotiated agreement as opposed to contentious litigation or regulatory adjudication. These methods have the benefit of preserving and, in some cases even enhancing, business relations that otherwise may be negatively affected by an adversarial process.13 Moreover, ADR can aid in saving costs associated with litigation. ADR procedures may either take the place of formal adjudication or complement adjudication and litigation by producing settlements within those fields. Flexibility is thus another principal advantage of ADR, as it usually allows parties to address different