From Telecom Policies to e- Economy

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From Telecom Policies to e- Economy

• Professor William H. Melody
• Managing Director, LIRNE.NET
• melody_at_lirne.net, www.lirne.net
• Presentation to
• Seventh Conference on Technology Policy and
  Innovation
• Connecting People, Ideas, and Resources across
  Communities
• Monterrey, Mexico, 10 -13 June 2003

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Characteristics of 21st Century Economies

• Driven by the services sectors
• Founded on information/communication networks
  next generation Internet
• Dependent on effective reforms in the telecom
  sector information infrastructure
• Strengthening links among local, national,
  regional, internatonal networks and markets

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Stages of Telecom/Information Sector Reform

• Telecom Liberalization (Participation, Univ.
  Access)
• Expanding Network Capacity (Broadband)
• Preparing the Network Foundation for New Services
• Developing New Services - killer applications!
• Applying Services Productively in Different
  Societies
• Telecom Reform Regulation Key Driver for
  Implementing Policy Reforms for the e-economy

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The telecom sector value chain
Equipment Supply
Telecom Infrastructure
Service Development
Competitive Markets
Monopoly/duopoly/oligopoly
Competitive Markets
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Significance of Network Unbundling

• Industry Sectors - Equipment, Operator Networks,
  Services
• Fixed and Mobile
• Basic Network Layers
• Content
  Communication Services
  Network OSS Management Raw
  Facility Capacity
  
  
  

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The Dimensions of Convergence on the Information
Infrastructure
Convergence Sectors

• Drivers of Convergence
• Technology
• Industry-Supply
• Market-Demand
• Policies/Regulation
• Industry Specific
• Convergent

• Applications
• Finance
• Commerce
• Education
• Health
• Publishing
• Manufacturing
• etc.

Computing
Content
Telecom
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Criteria for Economic Growth
Regulation Catalyst for, or Constraint upon
Growth?
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Progress with Telecom Reform

• Now 120 Countries with Separate Telecom
  Regulatory Authorities
• WTO Commitments to Liberalization
• Industry Specific Focus of Reforms
• Successes, Failures, Unanticipated Difficulties,
  Continuing Delays
• Regulatory Reform is Proceeding at a Slower Pace
  than Technology Development or Market and Service
  Potential

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Progress with Telecom Reform

• Regulation is the limiting factor constraining
  growth
• It is not a simple matter of removing regulations
  or eliminating regulators. It is enhancing their
  competence and credibility.
• Sound regulatory foundations are needed to
  attract investment, foster applications of new
  technologies and development of new services.
• The speed of regulatory reforms must increase and
  they must be directed to providing a foundation
  for network-based e- Economies.

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Information Infrastructure Investment 1990s

• Mobile - licenses - operating spectrum
• - network development
• Privatising telecom incumbents
• - licenses operating IPO
• - network development obligations
• Competitive network operators
• - fibre transmission
• - city / business LANs
• Software, services and content (e.g., Internet)
  
  

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Information Infrastructure Investment
Deficiencies 21st C

• Local - basic services access
• - broadband access
• Universal access - fixed
• - broadband
• Internet - local services and content
• Applications - e-economy e-society

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Policy, Regulation and Network Investment

• Licensing - paying for the privilege
• Annual Fees and charges
• Restrictions on investment opportunities
• Price and/or profit regulation
• Policy regulatory risk

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Assessing the Mixed Results of Market
Liberalization

• Successes, failures and frustrations
• Learning and adjustment?
• Naivite and market failure?
• Government failure in establishing the
  policy/legislative frameworks?
• Regulatory failure bottleneck, rather than
  facilitator?
• Inevitable market failure?

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Unresolved Network Market Issues

• Public Resource Infrastructures for Telecom
  Networks - Rights of Way, Spectrum, Numbers,
  Names
• Interconnection
• Termination Number Monopolies
• Access Limitations in the Face of Positive
  Externalities
• Leverage Opportunities for Monopoly Nodes in the
  Network

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Elements of Policy and Regulatory Risk in
Information Infrastructure Development

• Credibility regulatory independence from
  political intervention on substantive issues
• Credibility Regulatory independence from
  incumbent monopoly power
• Transparent processes
• Accountability for performance
• Competence and skills
• Commitment to implement policy objectives
• Evident fairness

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Can Policy/Regulatory Structure Reduce Investment
Risk?

• Morocco - licensing for mobile rollout
• Chile - making rural areas financially viable
• Denmark - minimizing barriers to participation
• Korea - multi-faceted programme promoting
  broadband rollout
• Canada innovative applications, wide
  participation, universal access
• Botswana world model for credible regulation

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Are Policy/Regulatory Structures Increasing
Investment Risk?

• Mexico Telmex/SBC monopoly power
• South Africa Telkom/SBC monopoly power
• US - tied up in administrative legal knots
• Bangladesh - political nightmare
• Ireland Celtic Tiger of Europe in IT slugs in
  Telecom

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Shifting Policy/Regulatory Priorities to
Stimulate Investment

• From supply of network facilities to stimulation
  of demand to justify investment
• From physical capital to human capital
• - awareness, skill, capabilities
• - applications by individuals
  organisations
• Diverse sources of private and public investment
• - operators, service providers,
• - intermediaries (e.g., Telecentres), user
  applications

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Regulatory Relations Affecting Sector Investment
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NGI - High Speed Access

• Role of the Market
• Digital Divide
• Role of Government
  Promote Competition
  Direct Regulation
  Public Sector Applications
  Public Investment - eg., Broadband
• At What Level Should Govt Intervene?

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Moving to Convergence Regulation

• Security, Privacy
• Intellectual Property Rights
• Digital Signatures Contracts
• Micro payments and Funds Transfer
• Network Quality - eg., e-commerce standards
• Consumer Protection
• More

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Paths to Universal Access

• Voice - prepaid mobile
• Internet, e-economy, e-society
• - fixed wireless network extensions
• - new operators energy, transport
• - radio and TV distribution networks
• - retail service suppliers, ISPs, VANS
• - greater role for intermediaries

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Internet Governance

• For the next Generation Internet-based
• e-Economy
• In 2002 ICANN president Stuart Lynn proposed that
  government representatives be appointed to Board
  positions.
• ICANN, which was created to save the Internet
  from governments, is now turning to governments
  to save ICANN.
• Michael Froomkin

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Internet Governance

• Direct Internet-specific issues, eg., ICANN
• ICT sector convergence and information
  infrastructure development issues, e.g., national
  telecom regulators-mach 2
• Trade- related issues in the e-economy, e.g.,
  WTO, WIPO
• Challenge Making regulatory institutions
  credible at both national and international
  levels.

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Capacity building Actions

• Build institutional networks for mutual
  development local to international
• Strategic management in a dynamic ICT environment
• Experiment the core of innovation
• Stimulate demand for skills

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Capacity building Requires Investment in Human
Capital

• Policies to direct, enable support
• Institutions to train sustain
• Programmes for the development dissemination of
  skills
• Programmes for the application maintenance of
  skills

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Capacity building for Information Societies

• Policy analysis regulation
• Strategic analysis management
• Innovation, experimentation flexibility
• Demand-led diffusion of core skills
• Network linkages

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Infrastructure For Digital Economies

• Higher Capacity Facilities - Broadband?
• Access to High Speed Networks?
• Access to Minimal Level of Universal Services?
• Access to Minimal Levels of Information?

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Characteristics of Information Networks

• High fixed costs and economies of scale
• Specialized monopolies and destructive
  competition
• Extreme forms of price discrimination
• Failure to serve segments of the polulation
• Failures of coordination across networks
• Positive network externalities efficiency
• benefits go far beyond the limits of private
  markets

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The Foundation for Efficient Markets

• Market theory all parties are fully informed,
  and information is available at minimum cost
• Is publicy requiring universal access to
  substantial levels of information necessary for
  markets in all sectors to function efficiently?
• Will market failures in information markets cause
  failures in services and product markets?
• If so, network access to information will be a
  new critical infrastructure for network economies

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Proactive Policy Regulation

• Create a favourable investment environment for
  physical human capital
• Minimize barriers to participation
• Facilitate demand as well as supply
• Apply skills and strategic management to achieve
  the spirit of the policy objectives
• Can only be done if regulatory structure is
  transparent and credible

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World Dialogue on Regulation for Network
Economies

• Mission
• to facilitate an international dialogue that
  generates and disseminates new knowledge
• on frontier issues in regulation and governance
• to support the development of network economies

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World Dialogue on Regulation for Network Economies

• Activities
• Research on the annual theme
• Dialogue www. Regulateonline.org
• - e-Brief
• Expert Forum
• Report

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World Dialogue on Regulation for Network
Economies (WDR)

• Dialogue Theme 2002
• The Next Step in Telecom Reform
• ICT Convergence Regulation or Multi-sector
  Utility Regulation ?

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World Dialogue on Regulation for Network
Economies (WDR)

• Dialogue Theme 2003
• Stimulating Investment in Network Development
  Roles for Regulators

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World Dialoge Theme 2002

• ICT Convergence
• Digitalization of the network
• Mobility
• Next generation Internet
• E-commerce
• Media integration
• Restructuring of industries

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World Dialogue Theme 2002

• ICT Convergence Regulation
• Access to communication channels and access to
  content
• New issues of competition and monopoly
• Privacy, security, IPR
• Reducing digital divides?
• Can content regulation be avoided?
• The most effective role for national telecom
  regulators?

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World Dialogue on Regulation for Network
Economies 2003 Research Partners

• Centre for Tele-Information, TU Denmark
• Economics of Infrastructures, TU Delft, NL
• LINK Centre, Wits University, S.A.
• Media_at_lse, London School of Economics

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World Dialogue on Regulation for Network
Economies 2003 Institutional Partners

• infoDev, World Bank
• ITU, BDT
• IDRC Canada
• LIRNE.NET
• Research Partner Universities

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World Dialogue Theme 2003

• Stimulating Investment in Network Development
  Roles for Regulators
• Defining and Implementing Regulation to
  Facilitate Sector Investment in Network
  Development
• The Challenge Creating regulation that leads
  rather than lags technology and market
  developments, providing a catalyst for investment
  and growth in network e-economies?

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World Dialogue on Regulation for Network
Economies

• Participate in the Dialogue review and comment
  on the research, www.regulateonline.org
• For more information contact
  Merete Henriksen, WDR
  Coordinator, henriksen_at_lirne.net
  Tel. [phone] Fax [phone]
  
• LIRNE.NET, www.lirne.net
• A Strategic Collaboration for applied research,
  training, policy and regulation support, relating
  to information infrastructure and new network
  economy development
• Center for Tele-Information (CTI), TU Denmark
• Economics of Infrastructures, TU Delft,
  Netherlands
• LINK Centre, Wits University, South Africa
• Media_at_lse, London School of Economics, UK