Technology Innovation and Regulation of ICTs - Assignment Example

Running head: Regulatory Theory: Innovation and Regulation of ICTs Insert         Insert Grade Insert 16th. January. OUTLINE Introduction Is regulation necessary, or can all the benefits claimed for it, be achieved through the promotion of competition alone? Benefits of promoting competition in the ICTs sector Conclusion Innovation and Regulation of ICT Introduction Information communication technology has become popular in most organizations. Generally, ICT involves communication device or application, which encompasses television, radio, computer, phones, satellite, and network hardware and software among others (Detschew, 2008, p.28). ICTs also include various services such as distance learning and video conferencing, whereby, an individual can study without having to attend class or a boss can chair a meeting while miles away via the aid of ICTs services. As a result, ICTs have impacted positively in schools through the provision of improved learning, and as a result, preparing students for the use of ICTs services in the future (Kok, 2006, p.6). ICT’s main benefit is its capability to enable access to information worldwide, even in less advanced regions. According to ICT regulation toolkit (2012), ICTs have transformed several activities, especially in the media industry, whereby, the media is capable of broadcasting programs to a wide variety of public. Satellite enables the public to have a variety of choices in television and radio channels. Nevertheless, “regulation can be defined as a sustained and focused control by a public agency over activities that are valued by a community” (Baldwin, Cave, and Lodge, 2012, p.2). Regulating of ICTs is mainly the government’s role, which regulates the industry for various reasons. Regulation in the case of ICTs can be justified because, if not, the industry may not be in a position to produce quality results, which are in accordance with the public interest (Baldwin, Cave, and Lodge, 2012, p.15). Market failure rationales are some of the factors that argue the need to regulate ICTs market; monopolies may emerge and yield to unfair competition. According to Halewood and Kenny (2008, p.173), ICT is primarily used for entertainment, however, its main role falls under the provision of necessary information, for instance, through broadcasting. In addition, it is a job-creating sector. Regulations can vary, for instance, price regulation whose aim is to ensure efficiency of ICTs operations and ensuring customer are protected from unreasonably high prices. Unhealthy business environment will only drag behind ICTs, and as a result, regulations are necessary in controlling the manner in which businesses are conducted. These may include ensuring that a firm’s market power is not misused by driving out other firm unethically with an aim of minimizing competition. This essay will discuss whether regulation is necessary, or competition alone can yield to the benefits associated with regulations. Q1: Is regulation necessary, or can all the benefits claimed for it, be achieved through the promotion of competition alone? The availability, reliability, accessibility, and efficiency of phones, computers, and their networks are what make ICTs competitive. Nevertheless, regulation of this market is also a priority. Baldwin, Cave, and Lodge (2012 p15) argue that, regulating is associated with human rights. Needless to say, the market failure rationale for regulating a market include existence of monopolies where only one company is allowed to produce for a whole industry. The monopolistic company sells unique products and the government in return restricts any other firm from entering into that industry. In addition, the existence of monopoly leads to failure of the market because of lack of competition and failure to satisfy public interest. A monopolistic company aims at maximizing profits, and in the process end up reducing output and setting a high price. Monopoly effects vary from low output, increased prices, and the transfer of revenues from customer to producer. Baldwin, Cave, and Lodge, (2012, p.17) further argue that regulation is important in a monopolistic industry to ensure fair competition. Regulation is also necessary when profits need to be transferred to the taxpayers, hence enabling customers to benefit from the windfall profits. ICT regulation toolkit (2012), regulation can also be in form of pricing, whose main aim is to ensure efficiency telecom in ICTs. In addition, it provides protection and equity among consumers especially from high prices. High monopolistic prices reduce incentives with an aim of decreasing costs; government intervention in price setting may lead to positive impacts in the market. When prices are limited, consumers benefit from low–affordable prices; however, in a competitive market, regulations may not be necessary because the operator will compete to emerge as the best operator. As a result, consumers will be subjected to discounts, low rates, and improved services. The ability to utilize ICTs is vital for development; efficiency at home and workplace is achieved, thus contributing to faster growth (Cali, Elis and TeVelde, N.d, p.63). Rules and regulations in the ICTs sector are evident in both developing and developed countries. These rules and regulations affect off shoring in IT services. For instance, the United States ban on off shoring services was because of its concerns on jobs. According to Cali, Elis and TeVelde (N.d, p.64), effective regulation enables ICT to grow fast. Subscriber and call charges are unregulated in most countries, and as a result, a subscriber has a variety of choices of service providers. However, price regulation may be ineffective in less competitive ICTs market (ICT regulation toolkit, 2012). Regulatory law on competition in the ICT market may lead to sustainable competition, as a result, fostering competition. Firms are prohibited from colluding, which occurs when they increase their price or rather reduce the quantities of their goods and services with an aim of pushing some firms out of the market. Regulations in the ICT sector can also prevent the monopolistic firms from using their power to reduce competition unfairly. Baldwin, Cave, and Lodge (2012, p.20) add that unequal bargaining power in the market hinders the protection of certain public interests, and as a result, applying regulation in such a market will enable the protection of public interests. ICT regulation toolkit (2012) explains that, regulation is vital, as it attempts to hinder undesirable results. However, the regulatory process is time and cost consuming. Needles to say, regulations may be accompanied by uncertainties, which may hinder public interest. Moreover, the government should only apply regulations in the needy parts of ICT sector; therefore, regulatory forbearance is the remedy to better results. It focuses on the parts that need regulation, and thereafter, withdrawing regulations where they are no longer necessary. In the United Kingdom, Office of Communication Act of 2003 encompasses communication regulations, which ICTs are required to abide by, ranging from licensing to data protection. For instance, data protection law aims at protecting customers’ privacy whereby, data should be processed lawfully. As a result, regulations enable the fair and secure use of ICTs due to their sensitive nature. In addition, regulations such as price regulation foster fair competition as well as protect the public’s interest. Benefits of promoting competition in the ICTs sector Pilat (2003, p.33) Insist that competition is very important in the ICT sector, as it may contribute to decrease in costs, thus stimulating diffusion. Nevertheless, some countries have low investment share in ICT, which arises because of market regulations that may limit competition. Promoting competition in ICT sector involves introducing competition policy, which promotes sustainable competition that enables the flourishing of competition. Preventing collusion in firms, misuse of market power, and reducing mergers and acquisitions that contribute to reduction in competition are some of the factors of promoting competition. According to OECD (2004, p.14), competition in ICTs is a concern due to the advancing technology, which is creating challenges in markets. Another point of concern is the unrealistic regulations that hinder competition; such regulations should be addressed as well. For competition to be successful, it must be strengthened. OECD (2008, p.32) further adds that, restrictive regulations have over time hindered ICTs investments. Therefore, only the necessary regulations should be implemented. The ability for ICT organizations and businesses to compete is vital. Lloyd (2010, p.59) emphasizes that competition is only attractive when it is efficient, and guarantees consumers quality in products and goods at competitive prices. Consumers demand for quality services at the best price, and therefore, the suppliers must be in a position to meet the customers’ needs in ICT. Therefore, in competition, competition policy is necessary as it enables the ICT firms to compete fairly rather than colluding. It is evident that regulations are necessary in the ICT market; however, realistic restrictions are most preferable, as they will not affect competition or drag down the ICT sector. On the other hand, fostering competition under competition policy will contribute to the excelling of ICT market. Needless to say, regulations enable the involved organizations to operate fairly, thus eliminating misuse of market power. ICTs have contributed to productivity worldwide, with United States being one such country that continues to grow. However, the absence of regulation may hinder fair competition because of monopolies, externalities, and unequal bargaining power. Conclusions Regulations are necessary in the field of ICTs. The existence of monopolies tends to foster unfairness through increase in prices because of the market power they possess. Unequal bargaining power tends to exist in unregulated markets, a situation that indicates that the interest of the public are not protected. Healthy competition is also vital in a market, and with so many service providers in ICT, it is necessary to implement regulation, which will foster fair competition. The absence of regulations will see some firms being excluded form the ICT market, while the powerful organizations continuously control the market via unfair prices and low output. However, a market should be regulated only when the need arises. Some parts of the industry may not need regulation, as they may hinder competition. However, the main aim of regulation should be the protection of consumer interest and fostering fair competition. Firms may behave in unfair manner that yields to undesirable results; they may decide to lower their prices with an aim of dominating the market by driving out their competitors. In this case, regulations should be considered; nevertheless, promoting competition cannot work alone, but regulations should be incorporated to achieve healthy results in ICT market. Reference Baldwin, R., Cave, M., & Lodge, M., 2012. Understanding Regulation: Theory, Strategy, and Practice. Oxford: Oxford University Press Publisher. Cali, M., Ellis, K., & TeVelde, D., N.d. The contribution of services to development and the role of trade liberalization and regulation. Overseas Devt Institute Publisher. Detschew, S., 2008. Impact of ICT in the Developing Countries on the Economic Growth: Implications Derived from Theory and Empiricism. Berlin: GRIN Verlag Publisher. Halewood, N., & Kenny, C., 2008. Young People and ICTs in Developing Countries. Information Technology for Development, Vol. 14, Issue 2; p171-177. (Online). Available at: http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=45524a85-41b6-40bb-9028-1548b8ba748f%40sessionmgr4&vid=8&hid=11 (accessed 16 February 2012). ICT regulation toolkit. 2012. 1.4 Innovative Technologies and Services. (Online). Available at: http://www.ictregulationtoolkit.org/en/Section.3101.html (accessed 16 February 2012). Kok, A., 2006. ICT integration into classrooms- a literature review. (Online). Available at: http://www.eadl.org/documents/2006/ICT%20Integration%20into%20Classrooms_KOK.pdf (accessed 16 February 2012). Lloyd, I., 2010. Cyber Law in the United Kingdom. Kluwer Law International publishers. OECD. 2008. Implementing Regulatory Reform: Building the Case through Results: Proceedings of the Meeting of the Group on Regulatory Policy. Paris: OECD Publishing. OECD. 2003. ICT and Economic Growth: Evidence from OECD Countries, Industries and Firms. Paris: OECD Publishing. Pilat, D. 2003. ICT and economic growth: evidence from OECD countries, industries and firms. Paris: OECD Publishing. Read More