International Regulatory Trends

1. International Regulatory Trends • Sector specific independent regulators separate from line ministries • Competition authorities have been given an enhanced role in the communication sector • Some countries are beginning to look at integration of regulatory institutions because of convergence

2. Two ways to insure regulatory independence • Full privatization of the incumbent • Establish a regulator that is separate from industry and from the Ministry or other governmental department with ownership share in incumbent • Driven by • WTO • EU directive

3. Competition authority • Main responsibility to deal with anti-competitive behaviors like mergers, cartels, predatory pricing • Not given major responsibility for telecom regulation • Takes action after the fact—need rules in place to prevent anti-competitive actions • Social features of regulation don’t fit with competition rules • Lack of professional knowledge specific to the industry

4. Relationship between competition authority and regulatory body • Authority to competition authority—NZ • Authority to regulatory body to apply competition rules—rare; UK as an example (OFCOM) • Coordination mechanisms—Switzerland, Germany, France, Portugal, Denmark, Sweden, Mexico, Spain have official rules in place for coordination and or consultation • Nothing formal in US, Canada, Japan

5. Regulatory responses to competition • Asymmetrical regulation of dominant carriers • Forbearance for non-dominant carriers • Self-regulation (Australia’s Communications Industry Forum sets technical standards, etc.); OFCOM in the UK able to allow self-regulation in any area

6. Convergence • Cable operators allowed to provide full PSTN services in 21 OECD countries; allowed in EU since January 1998 • Move toward horizontal regulatory approach • US, Canada, Japan, Switzerland, UK, and Italy have same regulator for telecom and broadcasting

7. Status of regulator in 29 OECD countries • 22 countries with regulator structurally separate from Ministry • Mexico and Czech Republic have functionally separate regulatory body within Ministry • Japan, Korea, Turkey have regulatory body that is still part of Ministry • New Zealand had no sector specific regulatory body—only the Kiwi Share Obligations on Telecom New Zealand—until April 2002—created a Telecom Commissioner within the Commerce Commission

8. Measures of regulatory independence • Is it separate from Ministry? • Who appoints the head of the regulatory body? Are terms guaranteed? What is structure of decision making within the regulatory body? • To whom does regulator report • How is it financed • Can decisions be overturned, other than by the courts? • How does the regulator recruit employees?

9. Reporting • Most popular is reporting to Ministry • Reporting to legislature (Austria, Germany, US) • Some countries have no reporting requirements except issuance of annual report

10. Financing • Fees used by 15 OECD countries • Ireland, Spain, Luxembourg, and Sweden have a levy on operators • Some countries use a combination of fees and government appropriations • Australia and France have full financing by government appropriation

11. Appointment and make-up of regulator • In most OECD countries, head(s) of regulatory body appointed by Minister or President • Decision making authority in 22 OECD countries is either a single person, or collegiate body which decides by simple majority • Belgium, Czech Rep, Denmark, Germany, Hungary, Iceland, Ireland, Luxembourg, Norway and UK have one person

12. Ability to overturn regulatory decisions (other than courts) • Most OECD countries, none • Can be over-ruled in six countries: • Canada, Hungary, Mexico given ministry or cabinet power to overturn decisions • Denmark—Telecom Complains and Telecom Consumer Boards can overturn • Norway—Telecom Appeals and Advisory Board and Ministry of Labour and Governmental Affairs • UK—Monopolies and Mergers Commission

13. Regulatory responsibilities • Approval of mergers—competition authority • Licensing—either ministry or regulator; growing tendency for regulator to do so • Interconnection—mostly regulators • Spectrum management and allocation—seems to be shared between ministry and regulator • Numbering—planning done by either ministries or regulators; allocation done mostly be regulators

14. Trends in pricing and tariffing approval • Increasing use of price cap regulation • Mostly applied to incumbent, or to carriers with market power; mostly applied to basic voice services • Finland, Iceland, Luxembourg have no specific telecom pricing regulation • In Australia, the competition authority regulates the incumbent through price cap regulation

15. More Trends • Universal Service • Framework in place through telecom law • Not in Czech Republic, Finland, Hungary, New Zealand, Ireland • Incumbent responsibility • UK, Norway, Spain, Iceland, Mexico, Sweden • Shared responsibility—regulator determines cost and the cost allocation among telecom operators • Service Quality • Monitoring done by regulator in most instances • No monitoring in Turkey and Japan