Economic regulation in the era of convergence

1
Economic regulation in the era of convergence
Mr. Herbert Fung Competition Affairs
Branch Office of the Telecommunications
Authority Hong Kong, China
18 May 2006
2
The trend of convergence

• We know convergence is happen in the following
  dimensions
• voice, video, data
• PSTN and IP traffic
• fixed and mobile traffic
• Local and international traffic
• network, content, application and services
• What should a economic regulator do (or not do)
  about these trends?

3
Implications of convergence on the market

• Shifting of focus from the network infrastructure
  layer to the application and service layer
• Existing bottlenecks are removed, new bottlenecks
  emerge
• New revenue streams replace the existing ones
• Embrace the change or be marginalized
• Network operators migrate into broader ICT based
  business models

4
What is economic regulation?

• Incentives not to ensure convergence happens,
  but to provide (nor not to dampen) incentives for
  convergence
• Welfare that convergence delivers what people
  want
• Efficiency that welfare is delivered in the
  most efficient manner
• Market and competition is the best way to provide
  incentives in delivering welfare efficiently

5
Regulatory principles in the convergence era

• Market driven intervene only in the case of
  market failure
• Proportionality minimum necessary remedy if
  intervention is needed
• Ex post rely on competition law instead of
  licence conditions as far as possible
• Technology neutrality no artificial regulatory
  barrier to convergence

6
Recent regulatory developments in Hong Kong

• Local loop unbundling (LLU) is to be withdrawn by
  2008 due to satisfactory last-mile rollout
• Retail market is fully liberalized. There is no
  dominant player and no pricing restriction in any
  retail market (fixed, mobile, broadband, pay-TV)
• VoIP is not artificially deemed as external
  traffic, and therefore it is not subject to
  discriminatory termination access charges since
  2006

7
Major policy reviews in progress

• Communications Authority merging telecom and
  broadcasting regulation
• Spectrum policy review 3G, WBA, digital
  broadcasting, spectrum auction, trading and
  liberalization
• Fixed mobile convergence unified
  interconnection environment, inter-modal number
  portability, etc.
• Universal service both fixed and mobile
  operators contribute in terms of funding and
  service provision
• Numbering make sure numbering restrictions do
  not inadvertently create competition barriers

8
Investment incentives

• Equal emphasis between infrastructure investment
  and RD investment
• Reciprocal relationship between NGN networks and
  innovative applications
• Harmonizing rules on antitrust and intellectual
  property rights
• Turn competition, innovation and investment into
  a virtuous cycle

9
Conclusion

• What economic regulation?
• The best way to deliver economic benefits is to
  deregulate
• What competition management?
• The most competitive environment is unmanageable,
  and not to be managed

10
Thank You
http//www.ofta.gov.hk