ITUEC Project:Capacity Building in Regulation Banjul,September 2630

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ITU/EC ProjectCapacity Building in
RegulationBanjul,September 26-30

• Effective Regulationthe challenges of
  transitioning from a monopoly to a competitive
  environment

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Introduction

• Due to historical reasons,most utility services
  including telecommunications tended to be
  orovided under a monopolistic environment
• However,driven by a number factors,most markets
  worldwide are now reforming in order to permit
  competitive environments.Drivers for this have
  included policy shifts,technological
  changes,consumer demand,etc.
• The change from monopoly to competition, however
  brings with it various challenges that can be
  classified as regulatory,policy and operational

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Introdn contnd

• This presentation primarily deals with the above
  challenges but with specific focus on regulatory
  aspects.

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2. Typical Characteristics of
Monopoly

• In general,the incumbent telecommunications
  service provider will be wholly or partially
  owned by government
• The range of products on offer tends to be
  limited and at the same timethereis minimal
  flexibility in tariff options
• It is common to have delays in service provision
  and maintenance often resuling in non-optimal
  quality of service
• Investment in new infrastructure tends to lag
  behind demand

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3. Why ChangeMonopoly to Competition?

• There are several benefits that often result from
  competition
• reduction in tariffs closer to costs.
• usually competition drives operators to
• offer a bigger variety of services to
• consumers.
• reduced service provision times and time to
• repair faults.
• improved quality of service and network
  coverage.
• availability of innovative solutions.
• Increased investment into the sector
• Increased tax revenue to government

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4. Ideal Reform and Restructuring Path

• Development and approval of an appropriate new
  policy,thru stakeholder consultation and with
  clear targets as well as timelines for
  implementation.
• Where telecommunications and postal services are
  still provided by one entity,provide for
  separation and incorporation of new entities
  within thew policy.
• The reform process should also provide for
  establishment of an independent regulatory agency

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Reform contnd

• Review and provide for amendment of the
  legislation to enable implementation of the new
  policy.
• Liberalise the sector,particularly for value
  added services
• Depending on what option is included in the
  policy,if the incumbent is to be privatised,then
  it would be desirable to to appoint a Transaction
  Advisor to assist in the process

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Reform contnd

• Ideally the regulator should be established
  before before the privatisation process takes off.

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Essentials of Effective Regulation

• Notwithstanding the differences in
  telecommunications markets around the world,some
  basic principles of effective regulation have now
  been identified.These include
• Minimisation of regulatory intervention after
  competition is establishedunder this
  principle,it is recognised that decisive
  intervention in early stages of liberalisation is
  necessary so as to permit effective competition
  to emerge.However after this is achieved ,then
  the extent of regulation should be governed by
  state of development of the sector.

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Essentials contnd

• Harmonisation with regional and global
  standardsThere are some best practices that have
  emergeed regionaly and globaly over time, like
  price capping,and universal sevice fund and
  so for anew regulator there may be no need to
  re-invent the wheel.
• Introduction of competition In recognition of
  benefits of competition, its early introduction
  in the market is a good step.However regulatory
  involvement is necessary to ensure-licensing of
  service providers,network interconnection,preventi
  on of anti-competitive practices etc.
• Regulation by Principle There are now emerging
  practices at international level on how to use
  principles

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Efficiencies contnd

• for providing regulatory guidance under
  specific circumstances and leave the details to
  industry operators.
• Establishment of Operational EfficienciesThis
  principle is brought iout to exemplify cases
  under which attainment of operational
  efficiencies can enhance regulation.Examples
  include-electronic filingof applications,website
  establishment,and electronic publication of
  regulatory decisions.

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6. Basic Elements of a Competitive Environment

• Market Definition
• Provides the context under which competition
  can be analysed and will normally address the two
  elements of product and geographic
  area.Definition of a market is therefore vital.
• Barriers to Entry
• Barriers to entry may take different forms,but
  ultimately the key issue is that they limit
  competitive response.Examples includehigh
  fixed/capital costs,government restrictions etc.

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Elements contnd

• Market Power and Dominance
• Market share is used to define both the market
  power and dominance.The definition in respect of
  size will vary from country to country but it is
  an essential element in deciding the regulatory
  actions.
• Essential Facilities
• Where certain facilities can be termed as
  being essential, either because practical
  duplication is difficult due to technical or
  economic reasons or they are supplied on a
  monopoly basis,then the regulator will need to
  intervene to facilitate competition.Examples of
  essential facilities include local access loops.

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7. Challenges to transitioning

• The challenges and suggested remedies
  considered here are primarily from the regulatory
  perpective.
• Policy and Legal Framework Provisions
• It is essential that these are elaborate,
  clearcut,and provide the regulator with the
  tools to effectively act.Lack of independence
  for example can undermine effective
  regulation.Equally well, if there is no adequate
  clarity in the policy provisions,regulating the
  sector can be quite contentious.

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Challenges contnd

• Timing for establishment of the regulator
• Should be done in such a manner that the
  regulator is able to participate in key decisions
  being made at the time of openinbg up the market.
• Human Capacity Building
• For the regulatory agency ,this will need to
  be fast tracked if the regulator is to have the
  confidence and competence to oversee the sector.

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Challenges contnd

• Financial Adequacy and Independence
• This is another area which can weaken the
  regulator if there are no sufficient
  independent sources available to the regulator.
• Competition Policy and Legal Framework
• Establishment of the above should ideally
  preceed the transition from monopoly to
  competition.Absence of the foregoing creates a
  major challenge for the regulator in overseeing
  the sector.

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Challenges contnd

• Technological Neutrality
• Using the above approach by the regulator in
  matters of licensing is essential if one is to
  minimise some of the disputes that may arise
  during service provision by competing operators.
• Universal Access
• The need for specific regulatory intervention
  so as to ensure universal access is a common
  aspect for developing countries.Policy actions
  and strategies have to be designed early in the
  reform process in order to adequately cater for
  this issue.

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Conclusion

• The foregoing is by no means exhaustive in terms
  of detailing out the challenges,but hopefully can
  provide some useful insight as to which pitfalls
  one could avoid.

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